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EUROPE AND THE FUTURE OF THE INSURANCE CUSTOMER EXPERIENCE

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By Olivier Vaysse

European insurance providers are ripe for a digitally-enabled evolution. The sector’s customer relationship model was turned upside down by the pandemic as it forced insurers and their customers to manage their relationships virtually. However, the ability to deliver delightful omnichannel customer experiences depends on an organisation’s ability to gather, understand and act in a timely way on customer data. This requires a digital transformation that shifts insurance core systems from being not only transactional systems of record but also  a proactive engagement platform that supports an ecosystem of wider industry collaboration.

The craving for customer centricity in the European insurance industry was merely accelerated by the pandemic. It has been a long time coming. According to Statista, between 2010 and 2020, 266 InsurTech start-ups were founded in the region. This illustrates the market need for an improved, personalised experience which the legacy technology vendors could not provide. Their policy-driven operational model meant customers with multiple insurance products end up with multiple customer records which are stored across a plethora of systems. This siloed approach frustrates insurers’ efforts to gain a holistic understanding of the customer and deliver a meaningful customer experience.

To compensate for the inherent technological limitations, insurers often add layers of complexity on top of their modern legacy core systems to assemble a comprehensive view of their customers. Also, with customers now demanding real-time interactions, personalised products and self-service opportunities, traditional core systems are, quite simply,not fit for purpose anymore. What’s more, in the New Normal, customers’ expectations are only going to get more sophisticated and demanding.

From the European insurers’ perspective, something has got to change if they want to become a one-stop-shop to capture new revenue opportunities. After all, it’s only going to get more difficult and expensive to develop, deliver, support, and maintain the patchwork functionality, given the inherent limitation of their legacy core systems.

An alternative data model for customer-obsessed insurers

There’s another option for insurers looking to differentiate themselves by creating world-class customer experiences. Using the coretech approach, which leverages the open architecture of insurtech and the scalability and broad functionality of core systems, customer-centricity is more than an idea. It’s in the data model, which puts the customer record at the heart of insurance operations.

Putting the customer record, rather than the policy number, at the centre of insurance operations empowers insurers to fundamentally redefine their relationships with the insured and expands sales and services opportunities with their partners, too.

To start with, in order to offer personalised customer experiences, real-time omnichannel access, and customer self-service options, European insurers need fast access to comprehensive and correct customer details.

By consolidating contact information, history, preferences, demographics, and using powerful application programming interfaces (APIs), coretech simplifies real-time integrations with InsurTechs, data sources, and other systems. It also accelerates speed-to-market because, simply put, there are fewer and simpler integrations necessary to access and update that customer data. Having a consolidated data platform, insurers will also satisfy the compliance requirements for the world-leading data protection regime mandated by the European Union.

From the outside, coretech allows the customer to interact with their data and access rich products and services on their own terms and in real-time. They don’t wait until a batch process finishes overnight, for example, or for janky manual processes to play out through intermediaries. Coretech also extends that speed, simplicity and convenience to authorised parties such as agents, brokers through persona-based apps, and by putting insurance ecosystems within reach of even smaller insurers. 

Building a nimble insurance ecosystem to futureproof the business

From the inside, coretech allows insurers to redefine their relationships with customers and between other third-party entities. Consumers clearly have an appetite for innovation within the insurance ecosystem. For example, in the EIS Customer Compass survey, 58% of consumers globally said they were interested in a mobility bundle including auto insurance, auto loans, buying or leasing options, remote monitoring, maintenance and driver safety guidance. As the value of collaborative inter and intra-sector service offerings increase, this provides insurers with an incredible opportunity to up-sell as the owners of the customer relationship. However, their technology platforms should be agile enough to integrate with third-party services.

Many insurers have joined forces with other businesses from different sectors to create more holistic coverage options and lifecycle bundles. According to the EIS Insurer Compass research, 86% stated they believe their ability to offer customer’s additional services which go beyond protection is essential to their future success. These new propositions combine insurance and non-insurance solutions into more personalised offers that are better suited to improve customer relationships than what protection products alone have been able to achieve.  

The flexibility to consolidate and support several lines of business on a single platform offers enormous operational efficiencies and satisfies the insurer’s immediate customer-centricity concerns. It also futureproofs the business by dramatically expanding and simplifying insurers’ ability to create and run up-sell and cross-sell campaigns, launch insurance ecosystems and get closer to its customers with frictionless digital interactions. 

What does the future of insurance hold

The European insurance sector finds itself at an inflection point created by fundamental changes within the client-carrier relationship model. In all its rapidly changing forms, consumer technology is shaping peoples’ patience and expectations for when and how they communicate and do business. They want the right answers instantly. From checking their account and payment statuses to searching for and purchasing new products and services, they are not afraid to do it themselves.  These evolving customer expectations are prompting insurers to reconsider their technology investments and even their business models. The reality is that traditional core systems simply compound insurers’ technology debt and impede their journey to growth. For insurers looking to achieve real customer-centricity — even while technology and customer expectations continue to evolve — they need something different. They should consider coretech.

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HERE’S HOW INSURANCE IS SET TO CHANGE

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By Adam Goldsmith, Insurance Specialist, SAS UK & Ireland

 

Making predictions about the state of any industry in the coming year is a nigh-on impossible task. But looking to the longer-term, the patterns we’re seeing in insurance firms, which have been inspired by the pandemic, have revealed in no uncertain terms that the industry is in flux. Change is here, and its impact will be felt for many years to come.

Woken up by the sharp jolt of the pandemic, insurance will experience dramatic change by 2025. But not all firms will adapt fast enough to the new insurance landscape or new expectations from customers. Those that pay attention to long-term predictions like the following could reap the rewards post-pandemic.

 

1. Knowing customers inside-out through their data will be non-negotiable

A typical Insurer today is set up in very traditional manner. There remains distinct, separate departments for the key functions: including assessing risk, acquisition, customer engagement, claims handling, customer protection and renewal.

Yet very few insurers have a truly joined-up view of a customer’s full journey with their organisation, let alone what can be done to optimise each interaction. What’s needed is the ability to understand each customer touchpoint as they traverse through their journey, as well as the ability to make decisions as to how best to engage them.

Insurers often cite legacy policy admin and claims systems as the biggest barrier standing in the way of this approach being adopted. By 2025, however, the most successful insurers will have broken those barriers down, gaining an unprecedented understanding of their customers’ needs and preferences, and the ability to offer pricing plans that are both fair and competitive.

 

2. Automation and algorithms will become the bedrock of all insurers

We’ve long heard of ‘digital transformation’ being a key objective for insurance executives. However, by 2025 it’s expected that successful insurers will have completed this transformation. Digitalisation will no longer be the differentiator, it will be the default. As a result, a new way to drive business advantage will have to emerge – and it will be centred on the use of algorithms to drive business decisions.

This is not a new concept. Gartner describes ‘algorithmic business’ as the ‘industrialised use of complex mathematical algorithms pivotal to driving improved business decisions or process automation for competitive differentiation’.

We’ve already seen some insurers start this journey in their claims function. Companies, including Aviva, have long automated decisions concerning whether a vehicle is deemed a total loss or not. However, the trend will become much more prevalent, with Gartner research predicting that, by 2023, over 33% of large organisations will have analysts practicing decision intelligence, such as decision modelling.

 

3. The customer will see positive change as they interact with their insurer

It’s clear by now that COVID-19 will fundamentally change how insurance is done – both in terms of how customers want to interact with insurers, and also how insurers need to adapt. While we hope this pandemic won’t be with us forever, it has opened the eyes of many executives to what is possible within the customer-facing parts of their organisation.

From my discussions with insurers, many have commented on how well employees and customers have adapted to the new normal. While there were initial logistical hurdles in virtualising contact centres, they’ve been impressed at how well staff have adapted under pressure to deliver what customers and shareholders expect. Many are likely to follow the approach of Lloyds in allowing staff to work remotely for the foreseeable future.

 

4. Prevention will be prioritised over payouts

Insurance has long been society’s safety-net, protecting us when something goes wrong in our lives. Yet, it would be to everyone’s benefit if risk could be avoided altogether. The use of telematics to assess the risk of younger drivers was the first big industry push here, but by 2025 we will see this becoming ubiquitous across many other products and customer demographics.

The recent example of Munich Re’s acquisition of IoT service provider Relayr will benefit manufacturers with a ‘pay as you use’ model. This will enable them to be more flexible and react faster to market changes. The IoT Observatory is also exploring new ways that data extracted from connected sensors and devices can help to transform risk assessment and empower insurers with data.

This is no small step for any traditional insurer. But it is one that puts a truly customer-centric lens on the service that insurers deliver. Data-driven risk prevention allows for significant product differentiation, taking insurers out of their comfort zone and enabling them to explore whole new opportunities.

 

5. Fraud prevention must shape up for a post-pandemic world

Come 2025, we will be living in a very different world with new risks that require novel insurance solutions to resolve.

One of the largest looming threats is insurance fraud. Analysis from the Insurance Fraud Bureau shows that fraudulent claims rose by 5% in 2019, and there are concerns the current economic climate could see this rise even further. In the aftermath of the 2008 Financial Crisis insurance fraud rose by 17%, and there’s no guarantee this won’t happen again on the back of growing practices like crash for cash fraud and ghost broking.

Putting in place an effective defence mechanism to intelligently detect, prevent and investigate potentially fraudulent claims will be an essential requirement by 2025. A soft defence is a liability while those that take fraud detection seriously will drive a more profitable outcome. This is especially true when it was announced recently that close to 20% of each policy premium is goes to cover the cost of fraud.

Insurers must be holding a finger to the wind during this unusual time, as many of the themes and patterns emerging now will shape the industry going forward. Insurers must figure out how to adapt their decision-making processes now, to take on an unpredictable and exciting future in insurance.

 

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VOLATILITY IS CRYPTO’S BEST FRIEND

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Stephen Ehrlich, Co-Founder and CEO at Voyager Digital.

 

Volatility is good for crypto. It serves multiple purposes as the whole crypto ecosystem matures, which we have to remember is an industry and technology that is still only just over a decade old. New and emerging industries are by their nature volatile as they move towards mainstream adoption. But the volatility attracts people, investors and technologists, who drive the pace of adoption forward and as it grows, volatility naturally decreases. In the case of Bitcoin, its volatility has steadily been decreasing over time and even the recent sharp moves have not seen such a big rise in volatility compared to historically (see chart below).

Chart showing Bitcoin Price and Volatility

Source: https://www.buybitcoinworldwide.com/volatility-index/

Volatility continues to attract participants as it is unquestionably in our human nature to be drawn to assets that are subject to rapid price appreciation. Throughout history there have been numerous asset bubbles that have burst, with Dutch tulips of the 1600s being the one that most referenced in relation to crypto-assets. But do tulips really provide any utility apart from looking and smelling good? Many crypto-assets actually provide a purpose, a utility, and serve as the backbone to new technology protocols upon which useful apps are being built. This is why we are seeing greater adoption and as the whole market continues to grow, we are now seeing institutions embrace Bitcoin by diversifying into it as an alternative store of value. This is why volatility is good for crypto. But another harsh reality is that it allows people to learn about the risks, as well as the rewards, of getting involved. Hopefully this is done with the assistance of their chosen broker or through educational webinars, video, and other collateral.

Yes, there will be many that will get their fingers burnt, especially if they employ leverage into their trading without a disciplined approach to managing risk. The same can be said of the internet boom and bust in the late 1990s and early 2000s that saw many a “dotcom” go bust. Leverage was around in those days too, so unfortunately many people learnt the hard way, but it is a necessary evil for the industry to become even more established. For Bitcoin, we have seen multiple bubbles burst, with 2017/18 being the last cycle and soon after the sceptics were suggesting the end for crypto-assets was nigh. But those who see the technology’s potential were keeping their heads down and building amazing platforms and applications. If we take a look at Bitcoin today, it’s clear that the end is nowhere near.

Volatility also attracts the attention of regulatory authorities, another natural evolution of nascent industries. On occasions though, there can be overregulation. Whilst the sentiment behind the UK’s FCA ban on retail investors being able to trade crypto derivatives is right, in respect to trying to provide greater investor protection, it can limit choice and ultimately drive investors to offshore brokers that may afford much less regulatory protections. If an investor really wants to employ leverage in their trading then they’ll find a way to do it, so perhaps rather than an outright ban, perhaps limit the amount of leverage they can use instead.

Bans certainly don’t help liquidity and are actually counterproductive. We’ve seen multiple decisions to “ban” crypto reversed as authorities realise that people simply circumvented it by using a VPN or other means to buy Bitcoin. India is now set to vote on a crypto ban, but at the same time they are due to introduce their own Central Bank Digital Currency, which in itself sends out mixed messages. As governments become more knowledgeable on crypto-assets and understand how they are totally borderless, bans are likely to become less and liquidity will continue to improve further.

Coinbase’s prospectus filing and the fact that the SEC is allowing this anticipated $100b direct listing to come public, with significant consumer involvement, is further acceptance of digital assets by the authorities. The continued evolution of the industry going mainstream and public companies vetted and allowed to move forward by the SEC, foreshadows the long-term outlook by the SEC that this industry is here to stay and regulation and acceptance of digital assets as an asset class is forthcoming. Regulation adds legitimacy to the industry and will attract a broader audience of investors and participants, as oversight gives comfort to a larger group of investors.

Regulation is very important, but it needs to find the balance that protects consumers, yet also fosters adoption of what is a truly ground-breaking technology and asset class. So, for those people that complain about crypto markets being too volatile, we NEED volatility in order for the whole ecosystem to thrive.

 

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