How Digital Transformation Is Creating An Impact On Insurance
There is no doubt that for years, digital transformation has been the talk of the insurance industry. In the wake of the ongoing COVID-19 pandemic, many insurers made bold advances in automating core processes, adopting new technology, and expanding their digital selling and collaboration capabilities. Recently, the conversation around digital transformation has changed, evolving from a focus on lower costs and increased operational efficiency to more strategic objectives, such as product innovation and richer customer experiences.
The insurers that have had the most success with digital transformation are now poised to go even further, with the development of entirely new business models, such as ecosystems, and the execution of purpose-led strategies, such as those related to sustainability. These organizations are also embracing workforce transformation as part of their broader enterprise transformation programs.
The age of ecosystems has arrived
We define ecosystems as networks of companies that collaborate to serve a broad set of customer needs, typically by offering a richer service experience around a core offering or providing multiple financial products and services through one centralized hub.
Across all lines of business, customers are looking for more affordable, transparent, and customized insurance that better suits evolving conditions and can be easily adjusted as needs change. And they are increasingly willing to buy that insurance from other companies (e.g., retailers, other financial institutions, tech platforms) that offer intuitive personalized experiences.
Winning with ecosystems is impossible without digital transformation and rich, high-quality customer data. Insurers that have not automated their processes integrated their data streams, moved key assets and processes to the cloud, or built out strong application programming interfaces (APIs) and microservices will struggle to develop their ecosystems or participate successfully in those orchestrated by others. Regulations and standards for open insurance will drive adoption in the years to come.
For all of these reasons, we believe ecosystems will rapidly become one of the industry’s major business models and fundamentally change the basis of competition in the industry.
The historic opportunity of sustainability
Climate change represents both an enormous threat to, and huge future growth opportunity for insurers. Beyond protecting people, businesses, and communities from increasing physical risks, the industry must lead in the transition to a greener economy. It can assert that leadership in multiple ways, including underwriting strategies, premium, and behavioral incentives, and allocating capital toward the development of green infrastructure.
Digitally mature insurers will have an advantage in multiple ways. Those with the strongest data management capabilities will find it easier to provide the data that regulators and investors are looking for relative to environmental, social, and governance (ESG) strategies. They will also be better positioned to track their progress toward their ESG commitments and tell a credible story to capital markets and industry groups that have been punishing insurers with low ESG ratings. In some cases, insurers are being excluded from ESG index funds, which have been attracting enormous capital inflows. If left unchecked, these developments could hurt insurers’ stock prices.
But insurers also need better data and more advanced analytical tools to model the incredibly complex risks of climate change. Such models are critical for the industry to begin to underwrite the huge investments necessary in the shift to a greener global economy. Sophisticated insights are also necessary to develop new types of products (e.g., parametric policies and those that feature carbon offsets) and risk prevention services that can help protect individuals, businesses, and communities from the most severe climate threats. All of these steps represent ways that digital transformation enables insurers to live their purpose.
The powerful people-tech dynamic
Not that long ago, the conventional wisdom in insurance held that as insurers adopted more technology and automated more processes, people would lose their jobs. Direct digital sales would reduce the number of agents and straight-through processing would eliminate most claims positions.
Today, that thinking has evolved significantly, reflecting the more nuanced, sophisticated, and interdependent human-tech dynamic that has emerged, as well as the need to balance multiple — and sometimes conflicting — objectives. The consensus among forward-looking executives is that human talent is every bit as important to future success as AI, machine learning, and modernized processing platforms.
Plus, insurers that can demonstrate that they are tech-forward and data-driven will be more attractive places to work among the most in-demand types of workers (e.g., data scientists, experience designers). These people want to work with the latest tools and solve interesting and meaningful problems, such as those related to sustainability and financial inclusion. Even if insurers partner with InsurTechs or outsource to access these workers, they need to be digitally advanced to share data and collaborate productively.
Even before remote working globalized the labor market, insurers were struggling to compete for top talent. By retooling the employee experience, energizing the culture with more agile ways of working and more collaboration, and articulating a compelling purpose that goes beyond the bottom line, insurers can demonstrate that they aren’t the boring old carriers of yesteryear. Indeed, by leading on sustainability and embracing innovative new business models (e.g., ecosystems), insurers can become “employers of choice” for younger workers.
New skills, expanded capabilities, more collaborative cultures, robust engagement and retention strategies, more creative sourcing models — tomorrow’s top-performing insurers will realize exponential gains by marrying the power of people and technology for increased engagement and more fulfilling experiences.
In a time of intense competition and dynamic changes in the insurance industry, we believe those insurers that can transform successfully to achieve digital maturity will be best positioned to win.
Inmediate is an insurtech startup from Singapore that is using the latest technology such as Artificial intelligence, Distributed Ledger, and NLP, making insurance processing and underwriting fast, cheap, and flexible. That gives for better processes, lower costs, improved time to market, and new revenue opportunities.