The insurance industry is going through an unprecedented shift in terms of buyer behavior, marketplace dynamics, and technology. As a result, integrating core insurance functions with innovative technology has never been more important – or impactful. To grow and compete in the digital insurance era, innovators are unlocking the value of advanced mobile applications and platforms, UBI and telematics, autonomous vehicle technology, machine learning and robotics, advanced analytics, and tightly integrated core systems.

What is Digital Insurance?
As with other important tools and approaches (for example, analytics), a hype wave has engulfed the term digital insurance. It is being hijacked to fit specific products and technologies, and is touted as the solution to many of the industry’s ills. In the no-hype world, digital insurance is a broad term connoting the use of technologies to integrate processes and information among core insurance functions including:

  • Product Development
  • Customer Acquisition
  • Distribution
  • Underwriting
  • Claims
  • Service Operations
  • Finance
  • IT

The payoff from digital insurance comes from capitalizing on data and processes across core functions. While the impact on key performance indicators can be dramatic (e.g. improved risk selection and loss ratios), the most important outcome is transforming the customer experience to improve satisfaction and retention, and ultimately growing the business.

Going Digital
Every insurer is at its own stage on the digital transformation curve. No matter where you are, it’s important to have a blueprint to guide your efforts and investments. Fragmentation among departments, siloed customer data, data quality woes, budget constraints, and scope-of-authority issues have saddled many insurers with piecemeal projects that don’t deliver their potential.

This time it’s different. Given the competitive marketplace and ever-increasing customer expectations, insurers no longer have the luxury of “figuring it out as they go” at a casual pace. Insurers must understand their customer – interests, preferences, buying behaviors – and move from a commodity price-driven approach to a customer-driven focus.

Every insurer should have an operational blueprint that depicts where digital resources can add value or reduce cost across the enterprise. That blueprint should also define high-level approaches and time frames for achieving those results. You might be tempted to call that a “digital strategy,” but that would understate the magnitude of the issue. Your overall business strategy should prominently incorporate the principles of “integration,” “technology-enabled,” and “data-enabled” to drive those priorities throughout the organization.

In terms of the digital insurance impact on core functions, here are some of the ways that traditional insurance functions are evolving:

  • Customer self-service is being transformed using advanced mobile applications for customer acquisition; claims reporting and inquiry; billing functions; and non-core functionality such as home automation, property inventory, etc.
  • Data is being mined using social media, UBI telemetry and other telematics, wearables, and other sources to price and underwrite risks more accurately and manage claims more effectively.
  • Customer trends are being deeply analyzed and correlated through social media, predictive analytics, and “big data” analysis to create insurance products and processes that are more aligned with customer needs. Those same resources are being tapped to sell more effectively, cross-sell existing customers, and retain customers over the long-term.
  • Robotic Process Automation (RPA) technology is being used to emulate human activities in processing claims and other service encounters to automate frequent and repetitive multi-step tasks.
  • Machine learning and artificial intelligence are being integrated into insurance operations. Machine learning data can be used to predict current or future outcomes producing reliable and repeatable decisions and results.
  • Home sensing is being used to develop homeowner insurance premiums.

Start With a Blueprint
Most companies have a technology plan, and typically these focus on infrastructure, applications, risk mitigation, prioritization parameters, etc. Two areas that are often underrepresented are data and integration – specifically, how data is consumed and applied, and how technologies are integrated throughout the business value chain – across departments, across systems, and across revenue and cost domains. Your technology plan – your blueprint – should include these elements.  Be prepared for push back as this will likely portend organizational and cultural changes. But such clarity around data and integration is essential for capturing the value of digital insurance. Some organizations are not equipped to make this kind of shift due to a lack of business or IT resources with the relevant experience. This may require engaging third parties as strategic business partners, or possibly a strategic acquisition. 

And while you are refining that blueprint, take a hard look at your leadership ranks. Technology-driven organizations require leaders who are educated and experienced in advanced analytics and data analysis in addition to technical insurance experience. This is a paradigm shift from the traditional insurance resource requirements. There must also be a balance of insurance and technology expertise at the technical and professional levels. Do you have the right talent in the right places?

The insurance industry is changing more rapidly than most had anticipated, with technology as a primary catalyst. “Going digital” is not easy, but it’s table stakes for enabling faster adaptation to market shifts and sustaining long-term growth and profitability.