Insurance companies today face significant challenges, increased capital requirements and continuing low-interest rates rank high amongst them. However, both are low in precedence when compared to the need to drive digital transformation within the industry.
According to research by Gartner, close to two-thirds of the world’s biggest insurance companies have already invested in insurance technology start-ups. By 2018, eight out of ten property, casualty and life insurers will have joined them.
However, although insurers are fully aware the future is digital, it seems that when it comes to the digital transformation of their own business, things are more difficult. Although insurers are investing in other technology businesses, a digital strategy itself is often not included within the insurer’s business strategy. It is, in fact, perhaps the key challenge facing the insurance industry today.
Below are six key steps that are essential in helping insurance firms achieve digital transformation:
- It starts with people…
Insurers need to understand the needs and priorities of the people at the heart of the digital initiative to develop their approach. According to Jonathan Swift (Wired’s Editor-in-Chief), to succeed in the evolving insurance market, you need to think like a start-up, while taking the time at the outset to analyse, and ask what your existing customers, stakeholders, employees and executives want and need from digital transformation.
They also need to bring in the digital expertise, not just at the front end, implementing digital initiatives, but at the top, setting the digital vision and strategy, while identifying the risks, and opportunities from emerging technology and changing consumer behaviours.
The gap in technological expertise is not unique to the insurance industry. A review from last year of 1,925 executive and non-executive directors at more than 100 of the largest banks, showed only 6% of board members and 3% of CEOs had professional backgrounds in technology. More than four in ten (43%) had no technology experience on their board at all. This knowledge gap is a common challenge across financial services but one that must be addressed.
- It relies on data…
[easy-tweet tweet=”Insurers need to use external digital analysis… to inform a process of segmentation ” hashtags=”Analysis, Data”]
Insurers already have much of the data they need, particularly regarding customer behaviours and attitudes. Aviva’s Chief Digital Officer believes they already have incredible insight, the challenge now is capturing this from silos across the business and attempting to turn it into actionable intelligence.
Insurers need to use external digital analysis, customer experience and empathy mapping and digital value chain analysis to inform a process of segmentation and targeting and to define their value proposition and goals.
- You need a roadmap…
Digitisation is changing markets quickly. With the threat of disruption from new, and changing customer behaviours and expectations, there is an urgency to implement digital initiatives that will prevent insurers falling behind and losing market share.
This cannot, however, come at the expense of a long-term plan. Insurers need a lasting plan as well as roadmaps for strategic initiatives and business imperatives.
- This requires a digital framework…
A framework allows the company to address digital goals and objectives. Not only will it show how initiatives to meet short term business requirements will be achieved, but also how these will change over time and how they link with your strategies.
The framework will address how projects today will fit in with the vision of the future, and the methods – on premises hosting, using the cloud, software as a service – that makes most sense to get there.
- Define the digitals scope…
There is no escape from considering in detail the company’s approach across digital. It is not just about what the business does, but how it presents it.
Insurers must outline the purpose, objectives and key initiatives and challenges in all the key areas: Website, branding, online content, digital advertising, contact management, social media and mobile. They must also determine what needs to be serviced in-house and what can be outsourced.
- Get it right the first time…
Execution and governance are essential to success. Organisations often bite off more than they can chew, starting with a grand transformation that takes too long to provide meaningful returns. The result can mean compromises that undermine the potential value of the project.’
Should the result be a disappointment to consumers or users, they’ll be reluctant to adopt later iterations. Big visions and objectives, therefore, need to be segmented into small, deliverable projects that provide valuable functionality.
That’s not to say the digital challenge does not require big changes. It does. But on the way there, each step counts, and it is one of the key areas insurers need to start addressing. They should do so not only because the digital transformation is probably the biggest issue that they face, but also because it’s central to addressing so many of the other challenges on the boardroom agenda.