Digital is what you need to accelerate Insurance innovation
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With the force of digital wind growing stronger within the realm of insurance sector, the industry’s defensive tactics will no longer work when it comes to innovation. It is essential that insurance providers prepare an offensive front to deliver tailored services and customized experiences to the customers.
The spurt of InsurTech startups is a clear indication of market’s needs and demands. Syncier, a B2B2X startup founded by Allianz, is partnering with Microsoft to streamline insurance processes through customized solutions. This partnership is expected to empower Allianz for centralizing its insurance portfolio management services through Microsoft’s Azure cloud. Allianz is also looking to offer an Azure cloud-based marketplace for ready-made software applications and personalized configurable services, in order to speed up innovation across the industry.
As the insurance sector prepares for an innovation-driven future, it must both evolve as well as transform. This means, the industry should make active efforts to evolve to match the pace and wavelength of the current trends. Also, it needs to transform the legacy processes and infrastructure so that the sector is capable of bringing in higher efficiency while improving productivity. They should automate whatever and wherever possible to reduce processing time as well as total costs. Automation can reduce the cost of a claims journey by as much as 30%, suggests a McKinsey research.
However, for the insurance industry to be able to kick-start its innovation engine, there are a few barriers that it must overcome:
- Silos: The traditionally siloed structure of the industry has been a major obstacle in the way toward achieving innovation excellence and process optimization. Often, departments remain completely unaware of the initiatives taken by other teams, which results in lower engagement, support, and financial assistance. Usually, several initiatives do not even conclude, thereby, ultimately bringing the insurance providers back to square one. A siloed structure prevents cross pollination of ideas, outcomes, failures, and success stories. This, at the end, proves detrimental to an organization’s overall growth.
- Resources: The innovation leaders in the industry usually do not have a dedicated budget for research and development. As a result, they have to depend on the other departments for funding and compete with other investment priorities. Innovation is a people issue first, and then a technology issue, especially in the insurance sector where incumbents are used to the traditional way of doing things. Innovation drivers must take up and deal with challenge of change management among its own people. Then only will it be possible for them to create a culture of innovation.
- Skills: Thinking outside of the box may sound cliched but is required to accelerate innovation in insurance. The absence of the ability within internal people to initiate something from scratch or think in a different direction may prove to be the largest hindrance. In such a situation, insurance industry should ask for help from outside the industry, from the sectors who have a huge pool of experienced innovation leaders. By combining the knowledge of insurance of internal resources and the innovative skills of outsourced resources, the industry can create a complimentary skill set for developing pioneering solutions. Many InsurTech startups have the technological expertise that may come handy for the insurance incumbents to lead in the race of digital innovation.
The three stages of digital transformation
The innovative insurance companies will not only follow but lead in the digital race. They will pioneer new technologies and define the upcoming trends.
As customers take ownership of their claims journey and other insurance-related processes, it becomes imperative for the industry to develop and offer products and services that are both customer-centric and technically-superior.
With the increasing price competition and narrowing profit margins, the insurance companies must adopt digital technologies to ensure higher cost savings and better returns. At the same time, scalability becomes essential to survival. Here, networking and partnerships with digitally-driven startups will help incumbents to thrive on available data and sophisticated technologies.
All in all, digital transformation is inevitable for the insurance sector as its customers demand innovative solutions. There are three principle stages of digital transformation of the industry:
Stage 1: Defining and understanding the value of digital transformation
Digital transformation in the insurance industry, like every other sector, requires complete buy-in from the top management. The senior leader must be able to understand and grasp the fundamental importance of their commitment in the transformational journey. They should be then able to clearly articulate the vision of this transformation and organizational goals that they want to achieve.
Senior level buy-in also clears the hurdles in terms of investments and funding, thus enabling insurance companies to take proactive approach toward innovation and disrupt the legacy processes. The targets set by the top-tier management make people more open to embrace and adapt to the changes. They become disciplined as well as motivated to improve efficiencies and productivity of the initiatives.
Stage 2: Making sure that the initiatives do not fail
For ensuring that the change initiatives do not fall flat, the first step is to nurture a digital culture, while taking one step at a time toward the transformational journey. In the early phase, it is advisable to start with those projects that do not contain significant risks and have a high probability of success. Such projects may include redesigning claims process and improving customer services activities. These changes will yield dual benefits of better customer satisfaction ratio and increased return on investments through cost savings.
A senior authority must lead the digital initiatives, preferably a Chief Digital Officer (CDO), who can find the perfect balance between the legacy processes and modern demands and integrate them both in an ideal fashion. Setting up a separate digital unit may also help as it will have a focused target and the necessary resources for leading the digital journey. Having the power to make their own decisions, the unit can take swift actions and be agile.
A fast, collaborative, and empowered culture will help the organization to center its attention on the customers.
Stage 3: Reaping the final fruits of transformation
Once the launch phase and the sustain phase of digital initiatives are successfully completed, the next step is to scale up the digital efforts. The initiatives should be sequenced thoughtfully for quick return and fast scaling. As the transformation progresses, it starts giving back value, ultimately becoming capable of self-funding. While sequencing, those initiatives should be prioritized that are less complex and will yield fast returns.
With the digital advancement, insurance companies will need to boost their capabilities in terms of skills as well as systems. A new operating model will be required, thus mandating organizational restructuring so that it will allow digital insurance companies to connect all the points within an organization in a moment.
For accelerating digital transformation and evolution, the insurance companies need to develop a collaborative business architecture that promotes sustainable innovation. Agility and speed are key to manage and deliver on the expectations of customers. Faster processing times for customer requests is a direct catalyst that shoots up customer satisfaction.
To increase the average customer lifetime value, insurance companies must look to digitize its offerings. It will allow them to reduce their costs while increasing efficiency and returns on investments.
Cigniti helps global insurers in their digital transformation, thereby deliver improved customer experience and gain competitive advantage. We make sure your applications / systems run seamlessly by ensuring efficient back-office operations. Our testing services portfolio and matchless track record prove us as a trusted advisor and preferred technology partner for the Insurance clients. We offer customized Advisory and Transformation Services in testing for Life Insurance (Life, Annuity, and Pension), Property & Casualty (P&C), Auto, and Re-insurance segments. Connect with us.