Traditional insurance carriers are facing an imperative to embrace digital capabilities, and many are well suited to do so. McKinsey caught up with Yolanda Zonno, a partner in the Madrid office, to discuss how digital has changed the insurance landscape and what traditional insurers can do to stay ahead of the curve.
McKinsey: How is digital affecting insurance distribution?
Yolanda Zonno: Digital adoption in insurance still lags behind other industries. According to our Finalta research, about 30 percent of insurance clients use digital to interact with their insurer compared with 70 percent of clients in banking, for instance. The purely offline customer, however, is progressively disappearing, giving way to digital customers, who account for 24 percent of users in the United Kingdom, 9 percent in Germany, and between 2 and 4 percent in other Western European countries for nonlife insurance.
Hybrid customers are the largest segment today. In 2020, these customers accounted for more than 50 percent of nonlife customers in Europe, including clients who research online and contract either offline or through remote advisory services—a growing trend in bancassurance, especially in Southern Europe.
McKinsey: What opportunities does the evolving context bring to traditional insurers?
Yolanda Zonno: Traditional insurers have the advantage of having established relationships with clients. The digital momentum has created an imperative for traditional insurance carriers to reactivate and deepen client relationships, and it has provided a vehicle to better and more conveniently access prospective customers.
To take advantage of the opportunity, insurers should do two things. First, invest in providing a distinctive experience by offering digitally enabled and personalized sales and services to clients. And second, they should shape their revenue growth agenda to include bold moves. These could include building a digital sales engine with omnichannel lead management, shaping an integrated value proposition beyond insurance, and leveraging distribution partnerships with digital players and non-insurers such as utilities, telcos, or real estate agents.
McKinsey: How can insurers set up a successful digital sales distribution model?
Yolanda Zonno: Insurers should act on two levels. First, they should learn how to boost digital sales performance to drive more and better digital traffic for both new and existing clients. They can tap into tools such as dynamic budget allocation on paid channels and micro segmented analytics use cases. They can also improve online and online-to-offline conversion through outstanding customer journeys in areas such as motor, home, and term life, and personalize and sequence multichannel campaigns and remote sales.
Second, they should create a digital sales backbone by implementing a marketing technology stack that enables a 360-degree client view and boosts campaign automation. This backbone can allow insurers to harness data and analytics for real-time decision making and refined targeting and put in place the capabilities and operating models that foster speed, omnichannel expertise, and innovation.
Many insurers have already laid the foundations to scale digital sales and have delivered impressive results—some growing sales by up to four times—in just a few months without cannibalizing offline results.
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Yolanda Zonno is a partner in McKinsey’s Madrid office.