The demand for more and enhanced automated experiences in our daily lives is growing, and the insurance sector is no exception. In recent years, a new crop of insurtech startups has embraced this approach to improve efficiency and experience for the customer, while better calculating risk for the business.
But it has not been an easy process, and digital transformation in this sector is far from complete. Consumers are constantly looking for better options with more efficient and easy-to-use services.
In fact, a recent Publicis Sapient survey found that 100% of consumers who have switched providers over the last year cited a reason pertaining to customer experience. That is greater than the 70% that cited pricing as a driver for switching.
This points to a changing market where consumers have higher and different expectations for insurance experiences, based partly on the ease with which they now do other tasks digitally, like shopping and banking. But at the same time, they are hesitant to rely too much on automated processes, given both the emotional nature of the events that lead consumers to file insurance claims, and growing concerns about ethics and privacy when it comes to data.
There is no question that on many levels, consumers are moving toward digital insurance experiences, and this is poised to increase. According to our survey, people would prefer a mobile app instead of phone or in-person conversations for receiving updates on claims.
Amid these changes, it is also clear that people continue to play a key role, especially when it comes to customer service, where they can provide the empathy and care that data and AI cannot.
Consumers are also looking for what they perceive as better digital services. In fact, 15% said they switched providers in search of better digital experiences. Among the tasks that could be improved with technology were filling out forms and providing information, and understanding policies and the coverage provided.
Insurance companies are finally responding. Investment in insurtech soared to reach $15.4 billion in 2021, nearly double the amount raised in 2020. And the money was not just from a few large investors, but from a variety of sources, and aimed into a variety of insurance providers, indicating the increased role of technology throughout the sector. This clearly shows that the sector is on a path of change.
This also comes at a time of other changes impacting and challenging the insurance sector, like the COVID-19 pandemic, increased severe weather events, and the rise of self-driving cars.
The growing role of data, and the need to understand it
Smooth digital experiences alone are not the only change happening. The way that insurance companies, and consumers, are using data is also rapidly evolving. New products such as usage-based insurance (UBI) leverage data to incentivize policyholders for “good behavior.”
For example, in the auto insurance sector, drivers with safer habits behind the wheel or who drive less than the national average can receive discounts on their insurance plans. Such approaches may become common in more insurance products.