Insurers tend to innovate slowly in an attempt to get things “right” in a heavily regulated industry. But that is changing. COVID and climate change have accelerated the digitalisation of the insurance industry, and there is no going back. The time to act fast is now.
However, the traditional challenges remain: insurance is compliance-heavy, and the financial and reputational risk of getting something wrong can be huge. Established insurers have complex systems that can be difficult and costly to modernise, and the insurance industry rightfully resists ill-considered changes that can bring about unforeseen risks.
But the competition is realising that digital transformation can generate a competitive advantage, and newcomers are starting as digital-only services. Legacy technology and cumbersome processes simply cannot allow insurers to innovate and manage risk effectively. Systems designed decades ago will become risks themselves, as they struggle to cope with the demands of today’s insurance industry.
This is all the more reason to embrace digital transformation. It is easier today to assess risk, profitability, and customer needs through the use of emerging technologies.
Digital transformation trends in insurance
The goals of increasing revenues, reducing costs, encouraging customer loyalty and promoting brand recognition remain, but today’s strategies require digital insurance technologies.
Customers embrace digital distribution and readily take advantage of automated processes, including chatbots, driven by artificial intelligence and machine learning. And while customers expect their data to be collected, they want it to remain secure. That security depends on sophisticated digital safeguards.
Insurers need accurate data for real-time analysis and algorithmic underwriting. In addition, they need flexible policy management systems that allow them to create new products quickly in response to new needs, such as the need for protection from climate change disasters, and incorporate ever-changing risk factors into product pricing.
Speed to market is the single most crucial advantage an insurer can have with new products, and that process is accelerating as digital capabilities multiply.
Digital transformation means more focus on the customer
Despite all the talk of digital insurance, embracing new technologies is about focusing on the customer. Fully digitised insurers can offer fast and accurate underwriting, tailored insurance offers, and instant claims payments. And these are not “extras.” Modern customers expect services to be quick, personalised, and trouble-free.
Millennials and Gen Z are digital natives who understand digital channels and expect companies to respond to their needs quickly, much like Amazon, Netflix, and others do. Insurance customers no longer want to have to speak to an insurance broker to find the right policy or understand coverages. They want simple, customised, transparent insurance that meets their individual needs. And they are not likely to remain on hold for a representative for long.
Digital transformation is driving the customer experience, and increasingly, that means utilising the cloud.
How does the cloud enable digital transformation?
On-premise technology cannot keep up with the need for change in the insurance industry. Company servers cannot rival the increasing number of cloud services, and those offerings are improving daily. Cloud services will soon outperform any proprietary software capabilities, from cloud-based databases to analytics tools. The cloud is more nimble, cheaper, and much more timely in delivering usable, accurate, real-time solutions for insurers.
Insurtech companies offer insurers the ability to integrate new insurance products into existing offerings so customers can quickly get coverage for new risks. At the same time, insurtechs enhance their cloud-based solutions with extensive customer and third-party data that can be harnessed in minutes to make informed decisions. And all of this empowers the product-creation process, helping insurers develop the right solutions at a competitive price at the right time.
For the foreseeable future, the cloud will be the home of digital innovation.
How to drive digital transformation in the insurance sector
There’s not much profit in going it alone. Even if leaders can anticipate trends, the enormous task of acquiring new hardware, software, networks, and databases will leave “lone wolf” companies struggling to catch up. Leading global insurers, like Ping An, are embracing the ecosystem model and showing the rest of the way.
Insurtech companies help insurers stay ahead of the game by offering new capabilities as the insurance landscape changes. Innovation today is a group effort, and the experiences and data of industry-wide companies drive trends. Undoubtedly, companies need to upgrade their internal processes and technologies. However, they need to ensure those technologies are compatible with online solutions and services that can plug into company procedures and products.
How does digital transformation work?
Companies don’t need to scrap entire business models and shut down to revamp. New technologies allow for continued operations and servicing of existing customers while expediting digital transformation. Companies can continue to operate seamlessly while upgrading, by leveraging new technologies that can function alongside existing infrastructure. This means insurers can keep their existing customers happy while preparing changes that will delight customers, new and old.
Leaders must view digital transformation as a never-ending process. Adoption of today’s ‘new’ technologies, like blockchain, AI and IoT will accelerate, while further advances in areas like quantum computing will present new opportunities for businesses of all kinds. Updating and upgrading will be the name of the game for decades to come.
Conclusion
Insurance companies cannot look ahead and predict digital capabilities or customer demands with complete certainty. Few in the insurance industry predicted the rise of blockchain or peer-to-peer marketplaces like Uber and Airbnb that have presented a whole new category to insurers. We can, however, be sure that the pace of change will continue to accelerate. It will be companies with the people, processes and technologies that can adapt quickly and constantly that will thrive.
The good news is that insurers don’t need to go it alone. Digital transformation is a journey, and insurtechs are perfectly placed to help incumbents accelerate their adoption of new technologies and deliver change.
How to leverage digital transformation to stay relevant
The secret is to start small. Build, learn and improve. Insurers can begin by identifying specific customer problems, market opportunities or business goals that are high priority. Explore how technology can offer new solutions and create maximum impact by downloading the exclusive virtual roundtable recording. You will hear from key industry leaders on what they find to be the best technology solutions.