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Digital Transformation – The Future of Insurance Industry!
According to PwC’s 22nd Annual Global CEO Survey, digital transformation in insurance industry have become prominent. Adapting to the changing technological advances in the current global scenario is inevitable and had become imperative for insurance companies to keep up with the pace.
Indeed, the insurance industry has majorly benefited society by helping people and providing them with retirement plans and health concerns. Insurers have also helped people recover from catastrophe, preventing loss and incentivizing lifestyles and increasing its social value.
Insurance Companies seem Perturbed by the following Concerns:
1. Speed of Technological Change: Nearly 51% of the insurance participants in 2018 stated being ‘extremely concerned’ about the pace of the shift in technological changes. As technology gradually but strongly and firmly entered all the sectors of business, the insurers felt siloed in the developing times.
2. Changing Consumer Behavior: With customer-oriented business focus, the customer experience became the prime focus of the companies resulting in the behavior change of the consumers. Consumers were now aware of their demands and rights more than ever. Consequently, the insurers had to level up to engage customers digitally. Articles like “Ways to Level-Up the Digital Customer Engagement“ help the insurers immensely.
3. Newmarket Entrants: With new ideas, talents, and technologies entering the market, the insurers with age-old and obsolete ways felt most uncomfortable.
Incorporating the Technology Use
As compared to 2018, various measures were taken into consideration by CEOs that indicate the positive introduction of technology and its adaptation by the insurance companies.
- The companies seemed considerably relaxed in the year 2019 about the same concerns of the previous year. Nearly 80% of the insurance CEOs agreed that Artificial Intelligence (AI) was part of their business models or will be in a couple of years.
- New business models are adopted that focusses on improving customer experience on a priority basis and then on reducing costs — the idea noticeably borrowed from the wave of new technology investment. The increasing use of sensors, AI, and machine learning in combination has helped businesses move towards more proactive, risk detention, intervention, and prevention.
- With the introduction of health monitoring devices, the practice of loss anticipation and compensation has been affected in an obvious way. Thus, it is a win-win situation for the insurer as there will be less risk and claims and policyholders can choose insurance as per their needs.
- Smart devices embedded in people’s homes enables policyholders to benefit from real-time equipment monitoring and maintenance.
- Furthermore, the Internet Of Things (IoT) technology helps to scale down property claims and also check crop damage risk by the help of real-time integrated data from aerial, ground, and satellite imagery.
- The technological connectivity between policyholder and insurer is strengthening trust, which is of paramount requirement.
The Digital Edge
According to the CEO Survey, 72% of the insurance CEOs rely on organic growth to drive revenue, while 70% rely on operational efficiency. The survey findings highlight that while some insurers are embracing the future and capitalizing on opportunities, others are still taking some more time to cope up with the pace. There is a massive prospect of InsurTech skills, highly in partnership but also through a brought in-house source of expertise and innovation.
Innovation is no more stuck in the shelves of a lab and incubators. Today, the front-runners have amalgamated technology with the core of the business and presented it to the customers. This shift in the mindset enables the companies to bring new products and services against the market challenges in the form of conventional ideas about insurance. Consequently, uncomplicated products are available in modular units that are easy to understand and distribute digitally.
Besides, companies now have a holistic view of insurance customers’ wants and needs. Companies look beyond traditional confines like health, wealth, agriculture, and financial management. The companies have come up with new solutions that encompass health, retirement provision and inheritance planning, etc.
The Strategies Adopted
Understanding the true essence of the word customer-centric has been a struggle for many insurers. Consumers want choices in all the services and products according to their wants and needs. Simplicity, flexibility, and personal interaction are of utmost importance to the consumers. InsurTech enterprises, innovating with customer needs are advancing in digital technology for a better insurer-insured relationship.
For example, the consumer can insure a car only when driving, golf clubs only when consumer hits the links and camera for vocation. Such is the kind of flexibility customers want. To bring usage-based and on-demand personalized insurance into existence, InsurTechs like Slice, Cuvva, and Trov are putting in the best efforts.
Any change requires time, efforts, and dedication. Insurers must understand that they need to break out of their legacy shells to grow with the changing times. It is required to bring changes to the decision-making policies. The age-old legacy of centralized decision-making would have to cease.
Insurance companies also need to change their working practices together with technological advancements. For example, insurance BPOs have improved the services provided by insurer companies. It enhances the staffs’ understanding and expertise in the subject.
According to a survey, 91% of insurers believe in providing exemplary customer service. For instance, a US Auto Insurer was facing challenges on technical front and an insurance bpo helped the company to re-establish itself.
The onus of success of any business ultimately lands on people. Technology does dominate the transformation agenda, but machines can not replace innate human capabilities. Therefore, it is troubling that more than 80% of insurance CEOs are concerned about their growth prospects due to the impact of skills shortages. Graph 2 highlights that 36% of the CEOs are extremely bothered.
The value of data, digital transformation, and associated changes can not be overlooked. About 90% of insurance CEOs highlight the significance of data to understanding customer preferences and managing enterprise risk decisions (93%). Only 10% who believe that data on customers’ preferences and needs is critical say that they receive comprehensive date.
And only 39% believe that business data about risks liable to be exposed is detailed. CEOs have also brought to notice the impact of the failure of data sharing within the organizations, which leads to the isolated nature of marketing, underwriting, and claims.
We have recognized five essential priorities for any insurance executive to consider, and the interdependency between them is crucial to understand.
1. Image Building: It is imperative to stand out and serve customers with something different. It can be in terms of innovation or customer experience. You can identify your forte and focus on specific capabilities.
2. SWOT: It is significant to understand the strengths, weaknesses, opportunities, and threats for your business. For example, providing equipment insurance to maintenance service is an excellent opportunity for an insurer. It requires to understand the target customer/ecosystem to come up with new ideas and technologies.
3. Shut Down Legacy System: Nothing is permanent but change. It is of vital importance in any business and becomes necessary to cut cords with traditional ways and keep pace with new changes.
Especially when new, cheaper, and more effective AI, cloud/ SaaS, blockchain, robotic process automation (RPA) and intelligent process automation (IPA) alternatives are available. These options enhance risk anticipation and reduce costs.
4. Talent Development: With the introduction of technologies, one of the task to take care of is to manage the freed-up space. PwC’s experience highlights how up-skilling existing staff can be highly effective and motivational. Partners and staff have found opportunities to enhance collective digital skills and knowledge.
Moreover, it is essential to have a culture, purpose, and environment that inspires and retains existing staff as well as people from InsurTech.
5. Effective Execution: All the innovations, plans, and changes are meaningless until implemented effectively. What we learn from the winners is their priority to customer needs beyond traditional insurance. The balance between talent development and strategic collaboration is critical for the smooth operation of companies.
We understand that with the new technologies and innovations in the global scenario, insurance companies need to catch up with the changing environments and developments. With recent developments, insurance companies have come up with on-demand, simple, flexible choices for customers with inter-personal relation for maximum customer satisfaction.
Cogneesol has been providing insurance process outsourcing services for more than a decade to worldwide clients. We use the latest technology and software applications related to the insurance industry. If you require a reliable outsourcing service provider at affordable costs, get in touch with us, and get a no-obligation quote today. Call us at +1-646-688-2821 or email us at [email protected].
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