With the ever-increasing internet penetration and usage disrupting all aspects of business across the world in the past decade, technology has slowly and steadily reshaped how we live. In the past year, however, this trend has been catapulted amidst the COVID-19 pandemic and subsequent lockdowns when even the sceptics were forced to embrace digitalisation in an almost overnight fashion for business continuity and survival.
With every aspect of business transforming, distribution channels are no exception. These events have significantly altered how services and products are delivered, affecting consumer expectations and behaviour, and impacting businesses all over the region and beyond.
According to a Bain and Facebook study, 47% of consumers decreased offline purchases with 30% increasing their online spending. For this study, the buying patterns of 8,600 digital consumers in six Southeast Asian countries were analysed for six months in 2020. The study also found that the region’s digital consumers are expected to spend more time at home even after restrictions are lifted. Consumers are increasingly buying essentials online, delaying splurge spending and favouring value for money and trusted brands. The study concluded that consumer goods companies are responding by swiftly increasing product availability and visibility online, targeting digital engagement across platforms and optimising pricing and value perception.
The role of insurance distribution in an increasingly digital world
While digital distribution was an emerging trend even before the pandemic, there is no doubt that global lockdowns have spurred this further. These developments have now opened up unique opportunities for key stakeholders to fortify their operations with digitalisation efforts and one of the best ways to achieve robust digital transformation in any given industry is through partnerships and collaborations as evidenced by several studies and reports. However, it is important to note that these new trends also expose businesses to unique risks in terms of security and protection. This is where insurance distribution becomes key.
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McKinsey Partner Sumit Popli said in an interview, “there is a lot more data available, a lot more computing power available. This allows banks and insurers to really understand customers deeply by using analytics. And we know, in insurance, the best time to have the initial conversation is at life moments—childbirth, marriage, things like that. Banks and insurance companies can now find out, using data and analytics, which is the right time. There are a lot of attackers who also realise this shift and have started to go after this opportunity. They are going after the customers and they are getting a lot of traction, so banks and insurers need to change.”
The digitalisation of insurance distribution becomes even more pertinent with the shifting consumer expectations.
“Customer experience is becoming a key competitive weapon — and insurers need to make sure they keep up with customers’ expectations,” says Evangelos Avramakis, Head Digital Ecosystems R&D, Swiss Re Institute.
Tapping into a well-developed digital insurance ecosystem
This ongoing drive toward digitisation has put the insurance industry on the verge of a paradigm shift. Before the pandemic, companies that digitised were at the forefront but now, digitisation has permeated every level of the competitive landscape. It is no longer a mere choice but a necessity. The world’s growing reliance on digital technologies is redefining boundaries across industries and insurers need to hop into this phenomenon.
As traditional business models become obsolete and conventional borders fall apart, the future of insurance lies in collaborative ecosystems where different cogs of the digital world, such as IoT, AI, machine learning, fintech, and Big Data work together collaboratively. Hence, digital ecosystems are the way forward as we usher into an era without sectors. According to a McKinsey report, ecosystems will account for 30 per cent of global revenues by 2025.
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This benefits insurance seekers and providers alike. According to an Accenture study, 76% of insurers agree that their competitive advantage will be determined not by their organisation alone, but by the strength of the partners and ecosystem they choose. With digital partners that help fuel the insurtech industry enabling easy onboarding, quick deliveries, and smooth payment gateways while ensuring data security and integrity, providers will see unprecedented growth and customer acquisition. While on the other hand, customers get excellent experience, access to all relevant and important information at fingertips, plus personalised services such as promotions, discounts, and more.
To achieve this, the key thing is to effectively expand digital distribution channels. AXA, for example, has bought a stake in and secured a distribution agreement with simplesurance — software that integrates into online stores’ checkout process, allowing customers to buy product insurance with a click. However, simply placing their services in the right distribution channels won’t be enough for insurers. They need to focus on creating quality and relevant products.
Key things to consider for existing and aspiring ecosystem players
The rise of ecosystems is one of the greatest opportunities, but it comes with its set of challenges and risks. Not all industry players are equally suited to pursue this, and companies that dive in might not be able to capture all of the value at stake. Leading, at-scale insurers are somewhat better suited to evolve into orchestrators. However, this emerging trend does create an avenue for local as well as regional players to realign priorities and beat the competition in the process.
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There are several important factors to consider before embarking on the path of becoming an ecosystem player. It not only requires technology investments but calls for a 360-degree view of the business operations across various dimensions to ensure that the investments align with the requirements. From talent to culture and target audience to strategies — everything needs to be carefully evaluated and strategised if needed. Other crucial aspects are partnerships and collaborations.
Building an insurtech ecosystem requires aligning with partners from outside the insurance industry, and stakeholders need to be ready to do that.
Deep diving into digital distribution and ecosystems
In line with these emerging trends in the insurtech industry, Insurtech Connect Asia is bringing an APAC-focused virtual summit “DIGITAL DISTRIBUTION & ECOSYSTEMS: VIRTUAL SUMMIT” on 25th February (1 pm to 4 pm SGT). From the distribution of micro-insurance to embracing technologies to support digital sales forces and the relevance of bancassurance today to insights on how to effectively expand ecosystem and distribution partnerships, the summit covers a wide range of relevant topics in the form of panel discussions and solo presentations involving industry leaders and key experts. If you are curious to learn more about digital ecosystems and platforms, and seeking to ride the insurtech digital distribution wave, register for the virtual summit here asia.insuretechconnect.com/summit
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This article is produced by the e27 team, sponsored by InsureTech Connect Asia
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