What is digital transformation in insurance and how does it work?
The spread of technology and a significant decrease in its cost drives changes in many industries. The traditional business models become outdated, and the expectations of customers from the businesses are much higher. Not only a customer wants a quick and smooth service, but a remote one. Personalization is reaching its top, and people want to see relevant offers only. Hence, digitalization is not passing by the insurance industry.
Digital transformation in insurance is on the rise, and its early adopters are already reaping the fruits. Yet, many conservative companies still hesitate about the changes and wonder what will happen to their business. Here is a short overview of the latest trends in the insurance industry, the role of digitalization, and reasons to go digital.
Defining digital transformation
Digital transformation presumes the adoption of technology into business operations with the aim to achieve improved operational efficiency and better customer experience. The end goal of this process is not limited to certain points since digitalization is driving businesses up, creating more opportunities, and most importantly improving resilience. To put it short, it is about integrating technology into every aspect of business conduct. The means for it are abundant. Among them are cloud technology, big data architecture, and artificial intelligence. Equipped with technology the company reaches digital maturity and becomes capable of adjusting to a changing environment.
Insurtech: essential tools to drive innovation in insurance business
The use of technology in the insurance business is referred to as insurtech. Its main goals are achieving improved customer experience, agility, operational efficiency, and increased time to market speed. Insurtech is closely related to fintech. Fintech aims at revolutionizing financial services. Insurtech has a common task of improving the pricing policies of insurance services. Hence, it often happens that a fintech solution solves the challenge of an insurance company.
The following technologies form a base of digital transformation in insurance and achieve the above-mentioned results:
- Data Analytics. The streams of data in insurance operations are intense. They build up quickly and are usually not processed well and in time. Using technology to capture all data enables instant multiplying of the business value, and better strategic planning. An example is predictive analytics which lets companies forecast the demand for their products.
- Automation. Digital transformation in insurance is centered around robotic process automation since it provides maximum efficiency. Insurers deal with numerous documents, forms, and other data that need to be stored and processed automatically with zero tolerance for errors. Utilization of automation tools allows minimized human interference and quicker processing time.
- IoT solutions. IoT sensors, cloud platforms, and all custom IoT development services aim to simplify routine tasks along with reducing operational costs.
- Omnichannel. When it comes to orienting business to customers, omnichannel interaction is key. Modern customers are used to communicating via various means, looking for reference information, comparing, and ordering online. It creates the need for availability not only offline but also online.
- Telematics. Collecting telematics is not a necessity for vehicle owners solely. In combination with IoT sensors, telematics is applied in life, health, property, fleet, warehouse insurance, and more.
- Artificial intelligence. The use of satellite images and drones has been already successful in the insurance industry. As AI products become more affordable, insurers have a chance to leverage their benefits to take on new, challenging cases.
How digital transformation is changing the insurance industry
Through working with companies on digital maturity, Euristiq has gained valuable insights into the processes. Here are a couple of examples of tech innovation in insurance for clients who decided to take a digital path.
Example 1. Striving for paperless operations: Digital document management software
Insurance companies deal with an enormous number of papers per hour. These are IDs, driver’s licenses, social security numbers, and more. Retrieving such data from various sources and verifying it goes before the claim can be processed. Hence, increasing the time spent on the routine operation performed daily. What could improve the effectiveness of claim processing is automating document management.
Our client, a large investment company, came to us with the idea to streamline the work of multiple microservices and data storages that communicate with each other. The team had a task to develop a platform that would collect the data from the existing system to create a letter of response or request for the clients. The letter would have to be based on the information retrieved from various storage types. Besides, all the data was sensitive since the client’s company deals with investment portfolios. Similarly to insurance companies, most documents they process are under a confidentiality tag, and establishing the security of data flow was crucial. The results exceeded expectations and the company managed to save £400K per year without pausing the operations and integrating the existing data storage into the new system.
Summary: Benefits of digital document management
Insurance companies have common issues that are often overlooked or perceived as unavoidable. They are costly and with the introduction of proper software, easy to eradicate. So, what can a cloud-based document management system bring to the table?
- Streamlined operations
- Strict compliance with rules and regulations
- Eliminated human errors like misinformation, typos, and unfilled spaces
- Tighten security measures and simplifies the process of updating them
Example 2. Optimizing insurance packages with the help of telematics
The forecasts say that the telematics market will reach as much as 103 billion US dollars in 2022. The reason is its effectiveness not only for fleet-based companies. It is a great contributing factor to insurers who inevitably work with them.
Euristiq experience of cooperation with the insurance company providing vehicle insurance packages illustrates a value of a cloud-based IoT solution and video telematics for the company.
The client concluded that non-visual telematics does not provide sufficient information about the driver’s behavior and driving environment. Solving insurance cases becomes more and more complicated without sufficient data. Hence, the opportunity was found in the visual telematics that had to be provided in real-time. The client wanted to enable visibility and traceability of the drivers and vehicles to make educated decisions when it comes to insurance claims, and insurance packages.
Euristiq team developed an IoT platform that collected visual telematics from the cameras installed in the vehicles and allowed a human operator to check the incidents if any occur. Using various sensors, the cameras were not just collectors of visual information but could detect certain hazardous scenarios and alert about the possible incident recorded. The video data was also categorized according to different criteria the customer requested and presented on the interactive map.
Another outcome of the work on this solution was creating a driver’s training center. With video telematics, the company could see drivers’ behaviors and work on alerting and educating them. Since all the collected data was presented in convenient dashboards, it was possible to see each driver’s statistics and work on them.
Summary: Benefits of IoT for vehicle insurance
Preventing all accidents is for sure a mission impossible. There will always be an unpredictable events, yet mitigating the risk to the maximum is possible. With the telematics that the company already has, be it visual or non-visual and technological tools, the results can exceed expectations. Initially, the client wanted to have streamlined and categorized data and received a training solution along with it. The sky is the limit when it comes to cloud-based solutions, and they boost the value of your business. In this particular case, the insurance company received:
- Data-driven vehicle insurance packages
- A tool for accident prevention
- Improved operational efficiency
Example 3. Omnichannel approach to portfolio management
Digitalization drives progress and innovation in insurance. To keep up with the competition and engage new customers, the company has to be ready to offer more products, better customer experience, and quick response. The introduction of social networks, instant messengers, and other digital products can be seen as both pressure and an opportunity for insurance companies. On one side, the industry is not willing to change the robust procedures that have been working for them, on the other hand, the new generation of customers shows that the needs have changed.
A way to respond is to take an omnichannel approach. It includes dividing customers into interest groups and tracking their behaviors, requests, and complaints, to predict the demand, and communicate with them in the requested way. In other words, ensuring that customers have multiple channels of communication, inquiring, and receiving their services.
Traditionally, the classification is looked at from the point of view of insurance purposes. Hence, companies would group customers according to home, vehicle, life, or another type of insurance they have. Introducing insurance portfolio management with a more sophisticated approach to categorizing can give a deeper understanding of the customer database. For example, some policies are overlapping and car insurance can be covered by travel insurance in some cases. So, what value does this information have, and how to use it?
Corporate customers use the company’s email addresses while individual clients might prefer chatting in a messenger or a contact form on the site. All pieces of information on the customer have value and should be recorded. Hence, customer portfolios become quite detailed and comprised of data from various sources. It calls for a tool that would handle all the load, and allow integrations with other systems.
The Euristiq team worked on portfolio management software for an investment company. The functionality of the program covers the collection of data from different sources including third-party systems. It was crucial to synchronize and display all information in a convenient way.
As a result, an app was created with different user roles. The employees got a tool for managing over 63,000 investor portfolios, their bank accounts, withdrawals, applications, and more.
Summary: Benefits of automated portfolio management
Automatized data collection, storage, and synchronization enabled a company to get full control over transactions, eliminate human error, and speed up processing time. Whenever an employee logs in to the system, they have the needed set of tools to manage the portfolio using a unified system. Besides, the employees are now equipped with the analytics instruments.
How does it change the overall performance of the company:
- Allows to manage an unlimited number of customers
- Provides transparency and traceability of actions
- Generates analytics
Top 5 trends of digital transformation in insurance
Staying on top of trends gives the vision of the market, and helps create new insurance products. Here is an overview of the of the top 5 leading trends that are rapidly absorbed by insurers.
1. The power of analytics
Digital transformation is a comprehensive process that encompasses taking many actions. It does not mean that the company should completely forget about the physical locations, and stop personal meetings with the customers. What is presumed is planning digital activities and making most operational activities digital. One of the reasons for that is analytics. It not only improves the existing processes but sets the right direction for changes. New insurance products, pricing strategies, sales, and marketing campaigns are more effective and relevant to the current market if driven by analytics. What can the future of digital analytics offer? There is no limit to the solutions, but the most important factor is the chance of getting customized platforms with any functionality.
2. Customer-driven approach
Traditionally, companies take care of organizing the portfolio of their services, and less attention is paid to how they see customers. The ecosystem of an insurance company should be centered around the customer’s needs and behaviors. Analyzing the issues, defining the most popular products, and predicting future demand are critical. If the company does not maintain proper channels of communication with existing and potential customers, the competition will. Hence, the future of insurance management systems is with customer-oriented services.
3. IoT evolution
IoT technology stimulated a breakthrough across industries. The IoT market worldwide is predicted to triple to 29 billion devices by 2030. In Japan, for example, the market of IoT property damage insurance is growing at an impressive speed and will reach 170 billion Japanese yen, from 1.3 billion in 2017. Among the main benefits of IoT products are risk mitigation tools, analytics, and customer interaction.
4. Upgrade through legacy modernization
According to the research on digital transformation around the world, conducted in 2022, as much as 45 % of companies are resorting to legacy modernization or mixed modernization. Building the operations from scratch is a less popular way since it requires larger budgets. A common misconception is that companies have to invest a significant amount of money into any change that can potentially cause a break in operations. Unlike destroying the old and building new, legacy modernization ensures a continuous work of an enterprise. Hence, it is worth considering cloud solutions that can extend the capabilities of the existing infrastructure and improve them.
5. Digital advertising of the products
Digital advertising of products and services allows more personalization. The customers are targeted by thousands of ads and they can filter them. Hence, it is important to formulate an offer that resonates with the customer’s needs, be they existing or potentially needed ones. Seasonal, travel, or life insurance packages should be advertised to the right target audience. Achieving the level of personalization becomes easier with digital tools. Whenever you start an advertising campaign, you can go as far as you want to reach potential buyers. Some platforms, for example, can offer travel insurance packages for people who have recently purchased a ticket for vacation, or life insurance for someone who has just had a baby. It concludes that investing in the representation of the brand in the digital world is a must in the modern environment.
Bringing digital transformation to your insurance business
Transforming an insurance organization is a gradual process that can be taken at any pace. The introduction of technology does not have to happen overnight, however, should be planned for in the near future. The driving force of digitalization is predominantly customer. New generations are living and working in the digital world. To reach them and show the value of the product, businesses must have a digital presence.
IoT, artificial intelligence, analytical tools, and more elements of digitalization open new opportunities to reduce operational costs, and increase efficiency. They also become inevitable elements of the resilience strategy in the turbulent economic environment. Digital handling of documentation is cheaper than paperwork, advertising products online requires less manpower, and so on. The benefits of digital operations are countless.
Orchestrating the process of going digital might look like a challenging task. And so it is, without the support of qualified specialists. Euristiq offers digital consulting services to discover the digital opportunities of the company, and develop a plan for the personalized digital transformation of your enterprise.