The Digital Insurance Imperative: Go Digital Or Go Bust

Ellen Carney

The bedrock of the insurance industry is quaking. For decades, large North American insurers got bigger by dominating distribution and methodically mastering information technology.  But the confluence of changing customer demands, hundreds of insuretech startups and non-traditional competitors sniffing around the business of insurance is messing up the long-standing insurance equilibrium.  Insurance carriers--and their agents and brokers--must go digital or go bust.  

During the second half of 2016, my fellow Forrester analyst, Oliwia Berdak and I interviewed digital business strategy executives with traditional insurers and hot startups around the globe to get their take on the role that digital will play in the business of insurance over the coming decade.  What were the big takeaways from our conversations?  Consider that:

  • Digital technologies have enabled new insurance models, threatening incumbents. Digital disruption threatens to reduce many insurance companies to low-margin utilities, with limited engagement with or relevance to customers.
  • Legacy insurers are struggling to respond.  Even though nearly one in three insurers told us in a separate survey that they were in the midst of massive disruption, insurers are being thwarted by their business silos, legacy tech, disconnected business partners, their scramble for skills, legal and compliance, AND the fact that except for auto, other business lines are profitable.
  • Vertical integration will break apart. The vertical integration that served insurers so well in the past has become an obstacle to the rapid change unleashed by digitally empowered customers. The insurance value chain will fragment as companies build new partnerships, pursue new revenue streams, and seek new ways to create value for customers.
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Which Nifty Mobile Banking Features Is Your App Missing?

Peter Wannemacher

Not long ago, Forrester published a report that listed “Eleven Mobile Features That More Banks Should Offer.” These features are nifty and valuable mobile services that a majority of banks worldwide don’t offer. As a follow-up to this research, we thought that we’d share three additional mobile banking features that we see more companies rolling outin the near future:

  • Cardless ATM transactions. Over the next five years, Forrester predicts a sharp rise in cross-channel banking interactions - in which a customer or prospect moves from one touchpoint to another to complete an objective. Mobile will act as the so-called “connective tissue” in many of these cross-channel journeys. For example, some banks* now support mobile-to-ATM cardless cash withdrawals. In general, the bank’s mobile app generates a code that customers can either use to enable ATM usage or send to others who can then withdraw cash directly from an ATM. Leading banks are enabling cardless ATM transactions in an effort to expand their mobile services. Wells Fargo, for example, already has a good mobile app — and the company is now being proactive by rolling out cardless ATM access and other next-generation features. There are many scenarios and mobile moments where cardless ATM transactions will prove their worth in convenience and value to customers.
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The Top Emerging Technologies For Digital Predators

Nigel Fenwick

If you’ve been following my research, you know I like to divide the business world into three categories of company:

  • Digital Predators successfully use emerging digital technologies to gain market share and/or displace traditional incumbent companies (e.g., Amazon, Lyft, Priceline, Airbnb, Netflix).
  • Digital Transformers evolve a traditional business to take advantage of emerging technologies, creating new sources of value for customers and opening up new competitive strategies (e.g., Burberry, Nestlé, L’Oréal, Unilever, USAA, Ford, Delta).
  • Digital Dinosaurs struggle to leave behind their old business model. These companies are typically slow to change because they must defend large P&Ls, or they have a near monopoly position, or they simply don’t see the opportunity/threat (e.g., many retailers, taxi companies, manufacturing firms, legal firms, recruiters, construction firms).
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What Financial Services Execs Can Expect In 2017

Peter Wannemacher

Every fall, more than a dozen Forrester analysts across multiple roles meet to discuss what executives and leaders at financial services firms should anticipate over the next year. Driven by our ongoing research, the result of this brainstorm is now available as the just-published “Predictions 2017: Pioneering Financial Providers Will Partner With Fintech To Build Ecosystems” report. Forrester clients can read the full predictions report by clicking the button here:

               

For non-clients, here are three of the 16 predictions we outline in our new report:

  • Leading providers and fintech firms will partner to build ecosystems. Dynamic ecosystems of value threaten traditional, vertically integrated financial firms that want to stick with the old-school value chain. But ecosystems also offer opportunities to financial providers that think carefully about the roles they want to play in the ecosystem — and by extension, the role they want to play in customers’ lives. Pioneering financial providers like BBVA have built ecosystems with fintech firms like OnDeck, and we predict that in 2017, more leading firms will follow suit and build dynamic ecosystems of value.   
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We Have A New Mobile Banking Leader: Westpac Tops Forrester’s Global Benchmark In 2016

Aurelie L'Hostis

Mobile banking adoption has reached critical mass. Rapid progress in mobile technologies and consumers' ever-increasing expectations and changing behavior have left many banks around the world playing catch-up. In the meantime, a cluster of banks is racing forward by putting customers at the center of their strategy, striving to anticipate customers' emerging needs, and by embracing an agile and iterative approach to speed up the development of new mobile capabilities that differentiate them from their peers. Today, these banks are delivering outstanding services to their customers in mobile, and in 2016, Westpac in Australia is leading the pack.

To help digital business strategy leaders better understand the landscape of mobile banking, identify best practices, and benchmark their own capabilities in this area, Forrester conducts an annual functionality benchmark applying 40 criteria. This year, we evaluated 46 leading retail banks from more than a dozen countries across four continents, and have just published the findings in our "2016 Global Mobile Banking Functionality Benchmark" report.

Here are some of the highlights from the global benchmark report:

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What Drives Mobile Banking Engagement?

Peter Wannemacher

This blog post is a collaboration between Peter Wannemacher and Nicole Dvorak, who also collaborated on Forrester's brand-new report on this topic.

As former New York Mayor Michael Bloomberg once tweeted, “If you can’t measure it, you can’t manage it and you can’t fix it.” Digital executives at banks must understand and gauge the drivers of mobile banking in order to boost engagement. To help executives and their teams accomplish this, Forrester recently built a driver analysis model to identify which factors increase mobile banking app use (as measured by the number of days used and the average duration of a session). This model included two categories of potential drivers: perceptions and behaviors. The full results of this research are detailed in our new report here.

Here are three key takeaways from our research:

  • Feelings of accomplishment fuel mobile banking use. The degree to which a mobile banking app helps a customer feel positive and accomplished has the largest impact on how often that customer will use mobile banking. This is further evidence that architecting positive emotional experiences is crucial to maintaining an engaged mobile banking audience. At leading providers, digital business execs and their teams will accomplish this, in part, by focusing on bank customers' mobile moments.  
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Spain, Turkey, And Poland Continue To Lead The Way In The European Mobile Banking Market

Aurelie L'Hostis

For the second year in a row, Spain’s CaixaBank tops our review of European banks’ mobile banking services. Not only CaixaBank delivers the basics superbly when it comes to transactional features, it also excels in offering a wide array of touchpoints including a smartwatch app and a fully-optimized mobile website with product research tools, as well as best-in-class alert services, and outstanding marketing and sales functionality.

Forrester has just published its 2016 European Mobile Banking Functionality Benchmark, revealing important insights about the current state of European mobile banking. We evaluated the mobile banking services of 11 of the largest retail banks in Europe, and found out that CaixaBank in Spain, Garanti in Turkey, and Bank Zachodni WBK in Poland continue to lead in mobile banking. The three banks achieve mobile banking success by offering both strong basic functionality and a wide range of next-generation features. For example, CaixaBank lets customers make mobile contactless payments in store by providing a digital wallet integrated into the main mobile banking app. Garanti offers an interactive, voice-activated virtual assistant that customers can use to search the app for functionality and various task like finding a past transaction. Bank Zachodni WBK helps customers reach human help easily by offering video banking through their mobile banking app.

What defines a mobile banking leader?

Mobile banking leaders prioritize mobile initiatives and keep on testing and learning to introduce substantial improvements month after month. By doing so, they deliver more engaging customer experiences and create new value for their customers.

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Banks: Your Customers’ Cross-Channel Experiences Are Shoddy (Or Worse)

Peter Wannemacher

Note: If you’re a Forrester client, you can jump straight to the full report here.

The other day, I stopped by my bank’s ATM to get some cash. After entering my card and PIN and while waiting for my money (during which I was a captive audience), I was presented with an ad for a new service from the bank. Unfortunately, the ad’s call-to-action was a message telling me to call the bank’s 1-800 number to find out more.

I had just encountered one of the broken or inadequate cross-channel experiences that millions of customers face every year.

This is a lose-lose situation: In this case, the bank knew — or should have known — a heck of a lot about me as a customer, yet it failed to use context* to design a better experience and guide me seamlessly across touchpoints. And as a result, the bank also failed to cross-sell me any products or services.

Forrester defines cross-channel behavior as any instance in which a customer or prospect moves from one touchpoint to another when completing an objective. Today, cross-channel goes way beyond online-to-offline transitions; going forward, these interactions will only increase in frequency and importance. Digital executives at banks are left with a tangle of customer journeys across various touchpoints (see image below).

In our new report, Design Better Cross-Channel Banking Journeys, we show that:

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Digital's Golden Rule: Always Save Your Customer’s Time

Nigel Fenwick
Digital lessons from a recent hotel experience.
 
I’m sitting here in my hotel room writing this and watching the in-room dining web page on my phone fail. It’s apparently given up the ghost and is caught in a perpetual loop. It’s the first time I tried using this particular hotel chain’s mobile website. The “Room Service Order Online” features prominently on the first page of the in-room guide. Never one to miss out on an opportunity to test a digital experience I figured I’d give it a go.
 
First, the photo in the room guide shows what looks to be a native app. So naturally, the first thing I did was go to the App store and search for the app using the hotel name. Nothing. HMMM … time to take a closer look at the page in the in-room guide.
 
Aha … I now see I need to browse to the hotel’s web domain and append /atyourservice. Of course they could have offered a QR code to make it easy but they don’t so I type it all in on the tiny keys on my phone. And then I’m brought to a page that looks remarkably like the hotel chain’s main landing page. Bear in mind I’m browsing while I’m in my room on the hotel’s wifi network. They ought to know where I am.
 
Nothing on this page says anything about ordering food. But I can browse to reserve a hotel room at one of a number of hotels! I can even checkin! Oh wait - I did that already.
 
I‘m thinking there must be a link to room-service somewhere …. Wait … there’s a pull down menu at the top … let’s see what this has - surely there’s a room service menu in here?
 
Oh! this is what I find (see figure).
 
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The Age Of The Customer Will Drive Four Actions That Insurers Need To Take In 2016

Ellen Carney

Talk about interesting times in the business of insurance.  The year 2015 saw the attention-getting launch of Google Compare and its hibernation about 12 months later.  Traditional insurers like Mass Mutual and Shelter Mutual got busy and launched their own direct-to-consumer digital quoting and sales businesses.  State Farm was busy filing patents for by-the-trip car insurance and the means to measure just how stressed drivers were behind the wheel and rate their insurance accordingly. Prudential recognized that previously scary diseases were now chronic conditions that could be medically managed, launching life insurance coverage for HIV positive customers. AOL saw an opportunity and is now selling insurance to its members.  And we at Forrester have been busy keeping track of over 700 disrupters across FinTech that have been capturing market attention and venture capital. Some of these firms like Lemonade are returning to the social roots of insurance.   Lemonade's founders also  appreciate that consumers are irrational economic animals and decided to hire a  behavioral scientist to help them anticipate the crazy actions of homo sapiens.  And yet some people out there still call insurance a boring industry!

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