Digital Transformation in Insurance – A Roadmap
A daunting combination of forces demands insurers embrace a new digital business model
- The insurance sector has been slow to adopt digital transformation compared to other industries
- There are myths associated with digital transformation that deter many insurers from committing digital transformation, including the perception of long timelines and high costs
- The business model has changed for insurance companies, and they must adapt
- AI and RPA automate rote and repetitive tasks to increase productivity with minimal disruption to your existing business
- Real-time analytics offer business intelligence that legacy systems just can’t match
- Customers and their experience should be the priority
Digital transformation isn’t just about the technology. It’s about applying the technology to people and processes to respond to shifting market dynamics and changing customer expectations. For P&C insurance companies, transformation impacts innovation, agility, productivity, and revenue.
This is all well and good, but just how is this actually playing out among insurers? How do you, as a CEO, CIO, or CTO start the ball rolling? Which metrics should be used to gauge success? Your company’s digital transformation will change not only how you execute key processes but how you evaluate ROI.
The rapidly changing insurance ecosystem makes digital transformation the essential means to navigate these challenges and opportunities.
Dispelling 3 Myths
The insurance sector, when compared to other industries, has been slow to embrace technology. Some of this comes from uncertainty about how to proceed, while others see technology as the be-all and end-all solution instead of a tool that supports the company’s vision and goals. Here are three myths that hold insurance companies back from embracing the digital transformation that will be essential to their success over the next decade and beyond.
Myth #1 – Transformation takes too much time and has a huge price tag
The very best transformations come in small sprints to move your company toward a larger goal. Look for a digital development firm with deep expertise in multiple insurtech technologies; one that has the proficiency to deliver cost-effective solutions on time and at the scale that fits your exact needs and budget. You’ll have a system in mere weeks or months that gives you more agility and flexibility than any legacy system, at a reasonable cost.
Myth #2 – It’s all about technology
It’s about solving business problems, not technology. This is where leadership counts: Focus on applying technology where it will help you overcome operational challenges and achieve business goals. These can be related to anything from the user experience to new products — look for the technology that will help you overcome the challenges to those objectives.
Myth #3 - Technological adoption is the most difficult part
Technology serves to support not just the business, but those running the business. The right tool for the job is just the beginning. As an executive, it’s incumbent on you to have clear goals; the correct mindset, vision, and roadmap; and to instill those into the people implementing and working with the technological changes. You must be committed to changing the way business is done, get buy-in from the entire executive team, and clearly convey the benefits of new processes to your employees so they understand how this is going to make their jobs better, too.
Fellow Insurance CEOs clearly feel bullish about the future of the sector and adoption of technology: 61% say technological disruption is an opportunity, 69% will invest in digital infrastructure within the next three years, and 59% say that investment’s primary objective will be to transform business and operating models.
Digital transformation is a must-have, not a choice (and it has a lot of benefits)
A daunting combination of forces that include financial performance, cost pressures, competitive threats, and the regulatory environment demand a change in the insurance industry business model.
Disruption in the form of completely digital insurers with lower expense ratios is upping the competitive ante. Transformation is pivotal to accelerate the development of your own innovative products, and legacy systems simply do not have the necessary response speed to compete on this level.
Online platforms, cloud storage, and automation boost efficiency and reduce the need for support and sales staff, which reduces operating costs. Up-and-coming insurance tech companies already enjoy lower expense ratios when compared to established insurers, so it’s important for existing insurers to take these steps to catch up.
The new model needs a combined focus on new technologies, real-time data, customer needs, and connected products and services. This new way of doing business also comes with benefits, and AI and data analytics are assets that will propel your company years into the future.
Artificial intelligence will power your digitally transformed business model
Artificial Intelligence (AI) and Robotic Process Automation (RPA) can be used to automate labor-intensive tasks such as claims management and underwriting.
These processes require analysis and retrieval of large amounts of diverse information from many different sources. Adoption of AI solutions means a significant reduction in processing time, taking it from hours to seconds.
AI-powered applications can also protect against fraudulent claims automatically. Additionally, solutions for accelerating the underwriting process can detect possible misalignments in policies and reduce risk exposure.
Real-time data analytics that are connected, accurate, and usable
Data means nothing unless it’s turned into actionable insights, and with large amounts of data, no human could possibly accomplish the analysis. AI brings the most complex analysis within reach. Predictive analytics forecast needs and mitigate risk. Studying big data brings operational efficiencies that reduce expenses for claims and underwriting.
Real-time contextual analytics means you have the business intelligence you need at your fingertips. This is invaluable information that can be used for:
- Underwriting and risk management: Better data visualization and predictive models improve accuracy.
- Customer insights: Extract and interpret data from a variety of sources, including social platforms, to determine which sales and marketing channels perform well and which do not. Personalize products and messages for better outreach.
- Service and distribution: Sales and service portals integrate information from CRM systems to help gather more data.
- Cybersecurity: Threats are everywhere. The cost of cybercrime in insurance has risen 40% in just the past few years. Business intelligence platforms can expose threats and detect weaknesses.
- Future-proofing your business: You need tools that allow you to collect data quickly and decisively, store it, pull reports from it, and use it to make better business decisions. A business intelligence system yields valuable information that can help with claims handling, fraud detection, reports, and financial projections, as well as centralize data access.
Success measurement is another benefit of AI. With real-time analytics, you can gain full visibility into how your customers interact with workflows and optimize rates of form completion. Analytics also can illuminate pain points, contract completion efficiency, and help you understand how customers interact digitally to improve the overall customer experience.
Streamline the customer journey to improve the experience
Customers today expect the consumer experience to be personalized and targeted. Executives who ignore the importance of customer service will see their company pay the price. Establishing a cross-functional, multichannel experience should be a CEO priority.
Buyers want and value self-service features that track interactions in real-time, instead of having to make inquiries via phone or email.
Customers want best-in-class customer service, and those insurers who offer it grow faster and are more profitable.
A typical, traditional insurance carrier today delivers customer experiences through separate functions using different departments managed by different executives who have different goals and metrics. This structure may work internally, but it overlooks the fact that the customer sees the experience as a single journey.
It’s only through modernizing core platforms — such as policy administration, billing, and claims systems —can insurers externalize the data and necessary business logic to create a satisfying digital experience for policyholders and distribution partners.
Starting your insurance company’s digital transformation
Once you have a clear idea of what you want to accomplish through digital transformation, it’s time to begin. Your first stage was to define value and secure commitments from your entire senior management team. After that, focus on these five goals:
1. Set clear targets
Without targets, some staff may find it hard to accept that the old ways of doing things were incredibly inefficient. They might think a 10% improvement in cycle time is great when 100% is possible.
External benchmarking can reinforce the conviction that cutting the time it takes to, for example, process a claims submission from 90 minutes to 20 is not enough if a competitor has reduced it to four. Be certain that, if your company does not match that benchmark soon, other companies will.
Setting clear targets at the outset also prevents back-sliding, and it imposes discipline on the process of deciding which initiatives to pursue for maximum impact. It’s important to make a separate target for each source of value creation.
Early support can be won by starting with projects that offer the potential for significant rewards with little risk. For example, a redesign of the claims process can save up to 40% and raise the ROI of your technology investment as much as 5%.
2. Form an outstanding launch team
You might consider adding the temporary (or permanent) position of Chief Digital Officer (CDO) to coordinate your transformation. They can make sure staff with the appropriate skills are in place, design the sequence of the transformation, devise methodologies, and make sure day-to-day priorities are addressed. Some external consultants offer this as a service, and that can be an excellent way to access this advanced skillset without making long-term commitments to another senior executive
3. Set up a separate digital unit
By setting up a digital unit independent of the organization, you will promote the new ways of working that are essential for digital success. These include agile product development, test-and-learn methods, and cross-functional teams with specific types of expertise.
These teams need to be empowered to make a swift impact, which often means giving them authority to make their own decisions. However, these digital units, when they finish their assignments, must be reintegrated into the rest of the company. Set a target for that in the not-too-distant future.
4. Establish and nurture a digital culture
Digital methods of working are fast, collaborative, and empowered. New employees will likely have digital skills, but these new methods must be used across the entire organization.
Employees look to the C-suite for guidance, especially when things are changing rapidly. This is a time to nurture employees who are used to the legacy way of working.
For these employees, much needs to change:
- A focus on customers rather than process
- Comfort with testing and learning
- Comfort with occasional failure
There are easy ways to kick-start change and garner support. As an example, instead of making decisions by considering a business case or competitor activities, which can be intimidating, start with, “How does this create value for our customer?”
When some initiatives are up and running and creating value, this is the time to turbocharge your transformation through a well-thought-out sequence of initiatives: The more value your transformation captures as it advances, the more it becomes self-funding and will garner more support.
Initiatives that are strategically important, have a quick payback, and reduce operational or process complexity should be prioritized. But be flexible. Financial pressures, legacy systems, and the need to find the right people for the technology might affect your final choices.
Your new operating model
When you begin your quest for digital transformation, you choose a new company structure. However, as your transformation evolves, you likely will have to do a fundamental reorganization.
Silos drawn along functional lines inhibit collaboration and performance. Solving this requires a new structure that is organized around sources of value and creating impermanent teams that will dissolve once they capture the value at stake.
These teams will later regroup around new avenues of revenue growth or cost-cutting. This means the entire organization can soon adopt an agile approach to working.
Digital transformation is not without its challenges. Projects fall behind schedule, conflicts arise, and there will be cultural and recruiting issues.
We tend to think about technology as all science, but the way forward for your company’s digital transformation is to employ creative thinking, learn as you go, and apply those lessons to the challenges ahead.
With your new digital ecosystem, you’ll reap the benefits of greater market penetration, lower operational costs, better customer experiences, product personalization, increased operational efficiency, and boosted revenue.
We’re the Digital Transformation Experts
RD Global empowers insurance companies with high-impact technology solutions rooted in a 5-star customer experience. Our unrivaled team of in-house technical experts can solve your most complex digital challenges with state-of-the-art custom insurtech software to power your digital transformation.
Only the digitally strong will survive and prosper. Schedule a discovery call to learn how RG Global can partner with you for success now and in the future