Why Your Insurance Business Needs BOTH Digital Transformation and Insurtech to Gain Competitive Advantage
Key takeaways
- While digital transformation is a viable and vital investment for you to make, it doesn't just come down to spending some money on upgrading your technology.
- The main issue holding insurers back on their digital transformation journeys is legacy tech.
- Embracing change now will set you up for success off the bat.
- Technology doesn't hold you back. It removes the barriers to product development and allows for much speedier launches.
No other year in insurance history has seen such a significant demand for digital transformation and insurtech. What previously was only nice to have is now something that you need to have. As a result, many are now confused about where to even begin.
This article will cover precisely that, along with two crucial things for insurance innovation: digital transformation and insurtech and the benefits they could bring to your business. You'll also find a lot of insights from experienced insurers and techies that have gone through these changes themselves. So, keep reading to find out!
Things to consider before undergoing digital transformation
Digital transformation is the process of adopting digital technologies and insurtech, to change the way you operate, deliver more value to customers, meet changing market needs and innovation. Artificial intelligence (AI), machine learning (ML), Internet of Things (IoT), blockchain, predictive, and data analysis are no longer just buzzwords. These technologies are quickly spreading globally and setting a strong foundation for the digital transformation strategy of many successful insurance companies.
Insurtechs take advantage of them, developing new products and services with the goal of reducing costs, both for clients and insurance providers. They also enhance operational efficiency and customer experience.
When it comes to insurtech, there are two things worth remembering:
- More robust backend processes often result in better customer-facing ones as well.
- Not all technologies are reliable and need thorough evaluation before implementing.
While digital transformation is a viable and vital investment for you to make, it doesn't just come down to spending some money on upgrading your technology. There are some other key points to consider before undertaking this task, let’s dive in!
#1. Cultural and organizational change
One of the main issues holding insurers back on their digital transformation journeys is legacy. But not just when it comes to technology. Old cultural and organizational mindsets are a colossal blocker too. How can you become fully digital- and customer-driven if you're stuck in non-digital operational structures? You’re absolutely right, you can’t. Therefore, your first step should be a review of the general internal outlook on the following matters:
When you answer these questions, it’s time to take the next step on your digital transformation journey - reviewing your approach to customers.
#2. Customer-centered human approach
According to recent research by PWC, the frontrunners in the market acknowledge changing customer needs and behavior. Even more so, those that respond to evolving customer needs by leveraging customer insight constantly iterate their experience.
To become genuinely customer-centered, businesses should take an approach that combines solid digital fundamentals underpinned by the so-called “human touch”. A study by Forbes found that 86% of consumers prefer to interact with a human agent; 71% said they would be less likely to use a brand if it didn’t have human customer service representatives available. Therefore, it's essential to understand that technology should primarily elevate human experts, not completely replace them. Combining these two practices are a significant step towards being truly customer-centric.
#3. Change for the future
Change is something that you need to consider and even try to predict to become future-proof. This procedure entails setting up flexible organizational structures and strategies that allow for constantly adapting to new trends. The change will continue, and you always need to be ready for it. Embracing it now will set you up for success off the bat. Also, help you avoid desperately accommodating to new standards when it might already be too late.
What digital transformation and insurtech can do for your insurance business?
In contrast to digital transformation, insurtech are the essential tools, products, and processes that support insurers on their digital transformation journey and help bring their business to the next level. As such, digital transformation is a much broader concept that involves a variety of matters, insurtech looks mainly towards problem-solving, growth, and innovation using technology. Often it's also used to categorize the startups or vendors in the insurance space that provide these products, services, and processes.
So, what is it that insurtechs can do that insurers typically can't do on their own? And what makes digital transformation so attractive to insurers? The most common reasons include: scalability and agility, efficiency and innovation, personalization and digital-first.
Now, let's dig into each of the benefits that digital transformation and insurtech present.
Scalability and agility
IT systems that can't scale restrict insurance businesses, which results in lost momentum, expensive re-platforming, and a chance for competitors to leap ahead. Your scaling encompasses various types of growth with the right digital transformation strategy, from increased volumes and product portfolio to workflows and security needs.
Modern, cloud-based technologies are often built especially with scalability and future readiness in mind. Apart from offering a rich feature-set out-of-the-box, a key functionality in new insurance systems is third-party integration. This approach enables you to custom-build ecosystems tailored to your specific needs and quickly adapt them whenever you need.
When entering your digital transformation journey, you should consider not only what you need now but what you might need in the future. Applying this mindset will undoubtedly set you up.
Agility makes it possible for you to focus your efforts on product development and better customer experiences. At the same time, the insurtechs do the heavy lifting on the tech side of things, preparing for whatever challenge or opportunity might arise.
Efficiency and innovation
A keyword in digital transformation is automation, which can help you boost efficiency by 40% all around the organization. By leveraging insurtech and technologies such as AI and ML, you can significantly increase speed throughout insurance operations and allow for more efficient workflows. From things such as instant policy creation and drastically quicker turnaround on claims to automatic billing and communication, digital transformation enables you to be there for your customers when they need you.
And speaking of, it's also possible to offer better, more efficient customer service by providing chatbots or live chat. Being available to the customer lowers the threshold for communication, improves the insurer-insuree relationship, and helps minimize the customer service backlog.
Also, trying out new endeavors always brings a certain degree of insecurity. Thus, making nimble insurtechs a part of the innovation strategy means collaborating on new ventures, drastically lowering the risk. You benefit from working with partners who are more prone to entering undiscovered territory. At the same time, insurtechs gain support, both financially- and experience-wise, allowing them to grow further.
Personalization and digital-first
One of the pitfalls of digital transformation is that insurers often believe that merely migrating from paper to a digital platform is enough. However, this isn’t the case. You need to enter a completely new mindset where digital is your primary medium. Start creating products and services for a digital customer, not adapt old ones to fit new standards.
At the same time, customers demand services that are both highly tailored to them and preferably wrapped up in one seamless omnichannel experience. New technology allows them to effortlessly access their policies, make claims, and pay their premiums, all in real-time, in one place. This information is stored and easily accessible in one system for you to automate where possible and make informed decisions where needed.
Moreover, by undergoing digital transformation and implementing insurtech, you can analyze data from smartphones, wearables, or even social media to offer more personalized marketing, products, and services.
With predictive analytics, you can also define when an insurance event might happen in the future and provide customers with services and incentives to prevent it from occurring.
With digital transformation and insurtech, technology doesn't hold you back. It removes the barriers to product development and allows for much speedier launches. Consider all the aspects of your customer experience to bring optimal value to your policyholders, from all-day service to new business and cover models, payments, etc.
Whatever type of insurance or wherever in the value chain you might operate, digital transformation and insurtech should be a part of your long-term business strategy. The first is essential to modernize the company, and the latter to drive innovation throughout the business. And, if employed correctly, it will undoubtedly lead to a strong, sustainable competitive advantage.
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