Digital transformation empowers consumers to be more informed and independent, and equips insurers with the tools to develop new tailored products and services and refine existing ones, said the latest sigma report published by Swiss Re.

This is leading to the development of new data-driven business models that will affect the entire insurance value chain, noted the report (Data-driven insurance: ready for the next frontier?), “True leverage will come from partnerships with key data suppliers.”

Insurers increasingly will operate in an environment where they have continuous access to different data sources including from connected objects (such as connected cars, homes or wearables) and platform providers. They also will gain behavioral insights from consumer and environmental data, the report indicated. “This will see the evolution of new-data driven business models taking insurers beyond their existing value chain,” sigma continued.

“The availability of internet-enabled devices and universal connectivity has changed consumer behaviors and expectations, particularly among younger generations,” said the report, explaining that customers now expect rapid access to information, transparency and more personalized products.

Although consumer-supplier touchpoints will become predominantly digital, human interaction will continue to play a role, said the report, which explained that consumer feedback and analysis will help insurers identify where in-person engagement is most effective.

Digital and Targeted Human Touch

“With the growing granularity of insights into customer behaviors,” the report said, “the role of insurance is evolving from indemnification of losses to a broader consultative service on risk prevention and mitigation covering both private and commercial clients’ changing needs over time.”

The sigma report cited the example of changes in an individual’s life circumstances such as marriage, a new home or job, signaled by digital data sources.

“In response, insurers can direct personalized guidance to the client on predictive and prescriptive next-step risk mitigation actions,” it continued. “The direct relationship with customers will evolve as new touchpoints and channels become normalized and back-office processes like marketing/sales, underwriting and claims administration are increasingly automated.”

Insurers will be able to target human engagement to circumstances where consumers expect an empathetic response, such as a health crisis or death in the family, the report said. “The personal touch in sensitive areas will bring a human face to insurance.”

Emerging Markets Lead the Way

At this point, insurers in emerging markets lead the way in optimizing the potential offered by digitalization because the starting point is digital rather than analogue in many of these markets, the report added.

“[Emerging market insurers] are partnering with established digital platforms and ecosystems to combine features typically offered by standalone incumbent firms into a one-stop-shop service,” said sigma. “Insurers bring underwriting expertise, while platforms and ecosystems offer access to customers through their ability to target specific segments and mine user behavior, as well as offer multiple touchpoints to capture user attention.”

Successful Insurers

Successful insurers in the long term will be those that leverage insights from their investments and partnerships in data and analytics while developing risk protection products aligned with evolving regulations, sigma said.

“Regulation will play an important role in supporting the integration of new technology and data into insurance business across different jurisdictions,” the report noted. “In monetizing the potential of digitalization, insurers will need to manage local data protection and privacy requirements.”

Source: Swiss Re/sigma

*This story appeared previously in our sister publication Insurance Journal.