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Your Guide to Insurance Digital Transformation & How to Achieve It

To win in today’s crowded and hyper-competitive insurance market requires speed, efficiency, and ease of use. That means going digital – and though this is not a simple process, by employing a smart strategy, every step will move you closer to reaping the benefits of digital transformation.

The trick is not to get overwhelmed – you don’t have to make the transition all in one fell swoop. Consider digital transformation a journey, rather than just a destination – and collect the benefits along the way. Here is our guide to insurance digital transformation and how you can deliver these new capabilities to your customers.

What is Insurance Digital Transformation?

Historically, the insurance industry has been notoriously sluggish in its adoption of new technologies. The ideas of optimizing workflows, moving to an online interface, or even processing claims same-day once seemed impossible. That is, until the worldwide digital transformation of all industries, and now the digital transformation of insurance.

For insurers, digital transformation is “the process of using digital technologies to create new — or modify existing —processes, cultures, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.”

Today, it is commonplace for property and casualty insurers to handle a majority of their business online or via digital applications. Today’s consumers simply demand speed – they want instant gratification, or in the case of insurance, immediate policy quotes, bill payments, and communication.

Where digital transformation of the insurance industry will go in the future is largely unknown. But, experts believe the biggest impacts will be felt across claims processing and underwriting, powered by new developments in artificial intelligence (AI) and the Internet of Things (IoT). These tools, and more, are part of the process of today’s insurance digital transformation.

The Process of Insurance Digital Transformation

The tools and applications that comprise digital insurance – AI, IoT, machine learning, predictive analytics, big data, and cloud-based services – are what have sparked insurance digital transformation. And while these tools are vital, the process of digital transformation involves much more than simply installing new software.

Step 1: Automate Current Processes

The first stage on the journey to insurance digital transformation is the automation of current processes. Consumers today expect high levels of speed and personalized attention, which would be nearly impossible without automated functions. There are real gains to be made here, and many operations in the insurance industry can be made more efficient and effective with digital technologies and techniques such as:

  • Automating underwriting rules and driving referrals through more efficient workflow processes
  • Automatically opening claims coverage and setting reserves based on pre-defined rule sets
  • Implementing live chat functions and automatically answering customer questions and concerns in real time
  • Automating billing and communications

Stage 2: Optimize for Strategic Focus

The second stage of an insurer’s digital maturity is that of optimizing for strategic focus. A step beyond automation of tasks, this stage focuses on identifying critical elements that differentiate carriers in the marketplace and leveraging digital technologies and strategies to optimize processes that support those market goals. For example:

  • Product excellence – some insurers are optimizing around product innovation, aiming to configure and create new products to serve the needs of specific markets such as commercial specialty
  • Speed to market – others are optimizing around the ability to change rates, rules, and product offerings faster than their competitors
  • Customer/agent experience and service – still others are optimizing around being easiest to do business with, typically through a preferred channel

Like the automation stage, the strategic focus stage has inherent value by itself, and is not necessarily just a stepping stone to another stage in a carrier’s journey. Indeed, market differentiation alone can make or break a business.

Stage 3: True Digital Transformation

The third, and most developed, stage of digital maturity is the complete, end-to-end transformation of the business to an open, connected “platform” model.

Sometimes referred to as “ecosystems,” platform companies, like Amazon and eBay, are organized to meet evolving market needs by orchestrating connections between buyers, sellers, products, data, and service providers – all in an open, informed, iterative, and dynamic cycle of supply and demand.

While this level of development clearly requires extensive digital underpinnings in order to operate, the model requires more than technology alone. It requires a new way of thinking and operating, and represents the complete transformation of an insurer’s organization and go-to-market strategy. True digital transformation:

  • Puts customer needs and expectations at the center of every decision and process
  • Shifts an organization from discrete internal and external business units – each with its own sets of data and processes – to creating ongoing, real-time communication and data sharing
  • Facilitates dynamic connections among shifting market participants
  • Radically changes relationships between partners, competitors, suppliers, etc.

Delivering Insurance Digital Transformation to Your Customers

The gap between insurers that are digitally enabled and those that are not is accelerating. It’s no longer a question of whether to replace legacy core systems. It’s about how. Many insurers — especially small-to-medium carriers and those with smaller pools of tech talent to draw from — are effectively leapfrogging the competition by transitioning to a software as a service (SaaS) model for their core systems.

Digital transformation is now baked into customers’ expectations. In “The 2016 State of Digital Transformation,” Altimeter surveyed 528 digital transformation leaders and strategists across industries and asked them to rank the priorities driving their digital transformation projects. The results will look surprisingly familiar to insurers:

  • Evolving customer behaviors and preferences (55 percent)
  • Growth opportunities in new markets (53 percent)
  • Increased competitive pressure (49 percent)
  • New standards in regulatory and compliance (42 percent)

The implication is that digital transformation is being driven by concerns around revenue, retention, and customer experience more than by technology. The digital transformation of insurance — at its best — lowers barriers to entry. It’s easy for end users to adopt and adapt via configuration, not code. And through the cloud, IT is now available as an operational expense rather than capital expense.

Due to pre-integrations and the ever-ready and continuously updated state of SaaS platforms, insurers are able to immediately use and benefit from more functionality for digital communications, data-driven decision making, and predictive analytics.

SaaS also relieves your IT personnel of repetitive and non-value-added responsibilities, like maintenance and upgrades, so they can concentrate on other business challenges, such as optimizing customer experiences and preparing to use new data sources, including those obtained from telematics and third-party providers.

When carriers proceed with insurance digital transformation, underpinned by a completely scalable, SaaS-based platform, the benefits they can expect to reap are endless. For most insurers, the first signs of positive change from digital transformation include:

  • Standardized processes
  • Cost reduction
  • Sales productivity
  • Speed to market
  • Omni-channel integration
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Andy Yohn
Andy is a co-founder of Duck Creek Technologies and has been involved in the design and development of the solution offerings of the company. Andy brings a solid mix of technical and business skills together through his 30+ years of working in the insurance automation industry. Andy served as founding Chief Architect of the Duck Creek Platform and currently is actively involved with product management and research and development projects. Prior to Duck Creek, Andy had a thirteen-year tenure with AMS Rating Services. Andy holds a bachelor's degree in Computer Science with minors in Mathematics and Music.