A report published last year by international business consulting firm McKinsey warns that the business models traditionally used by life assurance companies are no longer working, and the industry will have to become more flexible and more open and interactive with its customers if it is to attract future generations of consumers in significant numbers.

The report, “Transforming life insurance with design thinking”, by McKinsey researchers Markus Berger-de Leon, Jochen Kuhn, Ildiko Ring and Maximilian Straub, points out that, globally, start-ups and peer-to-peer networks in the digital sphere are taking over functions that traditionally formed part of the life industry’s offering.

In addition, the nature of the consumer is changing. “Generation Y, the Millennials, now coming of age, will comprise close to half of the insurance customer pool within the next 10 years. They expect highly interactive digital experiences, complete price transparency, as well as fast, and even instant, delivery. When seeking information, they rely less on friends and family, looking instead to social communities and online reviews,” the McKinsey researchers say.

And those people born in the 1960s and 1970s (known as Generation X) who are currently the predominant generation in the workplace, are also adopting many of these behaviours, they say, thanks to the “equalising” effect of smartphones.

The life companies, with their relatively rigid, cumbersome structures, are at a disadvantage in today’s fast-paced consumer environment in which products must constantly evolve to keep up with changes in people’s needs and technological advances.

The McKinsey researchers suggest that life assurers adopt a design-orientated approach that truly puts the customer first. This involves having real empathy with the customer, responding to “true, underlying needs” rather than “superficial, stated interests”.

It also involves a far higher level of interaction with the customer. The success of online start-ups such as taxi operator Uber and accommodation service Airbnb, they say, is not so much the digital tool itself as the experience it provides for consumers.

The approach encourages “iteration”: launching products that are perhaps not perfect to begin with, but which can be continually modified and improved. This is difficult for life companies, whose books typically contain policies going back 30 years. An answer, the researchers say, may be to have a two-speed structure that permits experimentation while supporting a book of in-force policies.

As is shown by Sanlam’s example, the big life assurers are getting the message. There is certainly one area in which they have a big advantage over small start-ups: technical expertise. Jack Kruger, the head of design at Sanlam, points out that although start-ups may be more nimble, they are unlikely to have the actuarial and medical expertise the big assurers can draw on when designing new products.

Another area in insurance where digital disruption is set to transform your experience as a consumer is the claims process.

At a trends briefing for the insurance industry held in Sandton this week, industry experts noted that the way an insurer handles claims is critical to the success or failure of the customer experience.

Leo Corcoran, the chief executive of insurance software specialists ClaimVantage, said many claims departments in South Africa are still using paper-based processes and their data is “locked in silos”. “They cannot start innovating and benefiting from disruptive technologies until they have consolidated their data and moved from paper to digital,” Corcoran said.

In a fully digitised environment, consumers will benefit from a smoother, faster claims process with fairer outcomes, and insurers will benefit from the analysis of shared data in the cloud, the briefing heard.