Digital transformation in insurance services – the opportunity

The digital revolution is transforming how customers interact with businesses. For an industry that is wrestling with disparate legacy systems and regulatory changes, digital transformation in insurance represents an exciting opportunity, but only if tackled correctly. The rewards for truly embracing digital transformation in insurance will be immense. These include:

• Personalised policy coverage: The need to change the accuracy of risk measurement and provide ‘tailored’ cover for customers is at the heart of this transformation. Customers are increasingly frustrated with traditional premium pricing models and the disparity of premiums between policy renewals and new customers based on average risk profiling. Currently telematics in vehicles has started to address this in the motor insurance industry. However with the development of the ‘Internet of Things’ this opportunity will increase and insurers will be expected to offer ‘real-time’ pricing and risk models.
• Omni-channel customer engagement: The multichannel model that delivers seamless and personalised customer experience is the holy grail for insurance companies. An omni-channel customer engagement will allow insurers to deliver an improved and more efficient service with a ‘single view’ of the customer across all channels.
• Process improvement: With a diverse range of disparate technology platforms and legacy systems, insurers are still using some manual processes to plug the gaps. Digitising would streamline processes, eliminate manual input, reduce errors, accelerate turnarounds and reduce operational costs.
• Business model innovation: New ‘tech savvy’ market entrants have disrupted traditional models. Established insurers have an opportunity to transform the business model and have the advantage of an established brand and customer base to compete effectively.
• Big data analysis: The volume of available data will increase significantly as we become more connected. The challenge for insurance companies is to have an efficient means of making sense of diverse data to better manage risk, provide more relevant service offers and reduce fraudulent claims.
• Emerging markets: The insurance sector is a mature market in the developed world, however large populations in emerging markets are becoming more affluent, having more valuable possessions and starting to seek insurance services for the first time. Many of these emerging markets would need a different sales and service channel model. While within existing developed economies the proliferation of high value mobile devices among youth is creating a market for insurers to engage with younger customers.
• Vendor partnerships: In order to transform their infrastructure effectively and efficiently insurance companies are looking to invest in FinTech start-ups and establish partnerships with existing IT providers to develop solutions tailored to their environment.

Many insurance companies already have IT transformation on their agenda, to address the legacy systems and regulatory challenges. However relatively few of these are true strategic digital transformation initiatives; instead they are typically technology refresh projects. Even fewer of these initiatives are aligned to the overall business strategy. The risk for insurers is that without a more strategic and integrated approach to real digital transformation the commercial and operational benefits will not be achieved.

The opportunities and rewards of digital transformation in insurance are discussed in further detail in our insight.