Legacy technology in insurance companies must be replaced with advanced digital systems to keep up with the changing business landscape.
- Different factors such as changing consumer attitudes are reshaping businesses, and the insurance industry is no exception.
- Legacy technology infrastructure and traditional business models in the insurance industry don’t have the capacity to deliver in these new market realities.
- Opting for digital transformation based on advanced technologies presents many benefits to insurance organizations.
- There are three paths to digital transformation that an insurance company can choose from: Getting a Standard software package, building a proprietary digital platform, or modernizing its legacy IT platform.
The business landscape across different industries is experiencing a transformation driven by changing consumer behavior and rampant technological advancements. The insurance industry has also been affected by this new wave of evolution.
A rising number of insurtech companies have gained considerable market traction with their cutting-edge digital technologies. This means that the insurance industry needs a composite technological revamp to stay abreast with the new market demands instigated by insurtech and overall client attitudes.
Traditional technological setups and business models may have worked for insurance organizations in the past, but that doesn’t necessitate their permanence. The market dynamics have changed, and the earlier you realize that, the better. The changing tide demands that companies adapt.
A poll of more than 900 senior insurance industry experts revealed that legacy IT infrastructure poses the greatest threat to the insurance industry. Most argued that outdated technology doesn’t have the capacity to meet the demands of tomorrow’s insurance market. They were all of the opinion that there is an urgent need for modernizing the current business processes typically used by insurers.
The lack of attention to IT infrastructure has resulted in redundant systems that provide an inadequate platform to compete in the changing business environment. These outdated systems are also driving up costs of new feature development and maintenance.
Here are a few ways digital transformation can help insurance organizations:
1. Enhancing service provisions and improving internal processes
A digital transformation based on intelligent process automation in insurance can help with policy management, screening, invoicing, and customer support. It can also help insurers enhance their internal processes.
2. More customers served in quicker time
Insurers become more effective as a result of intelligent automation. Customers may be reached and served in greater volume and at a faster rate, which is key to a positive customer experience. It can also help consumers get the money they need relatively quickly by streamlining judgment procedures and speeding up claim procedures.
3. More efficient judgments and improved products
Carriers can use advanced digital tools to assess risk in real-time and make more accurate and efficient judgments. Insurers may also offer more customer-friendly product options, such as pay-as-you-go pricing.
Intelligent business process automation can also assist insurers in preventing data breaches and non-payments. All these initiatives begin and end with data — data of consumers, their actions, and their likelihood of lapsed policies.
4. Access to more data
A state-of-the-art digital transformation can give you the tools to analyze both data acquired by insurers and evidence obtained outside of their networks. Data from social networks, demography, purchase history, external conditions, and other sources can all help to construct a picture of a client. Algorithms can utilize this data to identify consumers who need to be re-engaged, allowing you to tailor your re-engagement marketing to them.
By using intelligent tools, you can execute a re-engagement strategy that approaches clients via their preferred channel(s) at times when they’re most responsive.
5. More targeted marketing
To stay competitive in the insurance sector, insurers must produce new products. However, if those products are not marketed properly, all of the work is for naught. Therefore, a marketing strategy that highlights your new capabilities is crucial for profitability.
The right kind of digital transformation can also help marketers target clients more efficiently, increasing your client base and improving customer retention.
Advanced digital transformation allows insurers to use data to create consumer profiles that marketing can utilize to tailor its personas and better target advertising, especially digital advertising. Advanced tools may also track leads as they progress through the sales funnel – from knowledge to desire to decision to action – and tailor marketing efforts to these prospective customers at the individual level.
6. Reduced costs
A modern digital transformation can also significantly reduce the overall costs of running the IT systems. This can be achieved by running on the cloud instead of mainframe systems. IT costs for insurers with modernized IT infrastructure can be 41% less than the cost of running legacy IT systems.
As the need for a digital transformation is clear now, the next step is to figure out the best way forward. There are three IT infrastructure modernization options available for insurance companies:
1. Modernizing an existing legacy IT platform: This can prove to be a complicated project as many legacy IT platforms have limited capacity to be modernized. However, a method called refactoring can be used to modernize the existing IT architecture by altering the system’s internal structure. Refactoring, however, has its own drawbacks and can also prove to be a costly endeavor.
2. Constructing a proprietary IT platform: Building a proprietary IT platform involves creating a custom system architecture that is completely tailored to meet the unique requirements of an insurance company and integrating it into the operational environment. This option comes with its own challenges, such as longer timelines and higher costs, but these can be mitigated by working with an experienced partner.
3. Acquiring a standard software package: Standard software systems have readymade functionalities for underwriting, pricing, claims processing, and customer faced automation. This option is becoming popular with insurers due to less risk, quicker implementations, and cost-effectiveness. However, going for this option means that instead of coding a new solution, you are configuring an existing solution to meet your needs, which may never entirely fit the way your business works.
In the end, selecting the best possible option according to your business requirements and available resources is for you to decide. But RD Global can help you understand the options and guide you in the right direction.
RD Global is a software services company with the expertise and experience to provide state-of-the-art intelligent automation, digital transformation, and data analytics solutions for insurance carriers. For a thorough consultation regarding your digital transformation requirements, contact us today.