Looking at the APJ market, competing around customer experience will be the main driver for digital transformation, but a clear overall plan is essential. Insurers need to be more proactive in order to succeed.
The APJ region is large and dynamic with two broad kinds of market, mature (countries such as Japan and Korea) and emerging (Indonesia, India, China), and hugely exciting potential.
Mature markets have an in-house development philosophy that dates back fifteen or twenty years. In emerging markets though, they start with a best-of-breed approach to package-based or policy-based software, which often has high maintenance costs and lacks agility, being centered more around the product than the customer.
Until the last financial crisis, insurers had never had a problem making profit. The 2008 financial crisis, however, was a trigger that forced them to move away from pre-existing models. Their focus after 2008, which had been on operational efficiency, finance and risk, is shifting towards to an agile, transformational mode. Now insurers in both types of market are looking at more integrated software types that allow greater understanding of customer insights, as well as being able to predict and react to risk in a timely manner.
So what about trends for the future? Well, from what we see, the software that insurers have is still not particularly customer-centric. Now that the financial crisis has settled, the focus – regardless of region – should be on how insurers can engage with increasingly demanding and sophisticated consumers, giving them reasons to stay loyal rather than swap provider. That means customer experience has to be a top priority. Fig 2.5 / 2.6 highlights the importance of Customer Experience.
The key to this next wave of growth will be combining digital intensity with operational excellence. Insurers have gone from in-house to package to integrated software. Next, therefore, comes integrated and agile platform-based solutions that sit along the broader value chain, influencing everything from operations to customer engagement.
To me, the core operation of insurance is managing a system of records, but however sophisticated, that’s purely an operational attribute. It doesn’t drive top line growth. To stand out and succeed insurers need to show their customers both differentiation and innovation.
If they get this right, then customer persistency, customer retention, cross-selling and up-selling will follow – and growth will be a natural part of that. So while operational excellence underpins it, customer experience will really drive the digital transformation, pushing all of the above and ending up in profitability.
Thus far, most operations we speak to have taken a reactive and tactical approach rather than a strategic one. A real shift in perspective is needed, one that aligns with the overall business strategy and sets the foundation for a route to customer centricity.
What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAPforInsurance.
- Mazahir M. Valikarimwala, Industry Vice President, SAP
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