How can the digital transformation of the insurance industry reinforce the competitive advantage of co-operative and mutual insurers? asks Ben Telfer, vice-president, business intelligence, at the International Cooperative and Mutual Insurance Federation (ICMIF).
Digitalisation is fundamentally changing the entire insurance value chain: from how insurance products are designed and premiums are priced, to how policies are sold and claims are processed.
Big Data, advanced analytics and cognitive computing are just some of the new technology-driven developments that will re-shape how an insurance company operates in the future.
Insurance companies are already looking at how they can reinvent their operational models in this new digital age. Many insurers will focus on becoming more “customer-centric”, and explore how they can harness digital technology to improve the way they interact with customers.
The expectations that customers have from their digital experiences in other sectors, such as online shopping, will drive a higher level of customer expectation within the insurance industry. Insurers must therefore question how they can use digital technology to get closer to their customers and improve the customer’s overall experience.
While for many insurance companies this will represent a huge transformation, co-operative and mutual insurers, on the other hand, may find themselves with an unexpected advantage.
The existing operational models of mutuals and co-operatives are already closely-aligned to the needs and preferences of their customers (their members).
The use of advanced analytics and harnessing Big Data will allow insurance companies to better understand the needs and preference of their customers. Again, this provides a natural advantage for co-operative and mutual insurers
Many co-operative and mutual insurers are associated with affinity groups, and so tend to know their customer base better than other insurance companies. Without the need to generate short-term profits for external shareholders, co-operative and mutual insurers are also run, first and foremost, to protect the interest of their members. The members’ satisfaction and levels of trust are central to the vision and strategy for mutuals and co-operatives.
The use of advanced analytics and harnessing Big Data will allow insurance companies to better understand the needs and preference of their customers, and they will be able to offer a more personalised service. Again, this provides a natural advantage for co-operative and mutual insurers, as they have long been focused on serving the needs, and maintaining the trust, of their members.
The new digital era may also see a change in how customers view their insurer, with a shift from a means of financial reimbursement after an event, to one engaged in ongoing assistance.
Co-operative and mutual insurers could also naturally benefit from this shift as many, especially those with close links to the local community and niche affinity groups, are already engaging in risk management, prevention and educational programmes to improve the societal well-being of their members, such as youth rural road safety sessions (NFU Mutual, UK) or mental health workshops (FMG, New Zealand).
As insurance companies begin to adapt new strategies to survive (and thrive) in the new digital era, they also may face external competition. Giant technology companies such as Google and Amazon have been touted to start offering insurance products in the next few years, and, at the other end of the scale, new InsurTech firms (insurance-based technology start-up companies) are now entering the marketplace looking to revolutionise how insurance products are bought and sold via new digital platforms.
Co-operative and mutual insurers are no different and must adapt and upgrade their operational processes to embrace this new digitalisation. They may also be able to exploit this new transformation and become the natural fit as the desired insurance model for future generations in the new digital age.