Insurance Market Is Transforming Towards the Phygital

Insurance

Published 24 Jan 2024
5 min reading
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Insurance Market Is Transforming Towards the Phygital

In the post-pandemic reality, insurers in Europe, United States or China are trying to hold on to the clients by investing in the concept of phygital, and putting consumer experience at the heart of digital transformation programs. McKinsey shows that around 45% of consumers were driven to digital channels because of the pandemic or for their convenience, while 48% still prefer physical channels. In the case of insurance company customers, 24% of them still prefer to talk physically in person.

Phygital is a concept of using technology to bridge the digital with the physical, for the purpose of providing unique interactive experiences for the user. Insurance would generate higher consumer satisfaction through phygital experiences.

Consumers live in an omni-channel way, and that’s where insurers have to multi-access them

Modern insurance customers don’t just want to do business online. They demand the ability to make decisions through any medium of their choice. The omnichannel is the way to give them this ability. Traditionally, insurance agents were designated as a primary customer interaction channel, but this approach has all but disappeared.

The basis of the omnichannel is the integration between the channels used. Regardless of which channel the customer decides to use, they receive the same offer and can switch between available channels during the process. This has a positive impact on customer experience and the process of digital transformation itself.

This mix of available touchpoints makes for much more complex consumer engagement. According to McKinsey, share of life-insurance customers using a multi-access is twice as large as those who take a purely online way: 61% vs 30%.

multi-channel access

Insurers are catching on – but slowly

Customers are pushing their expectations every day, but what does the reality of insurers look like? The insurance market does of course listen actively to the demands, heading their transformation in the expected direction, but as with any modernization path it first has to overcome some obstacles.

Complex products and processes – both are serious barriers to overcome in insurer’s omnichannel transformation programs.
Fragmented sales processes – advisors have to handle multiple client touchpoints to complete the sale.
Poor data quality management – this leads to suboptimal decisions like offering the wrong personalized policy.
Manual interfaces between digital capabilities – they are still common and can lead to significant efficiency losses.
Disjointed systems – advisors have to spend a significant amount of time processing data to write quotations or make new business. On average, it takes an advisor up to three meetings to sell a new life policy, whereas a fully integrated system could do so during a single meeting.
Improper design/deployment of mobile applications, chatbots etc.
Outdated systems – those have proven to be the largest obstacle to digital channels implementation.

time to catch up

Making the Omni-work

Fully integrated omnichannel service requires a single view of customers. This is core to the implementation of processes in which customers are able to engage seamlessly through multiple channels. This way of insurance transformation insurers can start with:

A customer update needed to map and analyze customer needs,
Creating personalized customer engagements by interacting with customers at the right time and with the right message, creating hyper-personalized offers, proactive servicing, event-based processing, decision automation etc.,
Building systems to allow users to move seamlessly between channels, along with appropriate customer data, preferences, and key relationships,
Educating employees, sales network and customers to be digital-native,
Realization that human-to-human interaction (h2h) plays key role in the sale of high-value, more sophisticated products,
Building product portfolio suitable for sales in both h2h and direct digital channels,
Remembering about simplicity and clarity – according to EY 2021 Global Insurance Outlook, 63% of customers do not understand the extent of their life insurance coverage,
Process simplification – complexities driven by legacy systems, products, and culture is the key driver of the cost of IT solutions in omnichannel strategy,
Verifying the ability of existing IT infrastructure to support the integration of direct and agent channels.

omnichannel support

What are the benefits?

Omnichannel is a way to ensure higher customer satisfaction, insurers satisfy both digital savvy and non-digital savvy customers. Satisfied buyers are more loyal – providing positive customer experiences increased the chance that they will extend the policy by 80%, according to a report by McKinsey.

It also reduces costs by automating a significant proportion of the customer management, while smooth interaction of channels significantly raises quality of processed data sets. The omnichannel improves personalized offers and automated claims processing.

benefits

How to build the phygital?

Build and modernize the environment, step by step:

Step 1: Digitization of distributor portal – to address integrated lead management, needs analysis, quotation, and unified view of customers across segments optimized for live collaboration with customers. Advisors network is the most important sales channel for life insurers. Research shows that two-thirds of European insurance distribution is focused on physical intermediaries.

Step 2: Omni client portal – with built-in self-service capabilities, from quotation to payment and issuance, so that customers can close insurance deals themselves, or with an advisor assistance. Flexible, configurable solution that allows to improve business through automation and digital transformation.

build phygital

Step 3: Develop the customer-engagement models – for self-directed education, planning or wellness programs. Hybrid solutions driven by predictive analytics linked to life stage and data will allow mass customization of products, dynamic sales, and product modernization.

Step 4: Digital front integration with back office – it would seem that implementing a digital channel would be an obvious insurance transformation strategic choice, but insurers become challenged with inflexible legacy systems.

Step 5: Digitizing the end-to-end process – this step requires integrating significant amounts of client data across systems, and improved forms of analytics. Making use of customer data and integrated sales processes that route customers between direct channels and agent network, is a preliminary step to full channel integration.

Step 6: Full channel integration – which leads to a seamless, consistent customer experience that puts customer needs at the center. It provides access to relevant products and services through all channels and touchpoints.

Insurers better stay away from extensive custom builds, which can add to technical debt. They should use multi-component solutions that are ready to be integrated into the legacy core, based on open architecture principles, just as our omnichannel platform – Comarch Digital Insurance

Aleksandra Romot

Aleksandra Romot

Senior Business Consultant