Digital trust - blog Pravina Ladva: how insurers can help with it (swissre.com)
Read blog post from Swiss Re Group Chief Digital & Technology Officer, Pravina Ladva:
Every company that uses digital solutions relies on digital trust to engage with customers. If customers don’t trust the digital interactions with your company, you likely won't be in business for too long. But when you look deeper into what actually drives digital trust, you don't find a simple answer, and some of the common assumptions about digital trust turn out to be wrong.
I was surprised to see that the Swiss Re Institute's (SRI) recent publication "Decoding Digital Trust" shows that some common ideas about what increases trust can turn out undermining it. For example, one might expect a good correlation between digital trust and the strength of digital security legislation – a win for legislators determined to implement strong data protection laws.
Although a basic level of regulation increases trust, the authors found that, highly dependent on local conditions, digital trust will, past a certain point, not necessarily increase by adding further levels of rule-based protocol. Therefore, more regulation is not necessarily the be-all and end-all of creating digital trust.
There are many more non-linear relationships that led me to wonder whether there is any structured path to follow to understand what can bolster digital confidence among people. But there is no need to despair: There are quite a few proven means to boost digital trust. Let me highlight approaches on three levels that stood out to me in SRI’s digital trust pyramid, a nine-step methodology that provides a lens through which to approach digital trust.
There are ideal societal breeding grounds for digital trust
First, at the macro level, there are environmental factors, such as social-economic conditions and governance - that fuel digital trust. Insurers can support the right policies to promote these factors.
The SRI analysis reveals that countries with higher levels of digital trust usually exhibit one or more of the following cultural characteristics: They tend to have greater levels of innovation, higher incomes and better overall governance.
Although there is no silver bullet to achieve the ideal environmental factors for digital trust, I find it encouraging that certain societal characteristics are more suitable environments for creating digital trust.
The insurers can contribute to digital trust in others
Second, insurance already helps build trust in societal sectors from road traffic to health, from natural catastrophes to supply chain management. Now the industry is making its first steps into digital trust, most notably with cyber security products.
Cyber is the most obvious point on the digital value chain where insurers can seek to create trust. Insurers can consider incentivising "cyber hygiene" within organizations and among individuals, share best practices and encourage the use of third-party security firms. Enhancement of cyber hygiene will improve insurability and cyber resilience, and make cyber risk more easily underwritten. At the very least, cyber insurance puts a price tag on the risk to encourage customers to better manage the risk.
Insurers' contribution to cyber resilience of businesses is an important step towards establishing digital trust. SRI's analysis finds that there is a strong positive correlation between cyber preparedness and digital trust, suggesting that countries that invest in cyber security policies, legislation and outcomes do experience greater levels of digital trust within their economies.
Apart from cyber coverage, insurers are offering innovative solutions to secure trust in the digital space. I believe insurers should not just seek digital trust in themselves – they should think how they can facilitate it in others.
Swiss Re for example recently teamed up with Hitachi to provide an industry-first digital risk cover in automated manufacturing processes. There are insurers specialising in covering partially automated cars – just as there are insurers covering risk facing robotics.
Individual consumers can benefit too from insurance solutions for personal digital risks such as online financial fraud, identity theft, social media liability, cyber bullying and smart home malware attacks. Such products cover financial losses, legal and restitution costs, counselling expenses and IT consultation costs.
The insurance value chain offers many opportunities to prove trustworthiness
Third, the insurance industry can increase digital trust in the industry itself. Importantly, digital trust comes at many points of the insurance value chain. It can involve product design; sales and distribution; underwriting, pricing and risk assessment; and claims.
Being persuaded to buy insurance digitally is one thing; making sure individuals have sufficient information to judge coverage needs appropriately is another. A rich digital user interface and high-speed digital interaction may initially impress consumers but accelerated purchase journeys also risk individuals not fully understanding what they buy and are covered for. This protection gap may reveal itself only downstream when claims are filed.
The SRI experts emphasise: "It is important to balance sharing relevant information with the need to simplify the purchase journey." Previous research from Swiss Re Institute shows that behavioural design plays an important role in finding the balance between how much information insurers want to extract versus how much consumers are comfortable disclosing. Digital design, led by behavioural science, can engender trust and nudge users to make more informed choices.
Another important contributor to the comfort of customers is transparency – here digital technology is a game changer. Customers can access, track and manage their transactions, claims and policy updates at any time at the click of a button.
Ultimately, trust and transparency are both two-way streets that require customers sharing data on aspects of their lives, such as health, exercise or driving habits. While initially such an exchange can be incentivised, ultimately these relationships would be based on a foundation of digital trust.
The SRI experts emphasise: "If the re/insurance industry and many others cannot generate digital trust, they will miss out on one of their most important future resources – data." This data can help them analyse needs, wants and risks to develop tailored products to specific customer niches at prices commensurate with the risks being undertaken.
Let's face the challenge: Digital trust is difficult to gain and lost quickly – but could be among a company's most valuable intangible assets.