As the coronavirus pandemic hit Europe and leaders started encouraging or even mandating companies to send their workers home, investments in infrastructure and digital transformation of operations turned from “optional” to “necessary for survival”.
Based on the corona experience, one thing is certain - digital transformation of every single industry has accelerated to a degree that “digital-first” became the default way we work and operate.
Welcome to the world, where it will be increasingly difficult to do anything offline.
This fact became painfully obvious in life insurance. This segment was not booming in the past few years for various reasons, not least stagnant interest rates. Agents who had trouble getting a foot in the door at the best of times are now barred from most homes by imposed social distancing measures. This essentially shuts down the main sales channel for most products and leaves insurers scrambling to find a solution. Of course, the most obvious answer is to try and move customers to digital channels.
That is easier said than done, though.
The fact is that most life insurers lack the digital channels and capabilities needed to respond to the new reality. Over the past couple of years, life insurance has experienced slow growth – research and advisory firm EY found that CAGR was just 0.5% in the 2013-2018 period, lagging other sectors. To counteract the growth challenges, companies focused heavily on cost-cutting, leaving fewer resources for investments in future-proof solutions.
As the COVID-19 outbreak accelerated, many companies were found to be severely unprepared. Many life insurance carriers lack the sophisticated and intelligent digital channels needed to sell their products. The reason for this is complex – while it is true that cost-cutting measures depressed the investments, there is another reason why life insurers stuck with the traditional physical sales channels for so long. In our discussion with insurance companies, we often hear the argument that “people want to buy life insurance from other people.”
And that is not surprising. Life products can be complex and consumers like to have another person (an expert) to explain and help them navigate the myriad of available options, terms and conditions and possible riders. As EY puts it in its 2020 Europe Insurance Outlook:
“Most consumers are looking for a more holistic and personalized approach that is driven by their individual needs.”
In practice, this means that while products need to be available on digital platforms, they need to be accompanied by some sort of face-to-face or personal interaction. As we move to social isolation, we should equip the sales force with digital tools, for example, rich chat applications or video conferencing with screen sharing. This allows your field sales to visit their customers’ homes without being there physically.
There were signs that life insurance must change with new generations of consumers, such as millennials and Generation Z, who are used to buying things online. These are sophisticated users who do not mind the lack of personal contact but also have completely different privacy and user experience expectations. Insurance carriers’ traditional business models need to be updated to reflect the changed consumer expectations, which is why we also saw a surge in investments in Insurtechs in recent years.
Now, driven by the recent events, the change became a necessity and there is no doubt that life insurers need to change to survive.
Not everything is about technology. Insurance carriers also need to rethink their approach to customer experience. Convoluted online forms that require consumers to enter redundant information simply do not cut it anymore in a world where consumers already have set expectations for online interactions. I have seen apps for signing forms and screen-sharing solutions that make you want to tear your hair out.
Right now, creating digital and online experiences that delight customers is a necessity. I can guarantee you that this is at the top of priority list of many insurance leaders. While in the past companies had the luxury to weigh large upfront investments against the benefits, they can no longer afford to do this. Life insurance sales in the traditional manner have stopped. Period.
The immediate steps are painfully obvious. Insurers need to empower their sales force with the tools to work and interact with clients remotely – either through video and screen sharing or other means. They also need the tools to close sales digitally without the need for physical interaction – this means digital signatures and sophisticated means for verifying identity.
These tools need to provide the following features: