Digital transformation enables insurers to take advantage of many new opportunities. But first, they must define their strategic priorities. That means reevaluating business models, processes, products and service.
There are three key challenges insurers should address along the way:
- They must better manage risk mitigation by evolving from a financial loss compensation focus to include physical risk prevention.
- They must face down disruptive competitors by enabling rapid solution development.
- They must manage the enormous amount of data generated by connected networks to develop and deliver leading-edge products and services.
The ability to address these challenges effectively will enable insurers to successfully compete in the digital economy.
Customer expectations have changed. Evolving customer demands coupled with technological advancements mean that insurers are expected to provide risk prevention in addition to crisis management. These benefits can be managed by technology that interacts with customers across multiple channels.
Essentially, technology is allowing insurers to move into a world in which risk is more tangible.
Keeping up with disruption
Nearly 80% of insurance company chief information officers expect technology to significantly change or transform both the industry and their organization in less than five years, according to Ovum. More than a third of insurance companies are already using or developing IoT projects; another 25% are actively evaluating IoT projects.
These new technologies increase the risk to some incumbent carriers that new entrants will cause business disruption. Startups may lack the deep actuarial and underwriting experience and capabilities of established carriers, but they have access to customers, IoT infrastructure or the ability to process data in real-time.
As the volume of data grows, insurance companies must use solutions like AI and machine learning to process large amounts of data. The ability for insurers to adopt these types of platforms now can lead to better product and service agility. By using technology like AI and machine learning, insurers can deliver new products and services to customers while more effectively managing their existing portfolio. With a strong digital core, insurers can bundle products and services to deliver personalized offerings to specific customer segments and distribution channels.
The change afoot
The digital economy is still evolving. By aligning transformative actions across these three priority areas, businesses can more easily manage the transition in stages, creating a digital core and then extending digital functions across the enterprise. The reduced reliance on traditional risk-assessment and data-processing methods will provide insurance customers with a much more personalized experience via a multi-channel environment. These steps will reduce the possibility of business disruption and propel insurers to fresh success.
Insurance for the greater good
Many of today’s insurers are passionate about digital transformation and what it can do for business and for society.
Why? Because the industry is witnessing a steady shift from a centuries-old business model that has the potential to dramatically improve lives worldwide.
Rather than just compensating for financial loss, which insurers have done remarkably well, the industry is getting geared up to help people prevent loss, lead healthier lives, live longer and drive safer.
In short, digital transformation in the insurance business will potentially do more than any other industry to further society’s long-term well-being.
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