Why and how to compete with tech behemoths

Financial services companies are sure to experience disruption from big tech firms such as Google, Amazon and Facebook.

Read: Why financial sector will be strong this year

The insurance industry might be particularly vulnerable, as companies in the space have fallen behind their banking peers in meeting customer demands, finds an annual world insurance report from Capgemini in collaboration with global non-profit Efma.

Insurance firms rank third, after retail and banking, on cross-industry customer experience scores, with the greatest difference among customers aged 18 to 34. More than 32% of these customers say they’ve had a positive experience with their banks, while less than 26% report a positive experience with their insurers.

Read: Clients like you, they really like you—and that’s a problem

Globally, almost 30% of customers say they’d consider buying at least one insurance product from a big tech firm (defined in the report as large, multinational technology firms). That’s a 12-percentage point increase from 2015, when only about 18% of customers indicated willingness to purchase insurance from such firms.

In fact, customers across all segments now accept digital communications at the same level as conventional channels, with more than half of customers placing a high value on company websites for conducting insurance transactions. More than 40% consider mobile apps as an important channel, the report says.

“The use of data and being able to offer a truly digital customer experience are both critical for the insurer of the future, something big tech firms like Amazon and Google excel at,” says Anirban Bose, global head of financial services and member of the group executive board at Capgemini, in a release. “Threat from such entrants is more real than the insurance industry might want to admit.”

Read: Industry in flux will emerge lean and resilient: IIAC president

Firm operations must be digitally agile

Digitally agile operating models are a must for two reasons: alongside having to compete with big tech companies, firms must account for disruptions from environmental, technological and organizational factors.

More than 80% of insurers cite evolving customer preferences as the most critical factor driving digital agility, and their investments provide insights into the industry’s future. For example, almost two-thirds of insurance firms are testing smart watches and wearables; more than one-third have deployed telematics; and more than 55% are investing in speech recognition and blockchain.

Bringing together the best of digital and traditional channels is key, says the report. While more than 65% of surveyed respondents said end-to-end personalization of the customer journey was their greatest need, a big part of enhancing and personalizing the customer experience is creating digitally integrated ecosystems that help achieve interconnection.

The report concludes that enhanced digital agility will help insurance firms gain greater insight into customers’ needs, and improve time to market for innovations. It will also drive greater operational efficiency and cost savings.

For full details, download the world insurance report.

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