Why a crisis is a tipping point for digital transformation
The insurance industry is facing the start of long-term change in how we consume, learn, socialize, and communicate.
COVID-19 has rapidly accelerated the digital adoption rate for both consumers and businesses. In order to survive, many industries have had to cross the digital transformation chasm in a matter of days.
In fact, per the COVID-19 Digital Engagement Report, COVID-19 has accelerated companies’ digital communications strategy by an average of six years, with 97% of enterprise decision-makers stating that the pandemic sped up their company’s digital transformation. Clearly, the crisis is a “digital tipping point” for digital transformation in 2020.
The “digital tipping point” is the critical moment when organizations, customers, or industries change and adopt a new and irreversible digitally-enabled way of working. This change suddenly gains significant momentum due to factors such as a radical transformation in people’s behaviors, advances in digital technology, or a crisis such as the pandemic. The insurance industry is no exception.
Insurance is a traditionally conservative industry. One of the reasons for its conservative nature is the fact that insurance is highly regulated. There are many requirements to fulfill, such as filing statutory reports, forbidding particular practices, or using certain rating variables. Insurance companies must also keep many years of data available for the Annual Statements they must publish, making actuarial predictions, and settling long-tailed claims. To embrace digital transformation, the insurance industry has both cultural and practical hurdles to overcome.
On the other hand, insurance companies’ awareness of risk means they are likely to be especially cognizant of the pandemic’s perils. This has led to usually risk-averse insurance company employees who earlier might have been reluctant to change their methods, now becoming willing — even eager — to adapt.
‘Digital virtual reality’ looking forward: Consumer perspectives
COVID-19 is turning out to be a driver of long-term change in the way the insurance industry operates. Consumers are adjusting to the all-virtual shopping environment, and this includes their purchase of insurance.
Nevertheless, consumers expect when shopping around to receive answers quickly, which may not always be possible when buying insurance. Purchasing insurance is not like ordering pizza. Consumers know which pizza toppings they prefer; however, they may not understand the consequences of perils and deductibles. Not only is an insurance transaction more complicated, but it is also generally much more expensive. Furthermore, if an accident happens, the purchased insurance can be much more significant to restoring the consumer’s quality of life.
Insurance companies, in their virtual platforms, need to let their website visitors know that this sort of purchase can take a little time. Consumers need to be told what information is required to receive a quote. If they wish to window shop before entering personal details, an insurance company can share the price of a policy for a typical consumer in their location. For example, if the policy is for auto insurance, the insurance company can show what a policy for a driver of a certain age, distance driven, and deductible would cost.
Actual quotes, however, cannot be generated without specifics. Consumers should be assured that data will remain confidential (and companies should make sure they are). Even after consumers enter their data, the insurance company or broker may need time to get back to them. Consumers, who may have become accustomed to instant gratification in other parts of the internet, should be told their application is being reviewed and should also be informed when they will receive a response.
‘Digital virtual reality’ looking forward: Employee perspective
Businesses are dealing with distributed remote workforces, meaning they are more reliant than ever on digital tools and communication. The crisis has become a catalyst, accelerating the digital transformation journey as companies make investments in future-ready digital technology to sustain their businesses in the post-COVID-19 world.
For workers, the pandemic has shown that most people can work from anywhere; this trend will continue in the future. Fortunately, insurance employees are also consumers and have been receiving life training in doing much more online since the beginning of the pandemic.
What’s holding the industry back?
The pandemic has disrupted the global economy and dramatically changed how we conduct business. People want to know whether these changes are genuinely ‘irreversible’ or if organizations and people will revert to previous behaviors post-COVID-19. For example, consumers’ behavior may be different post-pandemic, and even though they expect increased digital interaction, only an integrated human and digital experience will meet their needs. Organizations may have to re-think their operations completely to adapt.
The pace and scale of change are unprecedented and have accelerated in the current environment; every company is being asked to change quickly, albeit with fewer resources. Some are not ready; they may lag behind or even shut down.
People and organizations need to undertake these changes, but they are not mentally ready or have sufficient investments to proceed. They would do well to heed Darwin: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”
The transformation imperative
As you consider initiating changes, be prepared to act boldly yet with empathy. According to “The Empathy Imperative: Consumer Perceptions on Brand Empathy through a Pandemic,” two out of three customers say that how brands respond during the pandemic will impact how they engage with them in the future. Insurance companies can turn empathy into action by addressing customers’ concerns. To make this work, they need to be aware of the impact on employees as well.
This crisis is the start of long-term change: how we consume, how we learn, how we socialize, and how we communicate. Consumers now expect accessibility, added value, and extra features in their digitally-enabled interactions. Your employees, thanks to their experiences, are mentally prepared to deliver them. The digital tipping point has arrived; how you’re crossing it is up to you.
Priya Merchant (priya.merchant.writing@gmail.com) is a digital transformation and innovation expert with nearly two decades of experience in financial services and insurance. The opinions expressed here are the author’s own.
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