How insurers can successfully achieve true digital transformation

Too many insurers see digitization as the route to solve specific business problems without realizing that it must be the core of a holistic framework.

For many carriers, the entry into digital boils down to creating new efficiencies in specific business processes such as underwriting and claims evaluation. (Shutterstock)

Digitalization is at the forefront of insurers’ minds when it comes to adapting to a changing market, but the means of achieving meaningful transformation can be tricky. Carriers’ first inclination is to turn to high-tech solutions to streamline processes that are in obvious need of upgrading. From optimizing underwriting to improving the customer experience, and harnessing insights from the troves of data insurers collect to unlock new value, digitization can take many forms. And that’s part of the problem.

Too many insurers see digitization as the route to solve specific business problems without realizing that it must be the core of a holistic framework for smarter and more efficient business models across all departments and operations.

For many carriers, the entry into digital boils down to creating new efficiencies in specific business processes such as underwriting and claims evaluation. For example:

In each of these cases, technology fills a specific role. But for digital transformation to actually prove transformative, it all has to be part of a broader connected framework.

An industry in the midst of change

Insurance has long been viewed as a conservative industry slow to adopt innovation. To be fair, risk aversion is inherent to the concept of insurance. But insurers are now virtually unanimous in embracing the fact that technology can play a vital role in helping them evaluate and price against risk, and better serve their customers.

A 2019 Accenture survey found that 96% of business and IT executives in the industry reported their organizations had accelerated the pace at which they adopted innovation over the prior three years, with 93% saying their organizations were experimenting with one or more core technologies.

This commitment to change comes amid the rapid rise of the InsurTech sector. Global investment in InsurTech reached a record $6.37 billion in 2019, according to Willis Towers Watson. That figure represents more than one-third of the total amount ever invested in InsurTech. The 2020s are set to witness the sector’s continued growth, and the coming years will see insurers step up their own investments in technology and form even more strategic partnerships with startups, blending institutional history with cutting-edge innovation.

Building a viable innovation framework

Building a viable innovation framework means new business models, new ways of optimization, new investments in emerging technologies and new partnerships with InsurTech companies. As KPMG notes, such partnerships have climbed significantly in recent years, a notable indicator of where the industry is headed.

It’s not enough for carriers to adopt AI here or sensor data there. Digital transformation isn’t about tactics; it’s about having the right strategy, one that can effectively guide business decisions.

Accordingly, it’s critical that insurers’ IT budgets and planning be calibrated to integrate new technologies across platforms and departments. Executives should bone up on emerging technologies and the InsurTech landscape to identify worthwhile partnership opportunities and find synergies.

Flexible connectivity will be paramount to the success of insurers’ tech initiatives. A flexible core system that enables swift time-to-market for new offerings — rather than a siloed, non-holistic approach — will empower insurers to achieve digital transformation at scale, resulting in immense financial benefits and enhanced service in-line with consumers expectations.

Employers in the industry must also inculcate a culture of digital transformation by training and retraining their workforces to work alongside AI and other emerging technologies. Notably, the Accenture survey found that 76% of insurance executives believe their workforces are “more digitally mature” than their organizations. These digitally savvy employees will be the linchpin to the success of organizational transformation.

Effective digital transformation will be achieved not with wholesale disruption, but an understanding of how to merge digital and human skill-sets. Human discernment, investigative skills and customer relations skills are vital assets for insurance companies of any age and size. But digitization carries the promise of helping insurance professionals better perform their jobs. With a careful, informed approach to implementing this transformation, insurers will reap substantial benefits across the board, rather than merely improving one or two of their functions.

Fortunately, the P&C industry has the wind at its back, as a recent analysis by Zacks shows. The analysis noted that earnings have spiked by 23.4% over the past year amid a healthy economy and strong capitalization. Digital transformation can help carriers keep the momentum going.

Colleen Wells (colleen.wells@sapiens.com) is responsible for Product Strategy for Sapiens North America P&C, as well as Sapiens’ Digital Product Suite globally. She possesses expertise in professional services, customer success, running product teams and her true passion — understanding market trends and providing valuable solutions to carriers and customers.

These opinions are the author’s own.

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