Covid-19 drives digital transformation in the insurance industry

Robin Wagner, Senior Vice President: International Insurance at TransUnion

New research from TransUnion on the performance of insurers shows the pandemic has sparked a fundamental shift in consumer demand and buying behaviour, requiring new digital assets like seamless onboarding, with robust identity verification at point of contact.

The research shows Covid-19 has hurt heavily intermediated, non-digitally transformed insurers. An analysis by TransUnion of quote volumes during Covid-19 revealed considerable variations across regions. In the UK, for example, volumes were relatively flat, whereas South Africa and India experienced a substantial decrease.

To find out why, we looked at how insurance is sold in different regions, broken down by distribution channel - digital direct, intermediated or aggregated. In the UK, where volumes were least affected, around 80% of auto and property insurance is sold through digital platforms (about 70% digital aggregation and 10% digital direct). These platforms offer customers an end-to-end service, from quote to policy document. The remaining 20% of sales are from intermediated channels, where a broker or sales representative plays an important role in the process.

An analysis of volumes at the client level provided further insights. Regardless of region, those that were managing better through the crisis had three characteristics in common, all of which relate to digital transformation.

1. Differentiated, digital distribution: They offer some intermediation, but most sales are conducted through direct, digital channels.
   
2. Quote and bind online: The complete buying journey is conducted online, from the quote right through to the application process and delivery of policy documentation.
   
3. Digital policy servicing: Customers can perform a range of policy services online, too, from changing coverage ratios and named drivers to log a claim.
   

In light of measures taken to address the pandemic, it makes sense that organisations offering a full suite of services online will be in a stronger position to continue with business as usual than those relying heavily on intermediaries or telephony-based contact centres. Going forward, the ability to conduct business online and support a remote workforce will be a standard feature in business continuity plans.

Shift in consumer behavior

We’re also likely to see a shift in buying behaviour as work-from-home and lockdown policies require people to do just about everything online, from work meetings and classes to grocery shopping and social hangouts. Consumers will demand a different experience and buying journey.

As a result, digital onboarding and self-service will no longer be a differentiator, but a must. Research shows businesses lose up to 70% of potential customers because of cumbersome onboarding processes.

In today’s environment, defining the identity of who you are transacting with is also more critical than ever. Synthetic or stolen identity fraud is likely to increase as consumers across the globe are being targeted in Covid-19 related scams, as TransUnion’s Consumer Financial Hardship Studies show. Data-driven verification will assist in identifying potential fraud and reducing losses, while still meeting consumer expectations for seamless onboarding. Linking personal and device identity at the onboarding stage also improves the customer experience later, when customers use the platform to manage their policy or log a claim.

Verification of both the individual and device transacting on a digital platform is key to protecting insurers’ bottom lines, as well as their customers. On short-term books, loss ratios are between 10% and 20% higher for policies where identities have not been verified or addresses have been misrepresented.

Despite talk about digital transformation in the insurance industry for years, many insurers still rely heavily on broker or agent intervention. As the Covid-19 crisis forces a fundamental shift from face-to-face and contact centre channels to faceless, digital platforms, the need to verify personal and digital identities will become even more critical. Insurers with a digital onboarding journey that can service customers and underwrite digitally will emerge from the crisis in a much better position and will be favoured by the market.