Insurance companies are under pressure to keep up with the ever-increasing needs of consumers and the changing regulatory environment. As such, they must continue to innovate and adopt technology to meet those needs. In fact, according to Accenture, nearly half of all organizations say they plan to invest in digital capabilities over the next 12 months. This includes insurance companies that want to remain relevant in today’s increasingly complex marketplace.
The term “digital transformation” was initially coined by Gartner in 2011 as a way to describe how businesses were adopting new technologies to improve their operations. Digital transformation is not just about using technology; it’s also about changing business processes, organizational structures, and culture. The goal is to create an organization where people can work together more effectively, regardless of location or time zone.
Innovation has always been important for insurers. But now, innovation is becoming even more critical. Consumers expect more from their insurance providers than ever before. They demand better customer service, faster claims processing, and access to information at any time, on any device. And they expect these things to be delivered through innovative products and services.
Insurers have long used technology to streamline back office functions like billing, collections, and policy administration. However, this type of automation only goes so far. It doesn’t address the need for real-time data analytics, which allows customers to make informed decisions based on current conditions. For example, if you know your car is parked in a flood plain, you might choose to purchase flood insurance. Or if you know your home is located near a fault line, you may decide to buy earthquake coverage.
Insurance companies have traditionally adopted technology solutions that help them manage risk. These include actuarial software, claim management systems, and enterprise resource planning (ERP) applications. But these tools don’t necessarily provide insight into what’s happening in the market. That’s why many insurers are turning to modern technologies such as big data and advanced analytics to gain deeper insights into consumer behavior and optimize their services and products.
Digital transformation impacts various business areas and looks different for every insurer. This is because it depends on each insurer’s specific needs. For instance, an insurer may be focussed on reducing costs, while others may be focussed on expanding to new markets. Generally, some of the benefits of digital transformation include:
Digital transformation is one of the biggest changes facing the global insurance sector today. Market participants claim that the industry is not an early adapter of digital technologies, but new entrants, changing customer expectations, and new business models are forcing it to adapt faster than ever. As a result, the insurtech market could reach $100 billion by 2025.
The term “insurtech” refers to companies offering innovative solutions to insurers. These include start-ups developing disruptive technology, such as artificial intelligence, machine learning, blockchain, and big data analytics; and established firms looking to expand into new markets.
However, some experts say that the true value of insurtech lies beyond just disrupting traditional industries. They argue that many insurtech businesses are actually creating entirely new markets. For example, startups like Lemonade offer financial protection against unexpected events such as car accidents, while others, such as AIG, offer life insurance policies via mobile apps.
Insurance companies can benefit from these innovations by improving their products and services, reducing costs, and enhancing customer experience. Insurers can also use insurtechs to enter new markets or to create new revenue streams.
For instance, insurtech companies have been able to disrupt the auto insurance market by providing affordable coverage for drivers who don’t qualify for traditional insurance. The same goes for health insurance: Some insurtechs provide plans tailored to specific populations, such as young people, or offer low-cost options for individuals without employer-sponsored benefits.
Other insurtechs focus on helping insurance companies reduce administrative costs by offering software that automates claims processing and payment processes, which helps insurers save time and money. Finally, insurtechs can help insurance companies better understand their customers and tailor offerings accordingly by using predictive modeling to predict future risk based on historical data.
While there is no single definition of insurtech, most agree that it involves using digital technologies to solve problems faced by the insurance industry. Examples include:
The insurance industry is notoriously traditional and lags behind most sectors when it comes to technological advancements. We have seen modern technologies come into play in sectors such as e-commerce, with predictive analytics, one-click checkouts, and 24/7 chatbot support, for a long time. But insurers’ legacy systems present significant barriers and their digital transformation process is much more challenging.
Having new technologies arise in the insurance space, and, most importantly, having the ability to easily integrate with them, will make insurance level up with other modernised sectors and ensure that it doesn’t fall behind. Digital transformation is crucial for insurers’ success. According to a Majesto 2022 report, millennials were the largest purchasers of insurance in 2021. As more digitally native millennials and Gen Zers look into purchasing insurance products, the insurance industry needs to meet their requirements.
Digital transformation is not only important when it comes to customer acquisition and retention, but also to reduce costs and optimize internal processes, ensuring that operations run smoothly and resources are properly allocated to the right business areas. This will be highly beneficial not just for now, but for years to come.
Covid has been the digital catalyst that accelerated digital transformation processes in insurance. According to a survey by KPMG, 78% of insurance CEOs say that covid-19 has turbo-charged progress on the creation of a seamless digital customer experience. Similarly, 79% say it has brought new urgency to the creation of new business models and revenue streams.
The first steps of implementing digital transformation across functions involve setting up a short and long-term strategy to form a clear digital roadmap for the future. Insurers are also moving to a platform-based approach, which involves a “platform” architecture where new tools and capabilities can be added or updated whenever needed. Instead of focussing on big decisions, insurers are taking more modular decisions and making small, informed changes.
A lot has been seen, especially with the rise of insurtechs, but this is just the beginning of the digital transformation in insurance. In fact, according to The Insurance Heads of Digital Report 2022, insurance technology spending in the US and the UK is expected to grow by more than 25% between 2022 and 2026.
Insurers are already making strides toward digital transformation, but they still face many challenges. Among these are:
Payments are a critical area in insurance, as they cover two of the most important points in the customer journey: collecting money for premiums and payout claims. These two steps of the journey will either make for an excellent customer experience and boost customer satisfaction or make customers look for other insurance providers.
The payments industry has been fully transformed in the past few years, with the rise of real-time payments and other digital payment methods. In order to offer customers a modern and seamless journey, insurers must also modernize their payment processes and offering. This includes offering a wide range of payment options that are both country and region-specific, but also ensuring that checkout processes are straightforward.
Plus, when paying out claims, they need to ensure that customers receive a payment experience that suits their needs and situations. This involves being able to pay out in the customers’ preferred payment method and through their most convenient channel. This may be a bank transfer, push-to-card, or voucher to their preferred retailer. The speed of the payment also matters – customers may need the funds immediately, so failing to deliver this will likely result in an unsatisfactory experience.
Imburse is a cloud-based middleware connecting large enterprises to the payments ecosystem, regardless of their existing IT infrastructure. Through a single connection to Imburse, enterprises can collect or pay out using various payment technologies and providers around the globe.
In a world where consumers’ payment preferences and technologies are ever-evolving, Imburse works with insurers to future-proof their payment requirements. Regardless of the business area, market, or requirements, Imburse will connect you to your choice of technology and provider.
Reach out to our team should you want to discuss how Imburse can help you. Our team is happy to show you what our platform can do for your business and offer you a free demo.