Breaking Barriers: How to speed up digital transformation in insurers

Woman holding futuristic insurance dashboard

Digital transformation can often seem a faraway dream for insurers. But despite the industry’s reputation as resistant to change, most incumbents long ago embarked on ambitious and costly transformation efforts – and progress has been made.

When governments across the world imposed Covid-19 lockdowns, insurers on the whole reacted quickly to switch to remote operations almost overnight. This would have been impossible only a decade earlier. And as the world went indoors, distribution went digital. 

But for customers who have come to expect instant fulfilment, intuitive self-service and personalised products, many insurance experiences still fall short. In this article, we’ll be unpacking some of the main obstacles insurers face and how they can be overcome. But first, let’s clarify what digital transformation means and why it’s so important for insurers.

What is digital transformation and why is it important? 

Salesforce defines digital transformation as “the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.”

Many established insurers are decades, even centuries old. It is no surprise then that their core technology stacks are often outdated. Built up layer-on-layer over the years to cater for current needs, these systems (and usually there are many!) are not compatible with today’s digital world. The problem extends beyond technology, to people, processes and policy too.

Digital transformation efforts span all these categories and aim to establish the foundations on which the modern insurer can keep up with, and even start driving, technology-enabled innovation.

Today’s customer expects to be able to interact with an insurer on their terms and to have access to real-time information and personalised recommendations. There is increasing competition from new, digital-native players that are entering the market and offering innovative products that better meet customers’ specific needs. This new breed of licensed insurance carriers like Lemonade, Oscar, Next and Zego, leverage digital capabilities to better understand and engage with customers, and to offer more personalised and responsive products and services.

The benefits extend beyond the customer though. Digital transformation enables insurers to reduce costs through automation, improve underwriting and risk selection with advanced analytics, and build completely new businesses leveraging technologies like artificial intelligence, the internet of things, blockchain and open APIs. 

Industry pioneers, like Wakam, show what is possible if incumbents dare to reimagine their business for the digital age. 

So what is stopping insurers from moving quickly into the modern age? 

One of the biggest obstacles insurers face is the lack of digital capabilities and expertise. Deloitte’s global survey found that 43% of insurers feel it’s getting harder to find skilled candidates in a number of functional areas — with technology topping the list. 

Another obstacle is the lack of a group-wide digital strategy. Novarica’s Insurer Digital Strategies report found that “only 40% of insurers have a formal digital strategy”. Many insurers have implemented individual digital projects, but have not yet developed a comprehensive digital strategy that can guide their overall transformation efforts.

Industry regulation is another unavoidable obstacle. Get it wrong and insurers can face huge fines or worse, so compliance with requirements is non-negotiable. Unfortunately, legal, risk and compliance teams established to protect the insurer, can inadvertently slow down transformation efforts. This impact extends to cumbersome processes and unnecessary bureaucracy that can make it difficult to adopt new technologies.

For any company, the process of digital transformation can be complex and time-consuming. For insurers with customers, employees, and technology spread all across the world, the challenge can seem almost insurmountable. 

Navigating the obstacle course of digital transformation 

So, what actions should insurers take to accelerate their digital transformation and maximise their return on investment? Of course, every company will face their own unique challenges, but there are several key areas that almost every insurer will benefit from investing time, money and effort in:

Close the skills gap

To close the skills gap and develop the people and knowledge required to thrive, insurers must first identify the skills needed to leverage digital technologies. This could include skills such as data analysis, software development, and AI.

Once the gaps have been identified, insurers must create a strategy for acquiring these skills. Hiring industry outsiders from leading technology companies can bring fresh perspectives and valuable expertise. Internal talent should not be ignored and ongoing investment in training and development is key to keeping up with the latest developments.

Hiring or developing people is only the first step though. Insurers must allow these newly skilled staff to co-create a culture of innovation, adopt new tools and establish their own ways of working.

To accelerate the above, insurers may choose to partner with insurtechs or consultancies to access the skills and expertise needed to leverage digital technologies quickly. At Kanopi, we work closely with our insurer clients to bring not only our technology but also our insurance innovation expertise to accelerate their digital transformation. 

Reduce bureaucracy and cumbersome processes

The still-far-too-common multi-page, paper-based insurance application form is indicative of the internal bureaucracy and inefficiencies that many insurers face. Processes implemented in the 90s – like having to phone up to change a minor policy detail – are frustratingly still industry standards. 

To accelerate transformation efforts, insurers must identify opportunities across the business where processes and policies can be streamlined.  As Simon Torrance, domain expert and insurtech influencer, once mentioned in a virtual roundtable hosted by Kanopi – “Regulation often moves one step behind innovation. However, for those who are truly motivated, where there’s a will, there’s a way.” Conventions must be challenged and only those that are fit for purpose maintained.

Internal processes can often present a serious challenge to successful insurer-insurtech partnerships. Startups move fast out of necessity, so insurers must attempt to adapt to this way of working. Early engagement with key internal stakeholders can go a long way to making these ventures a success.

Build a culture of innovation

This requires a cultural shift across the entire organisation, with employees empowered to improve previously accepted ways of working that no longer serve the company’s needs. Driving meaningful cultural transformation also requires changes in how companies are structured and run, and how employees are incentivised. Innovation teams must work hand-in-hand with business units to solve core business problems, with executives accepting that not all initiatives will result in a return on investment. Proof of concepts (PoC) can be used to test new innovations before investing to roll them out company-wide.

Take AXA CZ/SK for example, who recently ran a PoC pilot of a deep learning-powered platform for extracting data from incoming unstructured scanned documents. The AI application auto-classified all incoming documents, extracted hand-printed field values, and submitted the data for further analysis with a 96% accuracy rate. When scaled successfully, such an OCR system can save hundreds of hours in productive agents’ time and drive measurable operational savings. 

Collaboration is key, so foster close partnerships between innovation teams and control functions, including stakeholders like legal in cross-functional project teams from the outset. This is particularly important when developing new ventures, where early input can save serious pain later on.

Accelerate innovation with a two-speed approach

The strategic drivers for digital transformation are often multi-faceted, with priorities and impact across different P&L areas and time horizons. Most programmes span multiple years, even decades, so businesses cannot afford to wait until completion to see business results. 

Many insurers are adopting a ‘two-speed’ approach, establishing innovation accelerators uninhibited by their core, which can continue to focus on long-term transformation efforts. These accelerators can take the form of corporate venture capital and startup incubators, to new partnership-led businesses. 

Away from the restrictions of legacy architecture and process, these ‘speed boats’ can unlock short-term business results and learnings, which can be fed back and used to ‘future-proof’ the long-term transformation. Insurers should look at insurtech partnerships to help them quickly establish these new ventures and start experimenting as quickly as possible.

This two-speed approach can help insurers move quickly in the digital age, while also protecting their valuable core business which has been established over the years.

Experiment with new technologies and partners

Advances in technology show no signs of slowing down, so businesses must keep pace. In recent weeks, Open AI’s Chat GPT has stunned the world with many people’s first real experience of the much publicised power of artificial intelligence. 

The convergence of emerging and maturing technologies – including artificial intelligence, augmented and virtual reality, blockchain, cloud, e-commerce, and ‘the metaverse’ – present a huge opportunity. Insurers must experiment with these new technologies and identify those that prove most likely to provide a return, before investing heavily and incorporating them into digital transformation efforts. 

Where speed and innovation are a priority, partnering can speed up time-to-value and help you see how effective new technology capabilities can be. Emerging insurtech platforms may be able to help you get experiments to market in a better, faster way. For example, Kanopi helped our latest client – a top-tier global insurer – launch a new embedded insurance product in under 10  weeks, down from their usual 12-18 months. Learn more about Kanopi’s platform

Don’t give up hope!

Hopefully, we’ve established that digital transformation is essential for insurers to remain competitive in the digital age. Incumbents need to adapt or they may slowly be replaced by new digital-native players. 

Insurers must focus their efforts to close the skills gap, reduce bureaucracy and streamline processes, and build a culture of innovation throughout their organisations. Adopting a two-speed approach can unlock progress and pave the way for longer-term transformation through iterative experimentation. Looking beyond organisational walls, new technologies and partnerships with emerging players offer insurers a way to fast-track progress. 

Digital transformation is complex and there are no quick fixes, but by following the strategies outlined in this article, insurers stand the best chance to gain a competitive edge in the digital age.

About Kanopi

Kanopi is one of the top 50 companies globally, championing embedded insurance and helping insurers every day. We do this by enabling them to overcome the hurdles of legacy infrastructure, integrate with multiple third-party platforms and build seamless user journeys for customers. 

Building a strong digital strategy is the first step to success in a highly competitive insurance landscape. Get started with your digital transformation journey, download Kanopi’s FREE guide to building an insurance platform of the future.