The digitalization of insurance sales – models of the future

Hand on heart – what do you buy online?

Consumption behavior has long aligned so that customers realize their wishes conveniently over the internet. From groceries through furniture, clothing, travel or services like taking out online loans – almost everything can be ordered with a few clicks these days.

No wonder the wave of digitalization rolls on unstoppably. More and more companies worldwide deal intensively with how they can present and sell their products online. So anyone who wants to stay competitive has to find innovative strategies for the digital transformation of their own business model.

This even puts conservative industries that have relied strongly on personal contact with their customers in their sales for decades under pressure to act. This concerns focus areas like housing, health and also personal provision. The insurance sector is one of the largest growth markets in the context of digitalization.

How a new buying behavior forces the insurance industry into upheaval

For many years, it was common to have a trusted broker within the family or circle of acquaintances. This person took care of all procedures around insurance and was available for questions in personal advisory conversations. Independently studying or even checking the offers presented was only possible up to a certain degree, due to a lack of transparency and the prospects' lack of knowledge.

Taking out an insurance policy was thus, for a long time, a process that could sometimes stretch over several appointments and that was, to a large extent, based on the personal relationship, maybe even dependence, on an advisor. But those times are over.

The reason for that is shown by a comparable example: the annual vacation. For many decades, it was planned and booked at the trusted travel agency. Leafing through the colorful catalogs was almost a celebrated part of the relaxation. But you probably already sense what this parable is aiming at: although a certain regular clientele continues to rely on advice in a travel agency, by now especially younger generations take the planning of flights, hotel stays and excursions completely into their own hands.

The transparency of the internet enables customers to conveniently compare and take out insurance from home – and thereby puts insurers under pressure.

The internet makes it possible. Customers can comfortably inform themselves online, compare offers and book at favorable conditions, without having to leave the house. The experiences and comparison values gathered in the process not only have the consequence that customers have a heightened price sensitivity. Digitalization ultimately also changes people's expectations regarding the availability of offers. What works online for travel, purchases or banking services should also be possible for insurance.

And there it already is for insurers – the pressure to act.

New market trends in insurance sales

Technological progress and the customer behavior that comes with it create changed conditions for insurance sales.

Various studies already show that more and more people inform themselves over the internet and are open to innovative offers. The customer journey no longer runs exclusively linearly in one communication area.

Instead, for an ever-larger part of customers, the process of the buying decision is a constant interplay of…

• Online touchpoints like comparison portals, insurers' websites, social media, email newsletters, customer service via chat, etc. and…
• Offline touchpoints like broker conversations, calls to insurers' call centers, etc.

This presents not only industry newcomers like InsurTechs, but above all long-established insurance companies with new challenges:

• The demand for digital information offers on various communication channels increases steadily;
• Due to the greater transparency and easier access to details, customers today are better informed about the price and performance of individual insurers, which sensitizes them to a critical assessment of offers;
• In addition to classic sales, purely digital offers for insurance push into the market;
• The number of customers who don't necessarily need personal contact for a buying decision rises;
• Elaborate advisory processes have to be simplified so they can also be represented digitally in a transparent and appealing way;
• Reorganization of internal structures and business models, since digital sales requires a different cost efficiency.

Sales models of the future for insurance companies

Ultimately, digitalization puts an important cardinal question in focus: how can organizations in the insurance industry position themselves for the future?

Even if answering this question requires an individual analysis and strategy for every company, there are nevertheless some central approaches and concepts that can serve as orientation:

Omnichannel presence

Hybrid customers, who make buying decisions both online and offline, will continue to increase. Accordingly, it's of great importance to be present and reachable for these potential policyholders on all communication channels.

Whether a customer first informs themselves on a website and then takes out a policy with a broker; or whether they were first advised by phone and finally choose an offer via a portal, the interaction possibilities are diverse.

What's decisive is that potential customers always find their way to you. That is, prospects should not only receive the desired information about your products independent of the medium, but also be able to take out the policy directly if they wish.

Internally, this means that compensation models also have to be rethought. After all, in the omnichannel environment, classic commission models are hard to implement, since the procedures of information, advice and the buying decision are more strongly interlinked.

Modernizing your own infrastructure

To be able to implement digital information offers and sales concepts, you need an infrastructure designed for it. Brokers who still throw heavy brochures around and websites in the retro look of the 80s provide few plus points.

The process of digital transformation should therefore be implemented holistically in insurance businesses. Appealing customer experiences aren't given just because the IT department revamps the website. Ideally, the switching process runs through all levels and processes. From the option of a digital claims report to the advisor who uses a tablet for their presentation.

The process of digital transformation should therefore be implemented holistically in insurance businesses – this also includes the use of digital media in personal advice.

In addition, the digitalized processing of customer data offers new possibilities for needs-based advice and sales. These include, among other things, tailored offers automatically created based on customer information.

Consequently, a modernization of insurance IT is unavoidable, which, as a powerful platform, has to do justice to the multi-layered requirements of customers and employees. An investment in a suitable core system that supports the delivery of end-to-end processes is a basic prerequisite for this.

Innovative products and sales channels

One disadvantage of the insurance industry is that many of the classic products and services can't be transferred 1:1 into digital form. Because most offers are so extensive and opaque that, for good reason, for many years only personal advice by the broker was the means of choice.

In the digital transformation of their business model, insurers should therefore increasingly rely on the development of new products and sales channels. Away from tradition and toward innovation.

In the course of this, a softening of traditional categories also makes sense. Customers – unlike the legislator – increasingly distinguish less by classic lines like life, health or property insurance. Versatile insurance modules that cover several product categories at once hit the zeitgeist here more closely.

In parallel, a coherent product presentation is advantageous. If you communicate clearly and understandably online and offline and convince through transparent and low-priced offers, customers will be more willing to interact.

Against this backdrop, special attention should be paid to the aspect of individualization. Insurance products of the future are those that are individually orchestrated and can be adapted according to the wishes and ideas of customers. The address should happen as much as possible through emotional messages, so customers can identify better with the products.

Sales itself can in parallel be organized in various ways, from direct sales through sharing and partner models to peer-to-peer insurance. Ideally, the insurer manages to establish a fully integrated omnichannel sales in which it can fully respond to the needs of its hybrid customers.

The digitalization of insurance sales – blessing or curse?

At the latest since the corona crisis, one thing is obvious in the entire German economy: even if digitalization per se isn't a new topic, there's still a need for action in many areas.

But what, especially for traditional sectors like that of insurance companies, sounds like an imposed curse is in truth a blessing. Because even if the digital transformation of one's own business processes and sales strategies requires a continuous rethink, additional investments and extra work – it pays off.

After all, the customer is and remains the pivot of all efforts. So if they increasingly shift their attention to online content and want new means and ways to buy services, the ball is, figuratively speaking, in the provider's court.

With the digitalization of their sales, insurers thus make an important decision: do they play the ball back to their customers and thus enable a match that satisfies everyone… or do they voluntarily leave the field?

If you face exactly that choice and seek the support of a consultant with industry expertise, digitalization competence and an overview of the entire market, then we're happy to be your point of contact.