Digital transformation is critical to the insurance industry as consumers’ demands evolve and expectations rise. The industry has been traditionally slow to adapt to new technology, but new solutions are emerging that improve productivity and allow systems to more effectively stay up-and-running; it’s imperative for insurers to adapt.
But understanding what’s needed and executing adoption and implementation are two very different things. Most insurance organisations acknowledge that new technology should be embraced, but legacy environments stand in the way of more efficient processes.
More than one-third of carriers say rising customer expectations are the primary driver behind their plans for digital transformation, according to a study conducted by Forrester Consulting on behalf of Ensono. But with nearly 70% of insurance companies somewhere along the journey to digitally transform, many acknowledge a variety of barriers that stand in the way.
The top digital transformation challenges facing insurers are:
Cost
Ninety-nine per cent (99%) of insurers say they are facing cost difficulties associated with digital transformation, and not just in monetary terms. While it is true that the concept of migrating workloads from legacy technology can be cost-prohibitive, it can also be daunting in terms of time, risk, and resources. In legacy environments such as mainframes, the challenge is based on an “all-or-nothing” principle. Due to the complex nature of their operation, once the workload transition begins, it needs to be completed.
IT talent that is familiar in legacy tech is also a scarce resource, and it’s highly expensive to retain them in-house due to the lack of availability. Mainframe platforms use a variety of computer programming languages, and the workforce familiar with them are retiring at a rapid pace. Combine that with the fact that most universities no longer teach these legacy skills, and it is apparent that there is a talent shortage that poses a barrier for firms to even consider mass digital transformation.
Security
All insurers deal with personal information, and therefore are subject to strict data protection laws. In light of infamous recent data breaches, such as the Sony Pictures hack or the Equifax data breach, cybersecurity is more essential than ever. Since a great deal of digital transformation hinges on utilising cloud technology, measures must be taken to ensure that the consumers’ sensitive data are protected.
Due to of the lack of legacy skills mentioned earlier, this is no small feat. Companies need to have systems in place for all of their technology to work seamlessly. Because data is most vulnerable in transit, insurers must invest in infrastructure to mitigate risks.
Planning for the future
While adjusting to the evolving expectations of consumers, the challenges presented by digital transformation are not insurmountable. The biggest risk facing insurers is the risk of inaction. While there is much ado about the cost of digital transformation, the cost of not keeping pace is much higher, and that cost is competitive advantage, relevance, and service. The best approach is to have a comprehensive strategy.
To combat the skills gap, insurers must have sufficient outside help as well as in-house advocates of digital transformation goals. Organisations must steer consumer expectations to what is technologically feasible at the time, and commit to a holistic overhaul of their service delivery. There are certain digital enablers that help drive innovation and give firms an edge. While we’ve already touched on cybersecurity, here are some of the most applicable to insurers:
Application and Infrastructure mapping: There are many options now in terms of tools and providers who can assist in building a topoplogy that provides insights into how applications interact, and how they transact across legacy and modern platforms. From this topology, a plan can be built and the task can become far less overwhelming.
Connectivity: Implementing tools to improve interaction and engagement between consumers and organisations via data and technology. This can include edge computing, native apps and AI to name a few.
Experience Innovation: Putting care into mapping out the touchpoints of the user experience to create consistency and usability, while utilising enhancements such as speech-and-gesture-based interfaces.
Data Intelligence: Developing infrastructure that utilises data and analytics to gain useful business insights and tailors services to specific consumer needs.
The current market has fully embraced the new digital principal-agent relationship, with only greater and greater service capabilities developing on the horizon. All industries, from nonprofits to retail, have felt the impact of digital transformation, and insurance is no different. With consumer expectations for immediacy rapidly evolving, digital transformation isn’t an option for today’s carriers - it’s a necessity.
