Here’s Why 41% of Americans Might Switch Their Insurance This Year

The coronavirus pandemic created a slew of challenges for insurance companies when reviewing and paying out policies. But for some insurers, outdated systems highlighted how unprepared they were to cope with high volumes of online users. 

“The crisis rapidly unraveled and exposed the shortcomings of companies. The crucial need to reduce costs and maximize the benefits of business investments is now fuelling the adoption of automation as a means of future-proofing businesses, across the industry,” says Monica Spigner, EVP of Business Transformation at Teleperformance, an international customer experience management agency.

Some insurance companies have been slow to adapt to consumers’ digital channel needs. So much so that 41% of people might actually change companies because of it, according to a survey by the accounting and consulting firm PwC.

This isn’t a new issue

Adapting to digital services has always been a challenge for the industry. A recent survey from Bain & Company found that only 62% of insurers have a mobile app. There’s an app for just about everything, but apparently not your insurance company. The majority of digital tools customers use are not resources provided by their insurer. Instead, they find them from manufacturers, healthcare providers or tech companies. The tables below show the number of respondents who own a connected device from auto, home, health and life insurance providers.

Figure 1 – Auto

Source: Insurers Now Need Bigger, Bolder Digital Moves. Bain Insurance NPS survey by Dynata, 2019.

Figure 2 – Home

Source: Insurers Now Need Bigger, Bolder Digital Moves. Bain Insurance NPS survey by Dynata, 2019.

Figure 3 – Health/Life

Source: Insurers Now Need Bigger, Bolder Digital Moves. Bain Insurance NPS survey by Dynata, 2019.

“The insurance industry has historically been slow to adopt emerging technologies, weighed down with manual processes and a lack of innovation. Having stayed fairly stable pre-COVID, insurers didn’t feel the need to digitize legacy systems — until now,” adds Spigner. 

[ Read: How COVID-19 Could Change Insurance For the Better

According to research from Mckinsey, the pandemic has considerably accelerated our desire for digital channels — it’s estimated we’ve jumped five years forward. Our need for accessible online portals and apps has been amplified and some industries have adapted better than others. Grocery chains allow you to simply pick up groceries without entering their stores, kids are learning virtually, and yet insurance companies haven’t followed suit.

What’s the future of the insurance industry?

To keep up with the needs of customers, insurance companies need to implement changes, ranging from strong VPN systems to security protocols to avoid cyber threats. Spigner adds that before the pandemic, up to 70% of insurers had outdated systems that weren’t built to be flexible or accessed remotely. 

A survey from Deloitte’s Center for Financial Services revealed that 48% of insurers realized how unprepared they were for the economic instability. Only 28% said they had a clear plan for dealing with the effects of the pandemic. The faults of the industry have been revealed and now it’s time to adjust or be left behind. Spigner has an idea for how companies can meet the needs of their customers. 

“By putting automation at the heart of their operations, insurers are effectively innovating to earn back the trust of anxious customers and create a resilient digital experience — both internally and for customers,” Spigner adds.

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Taylor Leamey

Personal Finance Reporter

Taylor Leamey is a personal finance reporter at The Simple Dollar who specializes in personal loans, student loans, mortgages, renters, and financial policy. Her reporting has also been featured at CreditCards.com, Interest.com, Reviews.com, MyMove.com, and elsewhere.

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  • Andrea Perez
    Andrea Perez
    Personal Finance Editor

    Andrea Perez is an editor at The Simple Dollar who leads our news and opinion coverage. She specializes in financial policy, banking, and investing.