Be an insurance Netflix, not a Blockbuster
One of Blockbuster's biggest failures was that it failed to harness the latest technology to achieve digital transformation.
In 2004, when Blockbuster was at its peak, the video rental company operated 9,000 stores across the globe, employed 60,000 people, and posted $5.9 billion in revenue. The notion that a rival service like the seven-year-old Netflix could dethrone Blockbuster seemed far-fetched. But within six years, Blockbuster had filed for bankruptcy as Netflix soared in popularity.
The decline and fall of the Blockbuster empire can’t be pinned on any one decision, but one of the company’s biggest failures was that it had failed to latch onto the growing availability of streaming technology. By contrast, Netflix embraced it, pivoting away from DVD sales and rentals in anticipation of changing viewership habits.
A similar dynamic is unfolding in the insurance industry, where those suspicious of change and slow to innovate may find themselves on the same trajectory as Blockbuster. Meanwhile, insurers who harness the latest technology to achieve digital transformation will be better positioned to serve an evolving market and win the future.
Here’s why digitization is to insurance what streaming technology was to the video market.
Digitization: Avoiding Blockbuster’s fate
To understand the growing importance of innovative technology to the future of insurance, look no further than recent trends in InsurTech funding. In 2019, InsurTech investment reached nearly $6.4 billion, a 63% increase over 2018 figures, according to Willis Towers Watson.
Advances in artificial intelligence and data analytics, in particular, are providing new opportunities to optimize operations and drastically improve customer service with reduced costs and speedier processing times.
While InsurTech fundraising plunged 54% in the first quarter of 2020 amid coronavirus-driven economic turbulence, the pandemic has, in fact, made enhanced digital capabilities all the more important for insurers. As business operations moved almost entirely online, companies that already had robust digital infrastructure found themselves faring better than technological laggards. Not surprisingly, even in a tight economic climate, few insurers are planning to scale back their digital investments, with a recent Lightico-Sapiens survey finding that 28% of insurers are actually accelerating their digital transformation plans and only 5% are retrenching. A major reason most insurers are moving full steam ahead? Sheer consumer demand.
What today’s consumers want
Thinking back to the rise of Netflix and the fading of Blockbuster, it’s fairly obvious from the vantage point of 2020 why consumers came to prefer the convenience of browsing, selecting, and streaming content, all from the comfort of their own homes when the alternative was making a trip to the local video rental store to select a movie and then making yet another trip to return it. Better yet, using AI technology, Netflix learned what types of content its individual viewers liked and tailored its recommendations accordingly, making it much easier for viewers to discover shows and movies they’d actually like.
Consumers increasingly expect that same convenience when it comes to insurance. In the Lightico-Sapiens survey, 66% said that they’d be inclined to try a new digital app or website to make obtaining a policy easier. Sixty percent said they have less patience for filling out and sending paperwork, while 68% expect businesses to increase their capabilities for serving customers remotely.
Carriers who can meet these expectations by delivering high-performance, streamlined digital experiences, powered by strong core systems, will enjoy the competitive advantage.
AI for effective digitization
Just as Netflix introduced personalized content discovery to millions of movie buffs and TV fans, insurers can deliver efficient and personalized experiences to their consumers. Unfortunately, the industry’s failure to do so may have left money on the table in recent years, with Deloitte revealing that sales of life insurance policies have nosedived 42% per capita over the past 20 years. A lack of engagement and doubts about the relevancy of insurers’ product offerings have driven this decline — AI can help reverse it.
Data-driven insights can help insurers direct consumers to the offerings best aligned with their coverage needs. AI chatbots and virtual agents can enable insurers to ramp up their customer service capabilities in a scalable, cost-effective way. Natural Language Processing (NLP) technology, a subset of AI, can process customer service requests in a natural and intuitive way while also assisting on the insurer side with underwriting and fraud detection.
By 2025, AI spend in the U.S. insurance industry, alone, is expected to reach $2.63 billion, unleashing new opportunities for greater operational efficiency, better customer service, and new revenue. Those who remain on the digital path will find themselves reaping the benefits of this transformation, while those who hesitate may wish they had heeded the writing on the wall sooner.
Alex Zukerman is the chief marketing officer and chief strategy officer at Sapiens. Zukerman possesses a long history with Sapiens and the companies Sapiens acquired. He started at FIS back in 2001, subsequently moved to IDIT, and then worked at Sapiens for more than eight years, eventually becoming vice president, head of corporate strategy. Prior to returning to Sapiens in 2020, Zukerman worked at Novidea as the chief revenue officer. Zukerman holds an LLB from Tel Aviv University and possesses extensive insurance, financial services, sales, business development and product management experience. The opinions expressed here are the author’s own.
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