Digital Transformation is Key to the Future of the Insurance Industry
By Paul Bryce, CCO at Node4
With global spending on insurance IT topping the $100bn mark, the industry clearly sees technology as a key area of investment. And with an increasing focus on utilising data, the insurance industry is under pressure to focus on digital transformation as a route to drive disruption, improve processes and build stronger customer relationships.
The digital disruption journey
By their nature, digital transformation projects can involve considerable planning. Key to the process is enhancing the 360-degree view insurers have of their customers derived from data already collected, alongside renewing policies based on previous years of customer experience statistics. This typically involves analysing lifetime customer value, developing more up-selling and cross-selling opportunities, improving customer relationship management systems and using social media platforms to identify emerging trends throughout the customer lifetime journey.
Making the most efficient use of this plethora of data sources presents some particular challenges, given that data is collected from thousands of disparate sources and companies are dealing with an unprecedented number of highly complex data sets – both structured and unstructured. From an IT perspective, this complexity demands insurance companies invest in greater processing power and storage capacity.In addition,EY predicts that Artificial Intelligence (AI) will move into the mainstream across the insurance industry, alongside the increased use of blockchain platforms to achieve better data quality.
Getting this right can deliver huge benefits, and insurers fully understand that more sources of information allow them to build a deeper understanding of the risks associated with each customer, which in turn, helps build more accurate underwriting and pricing. Digital transformation also allows products to be more personalised and improves the efficiency of insurance application processes. Instead of customers supplying lots of data themselves, insurers can pull details in from other services, not only saving time, but also allowing brokers to focus more on relationships with customers.
Despite these compelling opportunities, insurers are still faced with two key questions – what should they do with the data they collect, and what’s the best way to store it?
Data protection priorities
When it comes to storing and protecting data, there are a multitude of options that are appropriate for the insurance industry. These include hosting data in the cloud, data centres, or a mix of both. All of these solutions can play an important role, but according to Deloitte, cloud computing should be high on insurers’ agendas in moving forward. Its research indicated that insurance CIOs, who are under pressure to deliver transformational digital capabilities, are looking to develop applications on the cloud as a faster alternative to on-premise deployments.
Similarly, emerging technologies such as advanced analytics, telematics monitoring via the Internet of Things (IoT), and cognitive applications demand infrastructure that is both quickly scalable and flexible, given the amount of data being generated and the processing power needed to leverage it.
As a result,hybrid solutions that can be specifically tailored to combine IT infrastructure options that fit specific business requirements offer a powerful case for investment. Developing a strategy that applies the most appropriate cloud and on-premise technologies to store, sort and protect the large volumes of customer data produced daily,and make it easily accessible and usable for the business, can help put insurers on the right road to achieve digital transformation.
Why insurers should welcome disruption
Disrupters in the insurance market have turned the current industry on its head. In practical terms, businesses that focus on quick claims management and complete transparency, in order to understand customers pain points and deliver an intuitive service,are taking business from traditional providers.
In contrast to many market incumbents, who have protracted claims processes and risk compliance procedures that leave customers with little idea of what their policies cover,innovative insurers recognise that customer satisfaction is driven by tailor-made packages. These, in turn, are enabled by solutions like cloud analytics and machine learning.
The use of Artificial Intelligence in the insurance industry is gaining significant momentum, with AI-powered chatbots now dealing with claims at remarkable speed. One extreme example of this is a claim that was settled in just three seconds. The process included “cross-referencing policy details, running 18 anti-fraud algorithms and transferring the settlement into the policyholder’s bank account”. While this illustrates the exception rather than the rule in terms of claim handling, it gives a strong indication of where innovation is heading.
The bottom line is savvy customers are looking for superior levels of customisation, security, business intelligence and service, and the insurance industry must respond. Insurance companies need to embark on their digital transformation journey to ensure they stay ahead of the game;embracing innovation while ensuring customer data stays protected.
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