Data is the key to new operational models for the insurance industry
There is a big dilemma in the Nordic insurance sector. The Nordic marketplace has been overrun with innovation over the past few decades. As new products, services and business models have revolutionized most sectors, the Nordic insurance industry has mostly been trapped in stasis.
Digitalization of services, the internet of things, big data and innovation through ecosystems are changing insurance business models and operations as well as customer expectations regarding the customer experience and transparency. New insurance ecosystems are changing and expanding possibilities for the insurance business into areas previously considered off limits.
Despite this ground-shaking development, the Nordic insurance sector has mostly remained in place. Rather than making a big digitalization leap, the sector has undertaken only modest development and fine-tuning. However, these tiny yet long overdue adjustments are inadequate in the new competitive environment. At the same time, the insurance marketplace has been flooded with globally competitive start-ups, and traditional business models are under assault from these nimble start-ups that are rewriting the rules.
To succeed in today’s competitive era, the full potential of digitalization must be realized, and insurers are no exception. In the digitalized world, new services, a top customer experience and competitive advantage will not come from just doing things the traditional way and following others but from brave innovation. Change and innovation is not about abandoning the past and its successes. More than ever, Nordic insurers must nurture and develop their foundations in trust, expertise and continuity among their customers. These are the essential characters that should distinguish the Nordic insurance industry from global competitors.
The very foundation of insurance operations must change
Becoming a complete “digital insurer” requires a fundamental and complete change of the core operation model of insurance companies. Many insurers are still doing business with old operation models that have digital solutions only glued on top of them.
Insurance companies need to adapt and change the core of their operation model to utilize data, information flows and cognitive analytics. This change is not just about updating systems and processes, but making data the foundation of everything—in other words, putting data at the centre of how insurance companies operate and provide value to customers. One common problem of today is that the appropriate data is scattered across different systems and touch-points without a comprehensive view or processes that valuably utilize this data.
Customer centricity is the ultimate goal of developing core operational models that utilize data effectively. An excellent insurance customer experience is a key factor in business and customer success—now and in the future. For the customer, the only thing that matters is that how quickly, smoothly and transparently the processes and services work for them. For insurance customers, it is not necessarily important who provides all the individual services within the insurance process, but who offers processes with real value. For insurance companies, this means that owning and providing quality processes driven with data is becoming ever more important. Accordingly, insurance companies also need to partner with non-insurance companies and lead their ecosystems to create additional services and new value for their clients. This requires a shift from “proprietary” to “open source” mindsets. Or in other words, a shift from exclusive to inclusive processes needs to happen within the insurance industry in order to adapt to the changing business landscape.
The true combination of data, cognitive analytics and customer orientation can be used to develop customer service and open up new business opportunities. For example, if a potential customer posts on social media about their upcoming travel or new home, insurers can target their messaging with offerings that address this need in real-time. This is not spam, but targeted and personalized service, sales and marketing all at once. However, this becomes spam if you target the wrong audience, at the wrong time and with the wrong solution. To avoid this, the right data and operational model to utilize it are vital.
Digitalization within the Nordic insurance sector is no longer about a willingness to change, but the extent of your willingness to change.