Digital Transformation in the insurance industry
Digital transformation, digitalization, digital maturity; these are all labels for the change from manual, cumbersome and time-consuming processes to digital, automated and efficient operation. It is based around the use of digital components, such as cloud services, Software as a Services, Infrastructure as a service, platform as a service, artificial intelligence and machine learning replacing the older methods that have become obsolete and inefficient.
With 2020’s global crisis, Digital Transformation was ‘forced’ in a way. It became a requirement for most businesses just to keep on working. Remote workforces went from being scattered little teams in a few companies, to all the work force that could do their work without a hands-on approach. 2020 was indeed a milestone in this regard. Digital transformation was completed –or in many cases started- because of the circumstance.
But, what does digital transformation entail? What are the concrete benefits for employers and employees? How about the insurance industry, how has digital transformation affected this industry in particular? These are some of the biggest questions we are going to answer in this article while highlighting the importance of being digitally mature.
First things first. Let us answer the question:
What Does Digital Transformation Entail?
Digital transformation, as mentioned above, is not just about running bills by a computer instead of doing it manually. Nor is it about the latest and flashiest programs, apps, or hardware. Digital transformation is about the way an organization thinks. Digital transformation begins by going from analog to digital, but it does not stop there. It is about using technology in your favor, for the needs you and your customers have.
For example, in the insurance industry, the digital transformation has begun in the form of management software that enhances productivity and efficiency. But it has not stopped there. The insurance industry has also adopted predictive analytics and artificial intelligence as part of its digital transformation. Brokers now have the capacity to understand and underwrite specific policies for specific needs while having a comprehensive software that lets them communicate easily with clients.
Consultant McKinsey shows that even in a situation like the pandemic, where people needed digital tools to keep doing their job, digital transformation is still a hard bone to pick: “Only 16 percent of respondents say their organizations’ digital transformations have successfully improved performance and equipped them to sustain changes in the long term. An additional 7 percent say that performance improved but that those improvements were not sustained. Even digitally savvy industries, such as high tech, media, and telecom, are struggling. Among these industries, the success rate does not exceed 26 percent. But in more traditional industries, such as oil and gas, automotive, infrastructure, and pharmaceuticals, digital transformations are even more challenging: success rates fall between 4 and 11 percent.”
These numbers are at the very least alarming, since digital transformation can, not only skyrocket productivity and efficiency but in certain scenarios, as seen all through 2020 even protect people’s health.
What Are The Main Benefits?
As discussed above, digital transformation can turn a whole company around. This means changing equipment, software and points of view about technology. Even when it is a challenging thing to do, given it involves hard wiring, it reports benefits to the company as whole since it enhances productivity and efficiency. It gives employees tools that enhance their performance. Most importantly it provides clients better services or products overall.
The major benefits from digital transformation are:
- Enhanced Data Collection: Manually collecting data from clients is at the least a time-consuming task these days. Digital methods allow the client to fill out the information and just send it to you. Bigger data bases equal more precision when the time comes to offer new products or services.
- Data driven decisions: With digital tools, like analytics, decisions no longer need be a wild guess, you can analyze numbers and facts. Analytic tools can process vast amounts of data giving you enough information to make good decisions.
- Enhanced customer service and customer experience: Customer experiences are overall improved when digital transformations happen. This involves every stage of the buyer’s journey and every member of the company that must help that customer.
- Digital tools enable better communication thus better focus on the client’s problem, specific solutions for specific problems, and the ability to go back on the buyer’s journey and improve it. It also involves tangible improvements. Digital Transformation can bring in platforms like websites and open communication channels, which can bring companies and clients closer together.
- Bigger profits: The SAP Center for Business Insights and Oxford Economics found out that:
- 80% of organizations that have completed digital transformation report increased profits.
- 85% say they have increased their market share.
- On average, leaders expect 23% higher revenue growth than competitors.
- Improved Productivity: Technological and digital tools can streamline workflows, and erase manual data entry. Saving workers enormous amounts of time.
- Increased Transparency: Digital tools leave a mark. This simply means that everything done in a digital tool is traceable to a degree. Sometimes, digital tools allow for real time collaboration, reports on the story of a product or a service, reports or history of payments, among other examples. Digital tools can show what is asked of them, this gives less room to speculation.
- Centralized operations: Digital tools allow for the centralization of the business, product or services information. From vendor to clients, from account reports to HR functions.
Are There Steps Towards Digital Transformation?
Both yes and no. Digital transformation is a comprehensive process that involves organizations as whole. There are pillar points to pay attention to that should help make the transition easier:
- Have objectives: Determine the organization’s level of digitization and try to align the current state and long-term digital goals.
- Formulate a strategy: Set a clear objective and build a feasible game plan which involves selecting areas of improvement and starting to integrate digital systems from those areas.
- Decide on the technologies you need: such as Analytics, Cloud, Virtual Reality, and Artificial Intelligence, are a vital driver for a successful digital transformation.
- Train your staff: the more you educate your employees on how beneficial the transformation is for the company, the less reluctant they will be to change.
What Does Digital Transformation Mean For Insurers?
Insurance companies need to leverage digital technologies to stay ahead of competitors. As digital transformation began in the last few years, the number of insurtech companies also increased. They drive change in insurers in 2 ways:
- Insurtech companies that build solutions for traditional insurance companies, that target usual pain points. They are growing in the field of Auto, Property and Casualty, Health and Life Insurance. They tend to have a customer centric approach and are improving on the inefficiencies traditional carriers have dealt with over the years.
- Insurtech companies, like Lemonade, that go for a direct approach and bet on a relationship with the client, instead of providing products to carriers.
Start your Transformation Today
A good first step towards a complete digital transformation, in the case of insurers, it to open the door to claim management systems. Terraclaim will save your brokers a great amount of time that would otherwise be spent in manual data entry. At the same time, you gain access to automations and a centralize locations for all your claims. See Terraclaim for yourself by requesting a demo here