Buying insurance from a tech giant such as Amazon or Google could become the 21st century equivalent of buying it from the supermarket.
The World Insurance Report 2018, released on Wednesday by Capgemini, suggests 29.5 per cent of customers globally are willing to buy insurance from big tech firms, which the report names as Amazon, Alibaba, Apple, Facebook and Google.
That’s a big rise from 2015 when only 17.5 per cent of consumers were willing to consider buying insurance from a technology company.
In the Asia Pacific region, which includes Australia but excludes Japan, 40.1 per cent of customers are willing to buy insurance from a tech company, compared with 25.1 per cent in 2015.
Mohit Jain, VP and chief customer officer for Capgemini’s financial services business in Australia and New Zealand, says Amazon, Alibaba, Apple and Google have teams exploring financial services, including digital banks and insurance.
“The big tech giants are ... never going to be able to differentiate on the rating part of it or the underwriting part,” Jain says. “They’ll only be able to differentiate on how nimble and simple their products are.”
For the most part, the tech companies would be ‘'white-labelling'’ an existing product, underwritten by a traditional insurance company. That’s the same model used by Coles and Woolworths and many other consumer-facing brands, such as Virgin.
But Jain says some tech companies are looking at how to disrupt the back-end as well, such as with blockchain technology.
Although Facebook is named in the report as a big tech company, Jain is sceptical a move into banking or insurance would be on the cards for the social networking giant.
“I think Facebook have their hands full with some of their own doings,” he says. “It’s not to say they wouldn’t have considered how to monetise the amount of data they have, but Facebook has really hurt themselves with the trust element and I don’t think people are going to trust their financial services products with Facebook.”
The report, which includes a survey of 10,000 customers and 130 experts in 20 countries, suggests the digital experience is more important than the actual product for a growing cohort of insurance customers.
Insurance companies are lagging behind the banks, and in Australia the gap is particularly large, the research suggests.
Globally, 39.3 per cent of banking customers and 32.8 per cent of insurance customers reported a positive experience, based on ease of use, personalisation, and mobile app features. That’s a 6.5 percentage point gap.
In Australia, 46.5 per cent of banking customers and 38.1 per cent of insurance customers reported a positive experience. That means the gap between banking and insurance was larger, at 8.4 percentage points, though both sectors performed better than the rest of the world.
The contrast is even starker for young Australians.
Globally, among consumers aged 18 to 35, 32.6 per cent of banking customers but only 25.7 per cent of insurance customers reported a positive experience. That’s a 6.9 percentage point gap.
For Australians aged 18 to 35, the gap between satisfaction of banking customers and insurance customers is 13.1 percentage points. That’s because 42.3 per cent of Australian banking customers in this age group reported a positive experience, versus 29.2 per cent of insurance customers the same age.
North American insurance companies are leading in this area, with 33.2 per cent of customers aged 18 to 35 reporting a positive digital experience.
Jain says consumers who are dissatisfied with the digital experience are more likely to churn to another provider. However, the traditional channels are still being used by younger customers, so it needs to be an omni-channel experience not digital-only.