The pace of change in the insurance industry—property & casualty, life, and health, specifically—can seem glacial compared to other areas of financial services like consumer banking where practically every touchpoint in the customer experience has been digitally transformed in recent years.
This slow march to innovation and transformation has been largely attributed to three factors:
- The elaborate regulatory and compliance environment the industry operates within.
- The sheer size of the leading insurers, which not only makes change more difficult but wards off competition.
- The growing complexity of the insurance product portfolio.
Aside from some advancements in the auto insurance segment in recent years, much of the industry has been able to put their heads down and profitably conduct business the way they always have—manually and face-to-face. That’s changing quickly, however, due to several global trends putting increasing pressure on the entire industry to evolve… or suffer the consequences.
Three trends accelerating the digital transformation of the insurance industry
Three macro trends are accelerating the digital transformation of the insurance industry at this moment, on a global scale. These include:
- Growing consumer expectations – Digital leaders like Amazon, Google, and Apple have obliterated the standards of ease, convenience, design, and speed that used to exist a generation ago—and in the process, they’ve set the bar higher than many insurance companies can clear today.
The customer experience is a critical differentiator for any services business, especially one as process-intensive as insurance. Your prospects and customers expect the same level of customer experience they receive from the digital brands they engage with each day—and they’re willing to go elsewhere to get it if need be.
- The digital barbarians are at the gate – For decades, insurance leaders could rely on their size, scale, and the strength of their balance sheets to ward off digital disruptors, but as Amazon’s Jeff Bezos famously said, “your margin is my opportunity.” The insurance industry’s margins are too attractive to pass up for digital native providers looking to gain a foothold in the lucrative market. In 2019, $7.3 billion in venture capital investing flowed into “insurtech” companies, up from $5.6 billion the year before.
The rapid customer acquisition curve and successful IPO of digital native insurer Lemonade has gained attention across the business world, which will no doubt spawn another generation of competitors looking to disrupt the status quo.
- An abrupt shift to remote work – The coronavirus pandemic has proven to be an accelerator rather than a change agent, compressing years of gradual change into a span of months.
The need to abandon storefront offices, claims centers, and processing hubs practically overnight in March 2020 has forced the industry to shift to a remote work model that highlighted the manual inefficiencies and overreliance on physical proximity in existing processes.
Digital leaders in the insurance industry pivoted to remote work with little disruption; digital laggards stumbled out of the gates. Here are a few areas to focus on to help close that digital gap.
Three digital transformation “quick win” opportunities
In an environment that’s resistant to change, stacking some “quick wins” early in the digital transformation journey is essential. These targeted projects have low capital costs, demonstrate fast ROI, and complement legacy IT investments. Here are three ways insurers are capitalizing on the industrywide momentum for digital transformation today:
- Automated processing of unstructured documents: Many insurance processes begins with the intake of an incredibly wide variety of documents from images and digital-native forms to scans (both typed and handwritten) and even video and audio.
Reviewing and entering this content manually is resource-consuming and prone to errors. Insurers are investing in platforms that allow them to digitally ingest all formats, convert and structure the data, then apply machine learning and artificial intelligence (ML/AI) tools to fix errors and flag data in need of human review.
- Identifying the right adjuster: Before they can be processed, claims must be assigned to the right adjuster based on customer location, area of expertise, and other factors specific to the type of policy.
This is another resource-intensive step in the claims process that can be digitally transformed and optimized through the use of bots—known as robotic process automation or RPA—and ML/AI to instantly and correctly route the claim to the right adjuster for prompt processing.
- Auto-adjudication of claims: Going one step further, bots and ML/AI can be applied to the claim adjudication phase of the process itself, using a highly-specific set of business rules built specifically for the insurer.
Claims can be approved, denied, altered, and even paid out without any human involvement, accelerating the claims process, improving the customer experience and satisfaction, reducing processing costs, and enhancing adjuster productivity. Contactless claims settlement is the future.
The right partner for your digital transformation journey
With three megatrends forcing insurers to fully embrace digital transformation, those who take advantage of the situation and act now will realize the same improvements to their processes, bottom line, and customer experience the consumer banking sector has seen over the last decade.
According to one McKinsey report, “A large [insurance] incumbent could more than double profits over 5 years by digitizing existing business.”
If you’re ready to take the next step in your transformation journey, Persistent is the right partner to help you get there faster.
Persistent Systems is the ISG 2020 Star of Excellence Award™ winning partner for the banking, financial services and insurance (BFSI) sector, based on our BFSI-specific enterprise modernization experience and ability to deliver digital business acceleration for our clients, enhancing their existing technology capabilities and bringing greater agility and advantage to their business.