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Digitisation must wait

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February 14, 2019

Digitisation is the buzzword on everyone’s lips. But customers don’t experience much of this in the context of insurance for companies. Is the insurance industry lagging behind? Where does the problem lie?

Digitisation is the buzzword on everyone’s lips. But customers don’t experience much of this in the context of insurance for companies. Is the insurance industry lagging behind? Where does the problem lie?

Machine-based process optimisation, job losses caused by AI (artificial intelligence), etc.; hardly any topic has featured more prominently in the economics headlines of recent months. Now one might expect, in a financially strong sector like the insurance industry, that corresponding innovations would be promptly promoted and implemented. However, the opposite seems to be the case, at least from a customer perspective. If we take a look at the offerings of company insurers in the area of employee benefits (occupational pensions, accident insurance, daily sickness allowances, etc.), we must grimly note that these are still in the early stages.

When it comes to occupational pensions, at least the larger providers have created reasonably attractive portal solutions that individual employees can also use to access their personal information. For group personal insurance, however, there are no digitally integrated approaches to be found. Policies, premium invoices and daily allowance statements are sent by mail. General terms and conditions and coverage fact sheets must be laboriously gathered via the provider’s website, not always with high hopes of success. Things don’t look any better in the collaboration between insurers and brokers, even though the topic of digitisation has been on the agenda for a whole decade already. Many providers have not gone past the status “as a PDF file via email”.

Therefore, customers only have this option available. In many cases, the independent insurance broker is the one to scan the insurer’s paper documents and send them to the customer via email, thus making them electronically available. It goes without saying that this process is not especially efficient and also carries numerous risks. Email does not represent a secure communication channel per se. Are all sensitive documents really only sent with password protection, using truly effective passwords? (And did you know, for example, that the length of a password is much more important than its complexity for security purposes?) Is the broker aware which data is considered sensitive from the company’s perspective? It’s not always clear. There is also a risk that emails could accidentally be sent to the wrong recipient. What about deputy arrangements (which might be organised for holidays, but not necessarily in the case of illness or accident), data storage (an inbox is not a data archive) and retrievability?

To state the case somewhat provocatively, the insurance sector outsources many steps throughout this process to customers, instead of providing a comprehensive digital solution of its own. If we consider our e-banking portal, for example, then we can easily imagine how this might look: A new policy is uploaded, the responsible HR team or (at the customer’s request) the responsible insurance broker receives (as desired) an email or text message. The broker logs onto the system using two-factor authentication and views the document. The broker identifies an error in the policy, leaves a comment on the document, then communicates the request for correction to the insurer. The customer is informed of this process in parallel. The following is also conceivable: An insurance premium invoice is placed in the portal. The broker marks the invoice as correct and the responsible HR employee already receives notification of this. The employee can then take this information directly from the portal and feed it into the internal approval process. Approvals are gathered in the portal so that they can be sent collectively, with all necessary data, to the party responsible for payment orders.

However, that is (still) far from the reality. Numerous obstacles stand between the status quo and solutions of the kind described. For instance, many providers first have a tremendous need to catch up with regard to their internal IT infrastructure. In some cases, they are still using systems that do not allow for automated connection to an appropriate portal. Progress is not exactly expedited by the margins – often very modest – that are achieved in employee benefit products, nor by the low market pressure. Not a lot will change unless some notable competitor clearly takes a thorough digital approach. Unfortunately, it must be noted in this context that hardly any providers openly communicate a comprehensive digitisation strategy (and if they do, only internally).

It will be interesting to observe the developments of coming years. Considering that a digitisation strategy cannot be implemented overnight, one can only hope that some major insurers will not miss the boat. In the best-case scenario, insurance brokers will be the first to bring viable solutions to the market. In a less favourable case, competing providers will do so. But there is also a worst-case scenario that cannot be ignored: New market participants with little industry knowledge but a high degree of technological expertise could storm the market in order to break it open – this sounds fantastical, but it’s not at all inconceivable, as many examples have historically shown in other industries.

We will continue in the future to report regularly on interesting topics related to the theme of employee benefits in Switzerland.

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