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Insurers face ‘digital reckoning’ after lagging on innovation

Insurers have no choice but to upgrade their public digital experience or undermine customer loyalty as the COVID-19 pandemic presents a watershed moment for the industry, new research from consultancy Bain & Company says.

Bain says the slow pace of customer-centred innovation in insurance has turned into a major setback since COVID-19 accelerated consumers’ migration to digital channels.

Digital adoption jumped by a fifth globally over the past year, almost four times the compound annual growth rate of the prior four years, according to Bain’s new survey, which covered 135,000 consumers in 17 countries

This indicates a “do or die” moment for insurers.

“To view the pandemic’s challenges as affording an opportunity for insurers would be too charitable,” the report says. “Realistically, they have no choice but to substantially upgrade the digital experience.”

The pandemic accentuates a gap in digital capabilities “that lagging companies must close in order to maintain or grow market share when the economy eventually recovers”.

Bain says incumbents do have valuable assets to rely in on the form of data generated from huge customer bases, ample capital and well-known brands.

However, consumers demand more and better digital interactions, and web searches and aggregator sites make it far easier to switch providers.

Customers experience the most problems with digital claims interactions, where they need personal help or found the process difficult. Seamless digital interactions earn greater loyalty from consumers in most countries, the survey found.

Brokers’ adoption of digital tools also remains low in most countries, which “tends to annoy customers”.

Bain says gathering and analysing customer data to understand behavioural changes will set up insurers to accelerate digital investments that improve the customer experience.

Tradition and legacy systems are “no excuse,” as a few incumbents have managed to set the pace for reliable digital channels and tools.