Digital transformation in Insurance - Essential Insurance technology you need to know
Meanwhile, not only new players, new business models, innovative insurance technology and high customer expectations are forcing the insurance industry to perform a massive transformation in the way business is done, but especially the novel Coronavirus pandemic. Agents, brokers, and financial advisors will likely face many risk management and logistical challenges. Insurers may have additional considerations when accommodating claims adjusters, who often need to travel to perform their jobs (Deloitte 2020). It is currently more crucial than ever before for insurers to use insurance technology and push digital transformation forward in order to be better positioned in the short term, protect staff and contain the spread of COVID-19.
The relevance of the topic was already evident before the pandemic: A survey from Accenture in 2019 revealed, that 90% of insurance executives have a coherent, long-term plan for insurance technology innovation in place (Accenture 2019). One of the key arguments is that by reducing the role of the broker and changing the traditional means of calculating rates, technology-oriented insurance service providers are often able to cut the cost of insurance by nearly 50 percent.
But what kind of technologies actually exist for the purpose of digital transformation in insurance? What are their benefits?And how can digital transformation in insurance be successfully managed?
For this purpose, Briisk identifies the following four key insurance technology components for effective digital transformation in insurance.
Cloud technology is presumably one of the main enablers for successful digital transformation in insurance and continuation of business operations during COVID-19. Collaboration in a cloud environment gives businesses the ability to communicate and share more easily outside of the traditional methods, resulting in more flexibility of work practices and efficient collaboration (Queensland Government 2017). Especially for the insurance industry, cloud insurance technology provides a big opportunity to overcome hurdles related to the lack of IT collaboration and burden of legacy systems. According to a recent study by Accenture, there are several reasons for the usage of cloud technology in insurance including:
1. Improves speedto market through greater IT agility and shorter project implementation time. Automate certain aspects like enrolment processes, claims management, underwriting and much more.
2. Innovate effectively and accelerate business growth by testing and deploying new MVPs quickly, meeting the evolving needs of the business and market.
3. Reduce operating costs for licensing, hardware and the maintenance of complex legacy systems.
4. Expand globally, standardise business across multiple geographies, foster international relationships and integrate with other companies via APIs. (Accenture 2018)
Intelligent Automation systems detect and produce vast amounts of information and can automate entire processes or workflows, learning and adapting as they go.The results are not only cost savings, but also faster in action and decision (e.g. fraud detection), have better outcomes (e.g. portfolio optimisation) and compliance (e.g. automate compliance and regulatory activities) (Deloitte). Therefore, certain insurance processes that have been resistant to change for many years can now become automated and used to gain further insights via analytics.
Data is at the heart of each insurance firm. However, most insurers are sitting on terabytes of decades-old data that is disconnected and stored on disparate systems and difficult to analyse. Data Analytics are capable of providing insights from this data, to support the decision making process, to tackle the most complex business problems and to address the growing market competition (Deloitte 2018). New data analytics capabilities and an increasing amount of data, enable to create deeper insights, make predictions and generate recommendations.
Over the last few years, most insurers have invested in Data Analytics solutions and understand that investing in Data Analytics is key to survive in a fast changing environment of digital transformation in insurance. DXC identifies data analytics as one of the key elements of digital transformation in insurance: “ability to perform detailed analytics for better business decision making depends on having a digital platform that can access enterprise-wide data and take advantage of cloud-first capabilities such as machine learning and artificial intelligence” (DXC 2018).
A way to practically enable data-driven insights through deep analytics is to orchestrate the flow of data through the various systems into a central data lake for analysis without disturbing the underlying systems of record, so-called digital decoupled architecture.
To benefit from all the components above, a course to transformation has to be set and digital innovation has to be promoted across the entire value chain. One of the most critical elements to successful digital transformation in insurance is the right mindset (Forbes 2019). Customer experience should be the heart of all strategy and decisions. According to Jeff Bezos, "The No. 1 thing that has made us successful by far is obsessive, compulsive focus on the customer as opposed to obsession over the competitor.”(Businessinsider 2018).Moreover, rapid progress has to be enabled via proactive measurements and the encouragement of rapid product creation through MVPs instead of seeking perfection.
Summary: Digital Transformation in Insurance & Insurance Technology
But how can you avoid business interruption and drive digital transformation at the same time? Replacing legacy systems is often too costly, complicated and expensive. Therefore, one of our recommended approaches is to provide a layer that can orchestrate the flow of data between the legacy systems and the new digital disruption channels. As time goes by, the legacy systems are decommissioned as the orchestration layer becomes more and more feature rich. Thus, the legacy systems are replaced bit by bit.
To sum up, the insurance industry needs to become ready to stand the pressure of new players, new business models and high customer expectations, as well as the current COVID-19 pandemic. This forces the insurance industry to use innovative insurance technology to perform a massive transformation in the way business is done - and the only answer is a persistent digital transformation in insurance.
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