There's no Insurance Policy for Digital Transformation, but there is Digital Intelligence
Insurance executives have yet to create a policy for themselves to ensure successful digital transformation. Perhaps, product development teams should take a look at that. Today’s insurers are consumed more than ever with disruption. More than a few of us are kept up at night worrying about everything “digital,” whether it’s in the form new competitors, mobile channels, redesigned customer experiences, analytics, and automation. We are concerned about how digital technologies will disrupt the industry’s competitive landscape, business model, value proposition, distribution network, and core operations as a whole.
But within the worry comes opportunity. Today, digital transformation has gone from talk to action, disrupting the status quo of everything from how claims are handled to the future of the agency model, as we know it today. I don’t know one carrier or organization without some type of digital investment underway. In 2018, insurance is transforming at its fastest pace ever, and it’s no longer just about system modernization.
As I write this, I am preparing to head to the world’s largest conference relating to digital insurance, InsureTech Connect. When I fell into this industry more than 20 years ago, I never imagined that more than 6,000 attendees would be discussing advancements and change in an industry that typically frowns upon advancements and change.
Insurance executives are focused on three major priorities: profitability during a period of low interest rates, customer engagement in a highly competitive, low-growth environment, and when – and by how much – their business model will be disrupted, particularly by digital.
Customer issues are critical, starting with finding customers that fit the company’s underwriting and risk profile. This requires making good use of data to make the best, most accurate risk forecasts. Insurers must also deliver on higher customer expectations, in part because financial services companies have set a new standard for speed, responsiveness and choice. Customers now expect both individual attention and better products and services from their insurance company. They also expect their company to be price-competitive, which means insurers must operate more efficiently.
Digital Disruption in Insurance
As insurers pursue opportunities to improve their outcomes, they should consider digital transformation along five areas of disruption:
Insurers are beginning to digitize their operations by investing in automation, such as robotic process automation, as well as analytics to make their operations more efficient and cost effective. Insurers are increasingly looking at customer journeys, especially in areas such as policy servicing and claims, for manual and repetitive steps in end-to-end processes. Automation and analytics have been used to improve overall speed and accuracy in areas such as claims routing or assigning underwriters, helping to cut overall time to market.
Insurers have been working to acquire customers through digital channels, as consumer familiarity with online shopping now extends to insurance. New customers frequently go online to shopfor new products and services, while existing customers use digital channels to report a loss. Even life insurance is becoming a digital transaction, especially for millennials now entering the market for these products. These digital natives expect a different experience than the previous generation, and insurers are striving to adjust. The most successful companies will take a design thinking approach to examining products, services and processes from a customer perspective. In life insurance, for instance, that means truly understanding and optimizing the experience end to end, including steps such as identifying the best way to process a beneficiary change. In order to be successful, insurance companies will need to provide channels for engagement which can offer a personalized experience. This will require an in-depth understanding and map of customer transaction journeys, analytics that produce insights into customer needs, and a more agile technology backbone.
Data and analytics are beginning to disrupt the insurance industry. Carriers are using data to make better decisions on underwriting and claims processing. In auto insurance, telematics is being used to make better underwriting decisions. Soon, insurers will be grappling with autonomous cars. Home insurance is complicated by sensors and smart home devices. Increasingly available health information from wearables and other sources promises.
In a way, digital technologies are also changing the classic risk profile as the safety quotient increases with the deployment of sensors. In autonomous cars, for instance, risk would be assessed on the safety profile of the car, as there is no driver. In addition, the types of risks will also change. Insurers that traditionally focused underwriting only on potential physical damage must now consider cyber risk. The emerging area of cyber risk products presents unique challenges, as insurers have far less historical experience measuring risks for data breaches than car accidents or house fires. Some insurers are using advanced analytics to better assess risk, support the underwriting process more effectively, and tie the right premium to the right policy.
New Digital Operating Models
Digital technologies are also disrupting the insurance business model, with platforms that allow customers to work directly with a company or with other customers, bypassing, or “disintermediating,” the traditional broker network or insurance model. In one example, a company was looking to disrupt the way policies were sold in a major market by using a pool of financial advisors to service policy holders and automating new business and policy administration. Customers can access the products they want, without the need to speak with a representative.
If you spend time in a room with insurance executives, everyone will agree that the promise of digital has not yet been fully achieved.
The companies that have seen the greatest results are those that took a more holistic approach, combining domain and data—people and technology—to create the context from the customer’s perspective needed to see real benefits from their digital investments.
To succeed, we all need to improve our digital intelligence. Digital intelligence is about driving breakthrough business outcomes, like improved customer experience, increased revenues, greater profit and reduced cost to serve. It is about enhancing human capabilities with advanced technologies like robotics, analytics and artificial intelligence to quickly deliver tailored, targeted and breakthrough results.
Orchestration of this is key and must be done with complex and interdependent technologies - AI, robotics, analytics, machine learning and more - to deliver tailored, targeted, effective solutions. This will reach success only through a team of deeply experienced, client-focused professionals who understand both technology and the context in which it is applied. With all of this said though, insurers have to provide the necessary structure and management mechanisms to accelerate their transformation journeys.
At the moment, opportunities are within reach to those companies that know how to move quickly and intelligently. No one has it completely figured out yet, but the most impactful digital strategies thus far aren’t just front, middle or back-end focused. Instead they are include enterprise-wide solutions that enhance both the customer experience and employee experience in harmony.
Data and domain. Artificial intelligence and human intuition. Technology and talent. Transformation can only happen when digital advances combine with specialized human expertise and put the customer journey at the forefront. Digital transformation isn't the end objective. It's a means to an end: greater profitability, deeper customer experiences, faster speed to market, growing revenues. Digital intelligence will help enable your success.