Technology is changing the way insurers and consumers interact and giving insurers access to considerable data so they can better understand their customers, says Swiss Re in its latest sigma study.

The study concludes that technology will not replace all agents and brokers but that they and carriers need to adjust to consumers’ preferences.

The study, “Digital distribution in insurance: a quiet revolution,” is an analysis of research from different countries and discusses how the internet and mobile devices are empowering consumers to search, review and purchase insurance policies without relying solely on the services of intermediaries.

At the same time, developments in Big Data are facilitating access to a rich source of data about customers, which insurers can use to enhance sales and marketing strategies. Digital transformation overall can help insurers become more consumer-centric, according to the study.

Quiet Revolution
“A quiet revolution is underway,” according to Kurt Karl, Swiss Re’s chief economist. In many countries the share of premiums accounted for by online sales is still small, but it is rising. “The statistics on e-commerce insurance mask the profound impact new technologies are having on the distribution process,” Karl said.

Some surveys indicate that consumers increasingly research online and that the internet has become a trusted source of advice for insurance. Aggregator or price comparison websites (PCWs), as well as social media, are playing a growing role in the pre-sales process. As Ginger Turner, co-author of the study, noted, “with mobile and telematics technology, consumers can now interact with their insurance provider anytime and anywhere.”

Moreover, relatively simple insurance products are being sold online more readily. This is most obvious in personal auto and property insurance, especially in developed markets.

Direct marketing of term life insurance and some insurance for small businesses (eg, professional liability cover) is also becoming prevalent. Swiss Re analysis shows that even in emerging Asia, where most sales occur via intermediaries, insurers have developed advanced capabilities for direct online platforms.

Meanwhile, the buying journey for insurance is becoming fragmented across multiple touch-points.

Not all insurance sectors are at the same stage of this digital transformation, and not all will proceed along the same adjustment path and at the same pace, according to report. But, the report says, the direction is clear: eventually, customers will be able to arrange most of their insurance needs through remote digital channels.

The example of the UK motor market, where e-commerce sales have come to dominate in just a few years, shows how quickly consumer buying habits can change. Likewise, in emerging markets, innovative mobile platforms are rapidly expanding access to insurance, the study says.

Intermediaries Remain Relevant
According to the study, digital transformation does not spell the end of intermediaries. It notes that technology has spawned new types of intermediaries such as PCWs and says any consumers will continue to value the personal interaction and expert advice of agents and brokers, especially for complex commercial and life and health risks.

The study says that the challenge for intermediaries and insurers is to adapt their business models to meet the varying needs and preferences of customers.

Rise of Big Data
Digital distribution is also facilitating access to a rich source of data about customers and fostering advances in predictive analytics, collectively labelled Big Data. This information offers deeper understanding of customers’ wants, needs and behaviors, which insurers can use for more targeted product design, pricing and sales.

Customer-Centric Innovation
According to the report, technology-led shifts in distribution increase transparency, empower customers and lower barriers to entry in some markets, which can lead to further commoditization of insurance products. Insurers who innovate and build trusted brands will succeed in the more price-competitive world.

However, successful innovation requires a culture that fosters experimentation and accepts failure during the design process. The key is to harness the insights from data analytics to improve risk selection and pricing, and to use technology to increase customer centricity in insurance products and services, the report says.