As the insurance industry experiences a pivotal shift towards digitalisation, InsurTech leaders emphasise the importance of digital transformation not only to meet evolving customer expectations but also to enhance operational efficiency and foster innovation.
Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how the business operates and delivers value to its customers.
This process is not merely about digitalising traditional services or creating an online presence; instead, it’s about rethinking old operating models, experimenting more, becoming more agile in the face of problems, and responding faster to market changes.
The insurance industry is at an inflection point. There has been a clear and seismic shift in customer expectations, thus making it imperative for companies to digitise.
Why is it important?
Moving on from on-premise, legacy technology to modern cloud technology is vitally important for organisations to meet the needs of the market they are serving and stay ahead of the competition.
Eileen Potter, vice president of insurance marketing at Smart Communications, said that implementing a digital transformation will allow insurance organisations to adapt to evolving customer expectations, improve operational efficiency, and drive innovation. “This increases business agility, enabling them to deliver superior experiences, optimise processes, and achieve long-term business growth,” she said.
Efrat Marmur, vice president of marketing at Air Doctor, stressed the importance that in today’s digital age, it’s crucial for every industry, including insurance, to adapt to the changing landscape. However, Marmur said the most significant aspect is meeting the evolving customer expectations for convenience and self-service interactions.
“By embracing digital transformation, insurers can provide policyholders with seamless experiences…By eliminating lengthy processes and applications, insurance companies become more customer facing and adopt a proactive approach instead of being reactive with their customers.”
What does a digital transformation involve?
Insurance industry professionals consider a digital transformation to mean the comprehensive integration of technology and digital solutions across the entire insurance value chain.
According to chief revenue officer at Scanbot Max Stratmann, a digital transformation should focus on integrating technology into existing processes and operations to optimise them. These can be categorised into insured-facing, and operational.
The insured-facing part, he continued, involves offering clients digital services, for example through a mobile app or a website. “These can include filing claims online, enrolling in policies digitally, and related digital insurance services. A digital service offering allows insureds to access services quickly and conveniently from anywhere, improving their overall experience and increasing satisfaction.”
On the operational side, Stratmann said a digital transformation in insurance involves digitising internal processes. A common aim is to eliminate manual data entry, as it is slow, costly, and error-prone. Insurers can, for instance, automate document processing by leveraging high-quality mobile document scanning. “This is particularly effective in claims-related workflows: Automating invoice and receipt processing reduces the manual effort and shortens the time to payout.”
Challenges and roadblocks
While digital transformation is critical to insurers’ success, it is a significant undertaking. As with any large technology initiative, digital transformation comes with its share of challenges and potential roadblocks. Smart Communications’ Potter said one common mistake is embarking on a digital transformation without a clear and well-defined strategy.
“Without a roadmap and specific, measurable goals, companies may end up investing in disparate technologies or initiatives that do not align with their overall objectives. It is crucial to have a comprehensive plan that outlines the desired outcomes, timelines, and resource allocation.”
In addition to lacking clear objectives, Mike Winterle, product marketing manager at Novidea, noted that other roadblocks to embracing a digital transformation can include a general resistance to change, inadequate data management and cybersecurity concerns.
“Many also have concerns about the potential for business interruption that can occur from changing technologies. They need to understand that their legacy solutions are holding them back and that by upgrading to digital solutions they will be setter up for greater growth and improved operations.”
Indeed, Potter said that insurers often face challenges when dealing with legacy systems and outdated infrastructure, since these systems are often incompatible with new digital solutions or require significant effort to integrate. She added that not only do organisations need to move on from legacy technology, but also from a “legacy mindset” that can keep them evolving their organisations.
A resistance to change, Scanbot’s Stratmann noted, tends to originated from employees who may be less tech-savvy. “For example, some may fear that automated processing will take away their jobs by digitizing work they currently do manually. These misgivings lead to a lack of enthusiasm for technology and weak adoption of initiatives, resulting in low ROI and missed opportunities to improve operations and the customer experience.”
In Stratmann’s view, companies should focus on two key aspects in order to successfully implement a digital transformation strategy: customer value and company culture.
“Firstly, they should ensure that any digital solutions they implement, such as a mobile app or web portal, are genuinely helpful to their customers,” he said. This means investing time and resources into developing features that meet real user needs and are easy to use. Only then will they enhance the overall customer experience.
Secondly, Stratman stressed that companies should work to cultivate a culture that is positive about technology and its potential benefits. This involves ensuring that employees are not afraid of losing their jobs to technology, but instead see digital tools as complements that help them provide better services and work more efficiently.
Smart Communications’ Potter agreed that supporting a culture change is an important part of overcoming resistance. “Companies should focus on change management, providing training and support to employees, agents, and advisors, and fostering a culture of collaboration and innovation to overcome resistance and encourage buy-in.”
Additionally, Novidea’s Winterle said companies would also do well to make sure they are partnering with technology providers that truly understand their business to help ensure a successful implementation.
Air Doctor’s Marmur was in strong agreement on this, adding that collaborating with technology partners and InsurTech startups can be a “game-changer on the digital transformation journey, as it allows for leveraging their expertise and innovative solutions to accelerate progress.”
Reaping the benefits
So, after curating a clear strategic vision, cultivating a positive culture change and shift away from a legacy mindset, focusing on delivering customer value and fostering technology partnerships, what benefits can insurers expect to see as a result of their efforts?
According to Novidea’s Winterle, the benefits of a digital transformation in insurance include improved efficiency, reduced costs, enhanced risk management, greater agility and flexibility, better customer experiences, and increased profitability. They can also benefit by expanding their offerings with the ability to quickly bring new products and coverages to the market.
One of the most significant of these benefits, which can be applicable to a range of insurance verticals, is the improvements in efficiency. Scanbot’s Stratmann said that by digitising and automating processes, insurance companies can increase efficiency and reduce costs, allowing them to offer better rates and more value to their customers.
Air Doctor’s Marmur elaborated on this. By automating manual processes, reducing errors, and making workflows smoother, she said, as well as leveraging data analytics and advanced algorithms, insurers can improve the accuracy of risk assessments, resulting in better pricing and underwriting decisions.
This links in closely with the benefits that insurers would reap from an enhanced customer experience. Stratmann noted, “Digital tools enable insurers to provide a more seamless and personalised customer experience with convenient online services, real-time communication, and fast claims processing.”
By being able to provide a more personalised customer experience, Air Doctor’s Marmur went on to explain that this has positive knock-on effects on engagement, customer satisfaction and hence retention rates.
The benefits of a successful digital transformation ultimately have one thing in common: they can improve an organisation’s competitiveness.
Smart Communications’ Potter said that modern, cloud technology enables insurers to adapt quickly to market changes and emerging trends. “This means they can explore new business models and launch new products and services rapidly, differentiating themselves from competitors.”
Further, Scanbot’s Stratmann said that by embracing digital transformation, insurers can stay ahead of the competition and “better adapt to changing market conditions, enabling them to grow and thrive in the digital age.”
Keep up with all the latest FinTech news here.
Copyright © 2023 FinTech Global