Insurance digital transformation refers to using digital solutions in the insurance industry to increase the sale of insurance policies by attracting buyers. Companies involved in the insurance industry are increasingly adopting technical know-how to enhance their reach and outshine their competition.
Let us first begin by understanding the meaning of, and the need for an insurance digital transformation.
a. What is Insurance Digital Transformation?
Insurance digital transformation refers to the process of incorporating technology to improve business operations, products, and services in the insurance industry. The process involves the use of high-tech digital tools like AI, machine learning, Internet of Things (IoT), and robotics among others.
Through the use of technology, companies can directly sell their policies to potential customers and earn huge profits. Moreover, data analytics has made understanding customer preferences easier for them. With digital solutions, insurance companies are becoming more customer-centric and making informed decisions every day.
b. Need For Insurance Digital Transformation
The insurance industry is one of the most important realms for business, and therefore the use of digital solutions has become a necessity for companies. Digital transformation is crucial to ensure that one stays relevant in the market and caters to the demands of the customers efficiently.
To understand what their clients desire from a policy, companies are becoming more reliant on technology. This has guaranteed positive results in the form of smoother business operations, better productivity, and more satisfied customers.
c. Purpose of the outline
In this blog, we will begin by discussing insurance digital transformation in detail and the benefits that make it a lucrative option. Then we will describe the process briefly and touch upon the trends and challenges of the same. To further illustrate the importance of insurance digital transformation, we will lastly mention two case studies of the insurance companies that have made their mark through digitalization.
II. Benefits of Insurance Digital Transformation
Now that we have an idea of what insurance digital transformation is, it becomes important to delve deeper into the topic. There is certainly a reason why most companies are adopting digital solutions in the industry. In this section, we will discuss the key benefits of insurance digital transformation.
a. Better customer engagement: As per Forbes, 73% of companies with a customer experience that is above average perform better financially than their competitors. Through better data, it becomes easier to understand customer behavior and expectations. Companies can then create personalized policies for them. Customers can also easily amend policies and buy new ones from their homes.
b. Improved efficiency and lesser costs: The use of tools like artificial intelligence, cloud-based solutions, and robotic process automation (RPA) automates all processes and improves the productivity and efficiency of the company. With this, one can expect a reduction in the overall time that is invested in the process and also a decrease in the cost of buying and selling policies through the traditional method.
c. New opportunities for revenue generation: Companies can easily generate revenue by using digital tools like IoT that can help them develop newer products. As per the Boston Consulting Group (BCG), banks with robust digital sales processes can increase conversion rates by 10-15% in the first year. It also allows them to create offers like pay-as-you-go which provides newer opportunities to attract more clients.
d. Enhanced decision-making: With detailed data analytics at your disposal, you can easily make more informed decisions. The use of AI, detailed algorithms et cetera can improve your decision-making capability. Many companies also use predictive analytics to identify the potential risks that their plans might face and this helps them stay prepared for the same.
e. Better detection of frauds: As per Capgemini, fraud detection systems using machine learning and detailed analytics reduce fraud investigation time by 70%. The use of data analytics can assist you in identifying claim patterns are detecting fraudulent claims that may come your way. Many companies have also started using digital tools like biometrics to ensure that their services are enjoyed by real customers only.
Higher risk management: Improved insights have the ability to manage risks. Insurance digital transformation involves multiple risks, however, the use of data analytics and insights can mitigate the challenges and help you deal with them efficiently. It also helps companies comply with regulations and codes of conduct to ensure that there are no pain points later.
III. Process of Insurance Digital Transformation
Insurance digital transformation is a lengthy process that requires immense care. It involves the use of state-of-the-art technology like artificial intelligence, machine learning, IoT, robotics et cetera. The process is complex and demands focus and agility. In this section, we will discuss the process of insurance digital transformation which comprises three steps.
a. Automating Existing Processes
You must begin by automating the existing business process with the help of robotic process automation (RPA) and other tools. This will help you deal with the dynamics of customer demands and provide round-the-clock services efficiently. Through automation, you will be able to lessen the burden on your employees and allow them to focus on more important functions. This step will also help you:
- Open claims coverage to customers.
- Operate billing and communication automatically.
- Introducing AI-enabled chatbots to deal with consumer problems instantly.
With automation and robotics, you will be able to give your insurance company the boost that it has been missing for years.
b. Advancing for Calculated Focus
This step involves determining what differentiates you and your services from others and aims at taking advantage of digital solutions and advanced strategies to ensure the fulfillment of pre-defined goals. It may also be used for the following purposes:
- Delivering innovative and better products that are personalized as per the needs of customers.
- Enhancing the speed to market so that you never miss an opportunity.
- Improving customer and employee experience towards your company.
Remember that customers will only choose your policies if they find something unique in them. So try to be unique in your insurance digital transformation to be easily noticed.
c. The Actual Digital Transformation
This last stage marks the end of insurance digital transformation into its final form as a platform that provides efficiency through technology. It will include organizing your company to cater to the dynamic demands of the market and provide a one-stop destination for all needs. It helps insurance companies by:
- Prioritizing customer demands and needs.
- Promotes real-time communication and sharing of data.
- Enhances connections in the industry.
By following these processes you will be able to develop a robust strategy for your insurance digital transformation and ensure its success.
IV. Trends in Insurance Digital Transformation
Digital transformation is a lucrative realm for all companies involved in the insurance industry. If you are one of them and want your company to grow exponentially, you must follow the five trends that define insurance digital transformation presently.
- Omnichannel: This involves integrating the existing legacy software into one robust system that makes accessing all relevant information or data easier and quicker.
- Developing a dashboard: This will help consumers get a better view of your policies and services. It will include a detailed list of the kinds of policies you offer, their prices, maturity, terms and conditions et cetera.
- Compare before buying: Deploying a system that helps customers compare and weigh the options that they have benefits companies in the long run. The use of chatbots who act as rational advisors is also a major trend.
- Digital claims management: Buying and selling insurance policies will take a digital turn. Customers will be able to buy policies, get reminders for payments, and file claims digitally.
- InsurTech: With digital solutions, you will be able to monitor the usage of vehicles through GPS tracking, and the health of patients through gadgets. It will also provide insights about the customers’ data quickly.
V. 4 Challenges of Insurance Digital Transformation
Digital transformation is definitely not child’s play as the entire process involves a number of challenges, which must be mitigated before it is too late. Listed below are four key challenges that you might face in insurance digital transformation.
- Data privacy and security: Being an insurance provider, you deal with huge data, and therefore, you also run the risk of data theft. Cloud-based data becomes more vulnerable to hacking and other risks. So you must put a foolproof mechanism in place to ensure that your data is private and safe.
- Infrastructure: A robust IT infrastructure is required to ensure streamlined business operations. Investing in the same rightly is a major challenge that haunts companies, but it can be taken care of with the help of an IT team. This will ensure that you have the best capabilities for your plans.
- Regulations: The insurance industry is regulated by government standards and rules, and this is another challenge for you. It is important to ensure that all your policies are in accordance with the regulatory policies that govern the insurance industry. This will help you avoid unnecessary hassle in the future.
- Operational risks: Insurance digital transformation relies a little too much on digital solutions, which can affect business operations drastically. It is wise to have a foolproof risk management plan to tackle any untoward mishap in the future.
VI. Future of Insurance Digital Transformation
Ever wondered what the future of digital transformation in the insurance industry might look like? Well, we have it all sorted. In this section, we will elaborate on what the future of insurance digital transformation will look like.
- Digital channels: Digital solutions have helped companies do away with the traditional mode of record-keeping and shifted the focus to digitization. This has helped them cater to the needs of customers and take more robust decisions with the help of data analytics. Moreover, the spread of Internet services and mobile applications has also made buying and selling policies easier.
- AI and data analytics: Companies are increasingly adopting AI and detailed analytics to drive growth and enhance customer experience. With the help of AI-enabled chatbots, the demands, and problems faced by customers can be easily handled round the clock.
- Advancing processes: Through digital tools companies have witnessed an optimization of business processes and higher levels of efficiency. It also increases the profit margins and productivity levels significantly.
VII. Case Study
To understand the importance of insurance digital transformation we have enlisted two giants of the insurance industry, that have grown significantly after deploying digital solutions.
a. Lemonade Insurance
Lemonade Insurance is a leading insurance company founded in 2015 that provides insurance policies to its customers for homes, renters, cars, pets, and life terms among others. It was just another insurance policy provider until it decided to digitally transform itself.
The company implemented its digital-first business model to smoothen the procedure of buying and using insurance policies, which led to higher customer satisfaction. It began with the clever use of data and gained a 150% of annual compound growth rate in its first five years. It also reached 1 million paying customers.
With the launch of its mobile application, there has been a rise in the number of customers with about 70% of the policyholders being younger than 35 years of age. To be sure, data acquired the focus of Lemonade’s insurance digital transformation and its annual revenue for 2021 was US $256.7 million up by 100%.
b. AXA Insurance
In this blog, we have discussed the significance of insurance digital transformation and included the challenges that the process might involve. Digital transformation in the insurance industry has a long way to go with digital channels, AI and data analytics, and advanced processes. We hope this helps you in your insurance digital transformation.