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Wednesday 03, May 2017 by Nabilah Annuar

Insurance: optimising the customer experience

Michael Jensen, Managing Director MENA Zone, AIG, discusses the impacts of digitisation and its disruption on the insurance sector.


The winds of change from digitisation and technological transformation are being keenly felt across our regional insurance industry.


This provides an opportunity from which both insurance companies and clients can benefit, particularly as the introduction of new digital distribution channels and bancassurance continue to improve awareness and penetration of personal insurance in the MENA region.


This thinking was confirmed by recent research conducted by MENA Insurance Pulse, sponsored by AIG, which found that regional industry players see technology as one of the top three opportunities offered by MENA insurance markets.


Technology is challenging traditional insurance business models; it has the potential not only to change the way insurance companies fundamentally operate, but to revolutionise the entire customer experience at the same time.


Data analysis and cost cutting


Insurance companies have been gathering and analysing data since the dawn of the insurance industry, but advances in technology, together with the staggering growth in the number and type of internet-connected devices, mean that insurers now have the ability to generate and analyse huge data sets. This data can then be factored into risk calculations and product offerings, at a lower cost than traditional business models allow. Insurance companies in the MENA region are starting to capitalise on the enormous opportunities offered by this. And we’ve only really just scratched the surface.


In a competitive insurance market as we have in the Middle East, insurers are looking for opportunities to optimise their processes and cut costs; the increasing digitisation of the MENA insurance market brings with it the potential for insurers to do this. Cost savings may eventually be passed onto customers as a tactic for customer retention. However, as the MENA Insurance Pulse 2017 research shows, customers are in fact willing to spend more money for a more appealing product or a better customer experience.


Customer experience and expectations in the digital age


The MENA insurance industry was historically very much driven by price competition. However, we are seeing a solid trend towards client service and customer experience being a key differentiator for insurers.


From a customer’s perspective, the ease of engaging with insurers has a significant impact on their overall experience. Customers today are increasingly demanding services at the push of a button on their smart phone. They want it easy and instant. As customer behaviours evolve, so do their expectations when it comes to how they interact with insurers—customers want to engage with insurers online and expect the same ease of use and access from their insurers as they get, for example, with mobile banking. This shift is particularly noticeable in the MENA region, where mobile penetration rates are amongst the highest in the world, and there is a large millennial population whose use of mobile technology is integral to their daily lives and jobs.


This shift towards improving the customer experience using methods tailored to the modern end-user has driven insurers to innovate and develop new ways of connecting with their customers. The MENA Insurance Pulse 2017 has found that not only is digital one of the most popular distribution channels amongst regional insurance companies, but it also has the most significant potential for growth among the younger, internet-savvy population. AIG’s full-purchase enabled internet site for travel insurance and personal accident insurance products is a good example of this.


That said, digital interaction is complementing and optimising traditional methods, rather than replacing them. For example, banks still represent a popular insurance distribution model.


With a balance between traditional and digital distribution channels, both opportunities and risks have emerged. With the rise of digitisation and the internet of things, cybersecurity is increasingly high on the priorities of banks and financial services firms in the UAE and the wider region, who are already investing in cyber security, risk mitigation and insurance.


The benefits offered by bancassurance


Bancassurance delivers its own set of benefits for both insurance companies and customers. Take as an example AIG’s partnership with Bank Muscat, Oman’s leading financial services provider. Since 2014, AIG Oman and Bank Muscat have had an exclusive partnership, which enables AIG to offer specially-tailored insurance products at around 60 Bank Muscat branches throughout the Sultanate. Through this partnership and continued efforts to educate consumers on the benefits of adequate insurance, AIG has access to a strong client base who are now aware of the benefits of being insured, whether to protect their car, home or family. AIG and Bank Muscat now serve over 50,000 customers in Oman.


This ease of access to insurance through both bancassurance and digital channels serves to increase both awareness and penetration of insurance in the region.


Insurance penetration is on the rise, despite economic headwinds


As we know, the Middle East is under-insured in comparison with other global regions. However, penetration rates are increasing, and this trend is expected to continue in spite of economic headwinds, thus presenting the regional insurance industry with a great opportunity.


The economic slowdown caused by the sustained low oil price and geopolitical instability in the MENA region has, of course, had an impact on the regional insurance industry. It was not long ago that customers were switching to bigger homes and enjoying several cars per household—all of which were insured. That reality has now been downsized, but in my experience, a short-term dip can also present opportunities that result in longer-term growth.


As customers rein in their spending, insurance companies are looking ahead. They are reflecting on their existing business operations, marketing tactics and product offerings and identifying innovative ways of working around the challenges they face, both to their advantage and that of their customers in the Middle East. Two key elements of this shift in focus are the continued education of consumers in order to increase insurance awareness and penetration in the region, as well as a focus on delivering better customer service, experiences and value, which enables insurers to differentiate themselves from their peers and ensure a positive customer experience.


Commitment from regional insurers to focus on innovation and embrace technology as a means of providing a better customer experience is a key part of the resilience of the regional insurance market in the face of economic turbulence. It can help spur on the underlying and fundamental growth of the regional industry.


The MENA insurance market is resilient


As in 2016, continued volatility is likely this year, but we at AIG remain positive in our outlook for the insurance industry in 2017 and beyond. To remedy lower insurance penetration rates in the current Middle East market compared with other global regions, regional industry players must continue to educate their customers on the essential protection and peace of mind brought to them by all forms of insurance, from SME insurance to auto, property, life and cyberinsurance. Moreover, they need to make it easier for customers to choose and buy these products.


Once the macro environment starts to settle down, this emerging digital insurance industry will guarantee greater products, improved customer awareness, and ultimately, it will spur greater, hopefully sustained, growth of a larger, stronger market. All of which means the future of the regional insurance market looks bright!

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