Demand for improved customer experience is the top driver of digital transformation in Europe’s insurance industry, but with growing digitalization, insurers report increasing security vulnerabilities, according to the results of the second annual ISG Pulse of the Insurance Industry survey, conducted by leading global technology research and advisory firm Information Services Group (ISG)
Eighty-seven percent of survey respondents cited improving customer experience as the top priority in designing digital transformation initiatives, with a focus on “mobile-first” and platform-based solutions for customer acquisition and management, product and offer personalization, and simplification of customer touchpoints such as claims and document management.
The survey results also showed increasing security vulnerabilties are accompanying the move to internet-based business processes, with 42 percent of respondents reporting rapidly growing security risks originating from porous customer and workplace technology touchpoints. Democratization of IT and remote work models have further increased risk exposure.
The ISG Pulse of the Insurance Industry survey, sponsored by Hexaware Technologies, surveyed 210 business and IT leaders at European insurance companies during the third quarter of 2021. Other drivers of digital transformation are competitive pressure, cited by 77 percent of respondents, and faster response to new market requirements, mentioned by 75 percent of respondents.
“The path to all-encompassing customer centricity is irreversible,” said Johanna von Geyr, partner and ISG EMEA insurance lead. “Insurance companies—like businesses of all types—recognize the need to further simplify products and business processes to retain existing customers and remain competitive.
“This trend will increase pressure on IT departments to replace legacy systems, modernize the application landscape and free up resources to develop new capabilities, better manage risk and transition to the platform economy,” she added.
With Insurtechs and other born-ditigal competitors poised to make market inroads, Europe’s insurers say expanding their platform businesses is a top priority. Of those surveyed, 43 percent say they would expand their online presence into a direct sales channel, with similar interest in mobile apps (42 percent), marketing via themed platforms (37 percent), and digital payment (34 percent).
Forty-five percent saw expanding their platform businesses as an efficient way to gain a more comprehensive understanding of customers’ needs and using that market knowledge to tap into new opportunities to create value.
With a growing digital landscape leading to more cyber risk, insurers plan to spend more on cybersecurity in the future, von Geyr said, citing the survey findings. “More than 40 percent of the European insurers we surveyed are expected to increase their investments in IT security technologies,” von Geyr said. “We expect the cybersecurity market will experience resulting growth in the next few quarters.”
Von Geyr noted the rise in cyber breaches also offers insurers the opportunity to help their customers improve cyber resilience with expanded cyber coverage and a holistic risk management approach. Some insurers are bundling cyber coverage with features such as cyber risk reports, cybersecurity training and risk advisory services.
To expand their digital capabilities, 46 percent of survey respondents expressed a desire to hire more qualified staff, particularly in data analytics (42 percent) and cybersecurity (40 percent), and 34 percent of respondents said they are seeking suitable IT service providers.
“Most respondents see the benefits of digitalization, such as cost reductions and increased speed, as far outweighing the risks,” von Geyr said. “The rise of millennial buyers, emerging competition, margin pressures, and a tightening regulatory environment have created a landscape in which only agile, data-driven, digitally enabled insurers will survive. Insurance companies are realigning their operations to an ‘online-first’ customer engagement strategy to meet these changing market conditions.”
The ISG Pulse Check – State of European Insurance Industry 2021 report is available on this website.