Digital Insurance is not a very familiar term in our country likewise ‘Insurance.’ But before jumping into ‘Digital Insurance’, we must know what actually ‘Insurance’ is and how this trend started. Without knowing the whole story, we just adopt any policy/system following the stream. It’s seems like adopting insurance policy is a trend that we must follow otherwise we might be addressed ‘down market’!
Long back when sailing ships got destroyed or lost their cargoes, merchants found that by dividing their cargoes among several boats, they protected themselves from total financial ruin. That way, if one of the boats was destroyed, no merchant lost everything. Each stood to lose only a small portion. In short, insurance basically involves a group of people agreeing to share risks. Though it’s a very old concept but a little bit of modification and systematical application transformed this concept into one of the most appealing offer of this 21st century. Adaptation of this policy is increasing day by day and becoming more popular.
When one buys insurance, he/she gets a policy. That policy is a legal contract.
DIGITAL INSURANCE
It spells out exactly what one is buying. It lets one know how much one must pay (the premium) and when it must be paid. It’s mandatory to read out the whole policy even if it seems complicated. When he/she is buying insurance, he/she is joining many others who pay money to the insurance company. That insurance company then use the money collected to pay claims that are submitted by those who have purchased insurance. The money is ‘pooled’ and losses and expenses are shared. An important aspect is the members of a pool share similar risk characteristics. Usually insurance agents sell policies for an insurance company.
In just two decades, digital technology has transformed the world. There are almost as many mobile subscriptions as there are people — 6.8 billion compared with the global population of 7.1 billion — and 40% of the world is online. [“The world in 2013: ICT facts and figures,” International Telecommunication Union, February 2013] New digital technologies are irrevocably changing the way consumers engage and interact with insurers. Traditional operating structures are being disrupted, driving insurance executives to reassess their business model. It is time for insurers to re-evaluate their future direction and make the digital agenda a high priority.
Insurers should rethink their relationships with consumers in a digitalized way. That’s why we are trying to expand our journey toward greater customer centricity to explore what insurers must do to become more customer-centric. Our scope extends beyond online distribution channels to a wide range of digital technologies: mobile (smart phones, tablets and apps); social media; cloud computing; analytics to mine business data and turn it into actionable insights; and digital platforms to interact and share information among insurer, agent and consumer. These technologies can be applied across the entire insurance value chain, from engaging and interacting with customers and distributors to sales and marketing, service fulfillment (underwriting and payment) and reinvestment.
Digital is a new market force that is driving a massive change in consumer expectations. It will require a different set of skills, culture and measurement. Industries such as telecommunications, consumer products, and media and entertainment have already harnessed digital to attract and retain new customers. It is time for insurers to evolve and respond: they cannot afford to be on the sidelines of the shift to digital.
Insurance companies face conflicting challenges. They must contend with continuing instability in financial markets, low interest rates, increasing acquisition costs, changing regulation and catastrophic losses from ongoing natural disasters.
Yet the global insurance market shows unprecedented growth potential, whether it is the sizable global population moving into retirement with greater life expectancy and health protection needs or the massive emerging markets of South America, Asia and Africa demanding the full suite of insurance products. But the toughest challenge faced by the insurance sector is the one that is transforming consumer behavior and business models-digital technology.
The most common reason technological transformation projects fail is because of a disconnection between ambition and level of investment. When retention, cross-sell and up-sell ratios fail to meet aspirations, insurers must look to the digital landscape to retain and grow customer value across the customer’s life cycle. If they don’t, others will. Insurers who equip their distributors with the digital tools to improve their own customer relationships can minimize any channel conflict.
Digital Insurance in Asia-Pacific Region [EY Global Insurance Digital Survey 2013]
During 2Q 2013, EY Ernst & Young (EY) Insurance Company conducted a global survey with participants from more than 100 insurance companies to understand how the digital agenda is reshaping the insurance sector. The three main geographic regions targeted were Europe, Asia-Pacific and the Americas, with additional contributions from Africa. To extrapolate regional views from country results, the gross written premium (GWP) of insurance business and the purchasing power parity (PPP) of countries were used to weight the country responses. [GWP data for each country is obtained from Swiss Re Sigma report (No 3/2012)]
Asia-Pacific insurers have far less clarity around the barriers to digital progress and future investment than their global peers. One reason may be that the region’s developing and emerging nations are at an earlier stage in their digital journey. Although Australia aligns more with the digitally developed European and US markets, it is outweighed by the large number of Asian countries included in the survey; therefore, the findings are more representative of Asia.
Digital strategy clarity is lacking A significant number of Asia-Pacific respondents did not know (or disclose) current levels of digital development spend: 79% versus 40% globally. Such lack of clarity is mirrored looking forward: 58% estimated future spend increases, compared to 81% globally. This may reflect the greater geographic complexity of the region or the deferral of strategic planning to the group level at this point in time.
Another reason for the lack of clarity may be a weaker sense of urgency and top-of-mind awareness. In 2013, GDP growth for Asia is forecast at 5.75%, compared to a 3.25% global average. [World Economic Outlook, International Monetary Fund, April 2013] Such prosperity, combined with lower insurance penetration and density rates in this region, means digital innovation has not been considered necessary to secure customer growth. Instead, insurers have historically focused on targeting market share, often by expanding their sales forces.
Integrating digital with other distribution channels is a top challenge Underlying the importance of agency distribution in Asia-Pacific, 68% of life insurers consider that “integrating digital and media with other distribution channels” is the top challenge they face in delivering their digital strategy. This is far less of a concern in non- life.
Customer experience and internal efficiency are driving digital strategy Asia-Pacific insurers view the benefits of digital through a slightly different lens. Like their global peers, enriching the customer experience is the key driver of digital strategy. Only 7% of regional respondents see “regaining more direct control of the customer relationship” as a driver, compared to 20% globally. This reflects the central role that agents continue to play in the Asia-Pacific region.
Regulatory restrictions are a higher concern Overall, the region has a mixed view of what is hindering its digital development. The global view positions it firmly as the responsibility of insurers: legacy technology, pace of delivery and cultural constraints. In contrast, Asia-Pacific recognizes legacy technology issues (63%) but also blames regulation (44%), a lack of a compelling business case (41%) and perceived customer/data security issues (40%). Regulatory environments vary from traditionally prescriptive to more permissive regimes. Asian regulators have historically been more protective of a less sophisticated consumer class, taking a more prescriptive approach.
Social media and mobile tools have a lower perceived value Asian insurers are less likely than their global counterparts to use social media and mobile tools to interact with customers and agents. Lack of interest in social media may reflect a more general reluctance to use digital to engage in customer dialogue, at least for softer types of communication. Asian insurers are more likely than their global counterparts to interact digitally with customers at financial stages (e.g., quotes, transactions and payment).
For example, 83% of regional insurers provide online quotes and 70% offer online purchase/transaction capabilities (72% and 66% globally). In contrast, 82% provide company and product information, and 49% educate customers about their brand values, compared to 92% and 63% globally.
The Digital Insurer interprets this data as Asia-Pacific being comfortable with the embedded face-to-face insurance paradigm and being slow to realize that other digital models already prevalent outside of Asia will gain significant traction. The Digital Insurer predicts that we are going to see a race in two different directions – incumbent insurers who will start to realize they need to apply digital thinking to transform their agency and bank assurance channels and new entrants (both insurers and non insurers) who are likely to take a ‘digital first’ approach to their business models.
Winners will emerge from both directions – but even agency and bank assurance models in Asia will be transformed over the next few years. In fact this race is already on.
Digital Insurance in the Context of Bangladesh
Day by day the economy of Bangladesh is rising. Our country is growing with a GDP of above 6% each year. In the year 2015, the target GDP is about 7.3%. But forecasts by the World Bank say that the GDP will be approximately 6.2%. Insurance sector is one of the growing sectors in the country, more than a half hundred insurance organizations and company are operating in the country.
Our government decided to strengthen the insurance sector along with other thrust sectors within 2021.
They are also working to enhance the capabilities of the life insurance and non-life insurance companies. It is also planning to give some extra facilities to the government employees by providing some sort of health insurance. Digital technologies are connecting customers and organizations like never before, and they’re opening some great opportunities for insurers to enrich customer relationships and boost agent productivity. We use the idea of the digital insurer to conceptualize the ways that insurance companies can digitize and enrich customer interactions and agent experience across all the devices they use.
As such, Digital insurer can be broken down into three key pillars: omni-channel, customer insight, and agent experience.
Omni Channel Omni-channel involves digitizing interactions across all channels, including the mobile application, consumer portal, call centre and social media. There are some key areas to think about when developing an Omni-channel strategy.
Customer Insight Insurers need to be able to turn customer data into insights, and insights into enablement. Digital interaction yields unprecedented amounts of information about your customers. By applying customer relationship management concepts in the digital world we can turn that data into insight and enable your agent to act on it.
Agent Experience Advancing the agent’s digital work experience is the third pillar of the digital insurer concept. Many insurance companies have thousands of agents out there, some of whom are employed by the company while others are independent – and all of them need access to key information and productivity tools, wherever they are.
There are three key elements to achieving this.
The first part is about setting the agent free on a mobile device and empowering them with mobile applications that replicate what they can do in the office. By doing that, we can enable captive and non-captive agents with the productivity; communication and collaboration tools they need to get out and engage with customers outside the office.
The second part is the agent desktop. This is about enabling the agent with all the elements of Office 365, so they can better support their customers and effectively market and sell their insurance products.
The third is a web-based portal especially for the independent agent’s use, which gives agents the tools and information they need to sell more effectively.
Using the digital insurer concept to pull together these three pillars enables insurers to visualize how they can work with Microsoft to deliver a digitized experience that helps them enhance customer interaction, turn customer data into insight, and enable agents to sell more effectively.
If we want to apply digital insurance business in Bangladesh we have to take some measures which are given below- creating new model, piloting new digital model (partner with companies with digital assets to create new model), digitalize worksite marketing (unlocking), transforming life insurance advisory business and digitalizing cross selling: person lines, assets management, banking.
It’s clearly visible fact that Bangladesh is one of the poorest countries in the world and people here fight hard to earn their livelihood and is marginal in relation to the expenditure with the income. Poor population is the biggest problem in digitalization. Majority of people, especially in rural areas are left outside the insurance coverage. This mainly results from a vast the unawareness among the people. Even a large portion of people don’t have the minimum idea of insurance. Because of unawareness of people, it is the most important obstacle in applying digital insurance.
Most of the insurance companies of our country are facing financial problems. Recently government is trying to take initiative to close some of the insurance companies because they are not maintaining the minimum standards. Poor financial condition in convention insurance company would also be a problem of digital insurance company. Political instability is a major problem in Bangladesh. For the instability in politics, many disruptive situations are often created which are bad for any businesses and lack of any supervision from the government are also serious problem.
Besides, higher price of internet at ISP level, satisfied consumers with current management system as they have no knowledge about the advantage of digitalized management system, lack of motivations for being digitalized, information technology, training for the employees and marketing policy, deficiency in operating software’s, no online portals etc. are other obstacles in this adapting Digital Insurance system.
The future consumer is an always-connected and digitally informed individual- empowered by their environment. Comprehensive “software plus service” approach to digital insurance benefits all stakeholders, from policyholders, agents/brokers and claims processors to insurance company product managers and executives. Providing the complete digital insurance experience in this “smarter world” requires more than just software.
It involves a comprehensive “software plus service” approach that helps companies leverage legacy intellectual property, capitalize on market trends and bring new products to market faster.
Claims settlement through online methods, high speed internet and customer service, application of Digital market methods, establishment of chartered digital insurance Institute of Bangladesh, alternative use of distribution channels such as Bank assurance, policyholder compensation schemes, online premium quote offer, online policy order, online premium transactions, use of call center by the insurance companies etc.
will take place in the insurance sector if the government, insurance companies and the common masses act for the advancement of this portion of the country’s financial service markets.In the social world, customer connect is effectively to the tune of millions. So insurance companies should comprehend the transition from a modular records approach to a public stream.
This is a move from tightly controlled records and procedural approaches towards that of instant messaging at a global scale. This calls for a major transformation in digital enablement – one capable of interacting with customers in a massively scalable manner. Only then, the philosophy of ‘Digital Bangladesh’ could attain a massive height and compete with global technological advancement.
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