Don't let digitization dread drag you down
Here are some of the most common reasons insurance companies fail to digitize completely — and how to address them.
Despite all the talk surrounding digital transformation and disruptors such as Lemonade and the changes that coronavirus has spurred on, the insurance industry has not yet enacted a complete digital transformation. Why is that? After all, the prospect of fulfilling customer expectations, saving on operational and processing costs, and improving efficiencies should provide plenty of incentive for insurance brokers and providers to fully digitize their processes.
Here, I’ll discuss the real obstacles to going digital such as fears about compliance, organizational resistance, scalability issues, constraints of legacy IT systems, and slow implementation — and how insurers can address these challenges to thrive.
High digital needs remain unmet
Throughout the pandemic and during the transition to the “new normal,” consumer interest in buying insurance didn’t wane. According to a recent study, 30.3% said they plan on increasing their spending on insurance, while 45% of consumers have shopped for car or home insurance in the past six months. Simultaneously, insurance claims continue to pour in.
Unfortunately, the same survey shows that policyholders remain largely dissatisfied with the level of efficient communication, with 71% stating they struggled to connect with their insurers to ask questions or modify their policy. This is quite the opposite of the 69% who expected the companies they interact with to “automate and digitize” services.
Poor digital communication results in Not in Good Order (NIGO) documents, high costs, and a long time to settlement. This hurts the customer experience and jeopardizes insurers’ bottom line.
What’s stopping a full digital transformation?
Despite growing customer demand for digital services, insurance companies are failing to keep up.
Most insurance companies already have some digital tools in place for customer-facing processes. Yet, these tools often only cover certain aspects of workflows rather than end-to-end journeys.
For example, robotic process automation (RPA) is growing in popularity thanks to its ability to improve the efficiency of specific tasks, such as using bots to communicate with prospects.
The problem with it is that silos remain, and processes are not always part of an integrated whole. For example, it’s common to see things like agents using bots to reach and vet prospective policyholders. But once those prospects are on an actual sales call, they have to repeat information they already shared with the bot. Agents waste time collecting information that was already provided, manually following up with prospects, and collecting cumbersome physical paperwork.
Most existing systems simply aren’t smart enough to sell in a fully automated and digital way. Due to this lack of cohesion, sales cycles are long and cumbersome. The customer often loses excitement or starts having doubts.
Insurance companies may sense, to varying degrees, that they have a digitization problem. But there are often real or perceived issues that are blocking a full digital transformation. Let’s take a look at some of the most common reasons for failing to completely digitize — and how to address them.
1. Compliance concerns
Compliance demands are greater than ever. So while it’s common enough for customers to be able to start the insurance purchasing or First Notice of Loss (FNOL) process online, compliance paperwork remains common at various parts of the customer journey. For instance, they may be required to at some point show ID or sign papers in person.
But insurers needn’t feel forced to choose between staying compliant and going fully digital. Many digital solutions even surpass the official requirements, relying on things like encryption, time-stamping, and digital audit trails.
2. Employee and executive resistance
Resistance from key stakeholders, including executive leadership, middle management, sales agents, and back-office employees, can derail innovation efforts. Competing priorities, day-to-day concerns, fears about learning new technology, and comfort with legacy systems are all potential issues.
Adopting a new solution doesn’t just mean getting approval from procurement and IT departments. It means ensuring all the people who will be using or benefiting from the technology are receptive to it. How is this ensured? By making sure management knows how the technology can help them achieve their goals and sales agents have been properly trained, and by making sure back-office employees are synced as well.
3. Scalability obstacles
Insurers that are considering adopting new technology may be reluctant to take the plunge if they foresee issues with scalability.
The good news is that many cloud-based solutions offer the level of flexibility needed to promote scalability. Insurers should have their IT department ask vendors how the technology will work as systems increase their usage. Can more users be easily added as market share increases? Is pricing fair given fluctuating usage (for example, certain times of the year when more or fewer claims are likely to be filed)?
Some technologies are more likely to promote a scalable insurance business than others. For instance, automated and AI-based processes can actually allow insurers to maintain a smaller staff year-round and as the company grows.
4. Worries about integration with backend systems
Insurers are often hesitant about adopting new customer-facing solutions, whether it’s eSignatures, digital payments, or digital forms, because they worry they won’t sync with their existing backend system.
But today’s customer-facing technology is designed to sync seamlessly with backend systems. This allows insurers to enjoy faster ROI without having to overhaul core technology.
In fact, insurers can postpone upgrading their backend systems by focusing on technology that actually improves the user experience, making sales and claims faster and more efficient.
Digitization without trade-offs
According to McKinsey research, upping automation and digitization investments processes can lead to savings of up to 80%. This comes on top of the improved customer experience, faster time to settlement, and more policies signed that insurers can look forward to by adopting new technology. Insurers can allay their fears about investing in new technology by making compliance a priority, getting all stakeholders aligned around digital transformation, ensuring the technology scales, and working around the constraints of legacy backend systems.
The opinions expressed here are the author’s own.
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