Insurers no longer ask whether they should digitally transform, they ask where to start and how to deliver the transformation
Insurance companies recognise the need to be customer focused, innovative and agile, however they are trying to achieve these traits in a highly challenging environment.
Disruptive competition, regulatory reform and ever-changing customer expectations are pushing insurers out of their comfort zones. Layer on rising cost pressures and fierce competition for talent, and it’s not surprising that many are turning to digital transformation initiatives as the answer. The ability to offer personalised products and flex to customer needs shows how embracing digital can drive the insurance industry forward.
A recent EXL report shows that less than one third of insurers report digital transformation as a success, so why do so many insurers struggle to deliver effective digital transformation?1
A promise of £1 billion to be invested into digital over the coming years won’t give you a market leading combined ratio, nor will a digital portal create best in class customer satisfaction. Digital transformation requires a clarity of purpose, a marrying of the solution to the problem and an environment in which it can flourish
Start with why
If ships do not sail without a final destination, why would you launch a transformation without a clear end goal?
Insurers need to understand and articulate what they are trying to achieve from digital transformation. In a world where the opportunities to digitise appear endless, finding the right starting point requires knowledge of the final destination.
This should start by defining transformation goals in line with wider business strategy, clearly articulating the purpose of each aspect of a digital transformation. Starting with 'why’ allows organisations to identify the priority transformation activity and will ensure digital transformation helps deliver the vision of the future.
As we see more insurers launching programmes to offer the most streamlined claims journey or bring products to new customer demographics it is the firms that have built their transformation around 'why', not, budget allocation, that we have seen to be most successful. With AXA, Allianz, Aviva and many more publicly highlighting going digital as a strategic priority, the 'why' behind these statements will be crucial to gain value from the investment.
Don’t put square pegs into round holes
If starting with 'why' sets up a digital transformation for success, then a marrying of the solution to the problem enables that success to become reality.
A largely intermediated value chain, presence of legacy IT systems and complex set of products creates a challenging landscape for technology to dissect. Add to this the excitement which comes with investment and the numerous buzz words of the digital age - it’s easy to see why insurance companies have been victims of unsuccessful digitisation.
Lloyds of London showed how to effectively match a solution to the problem during their recently announced digital strategy2. Aware that doing business at Lloyds was becoming uncompetitive, the new CEO has opted to digitise a portion of the market, proposing moving simpler fast flow risks onto a digital risk exchange whilst keeping more complex business offline. This proposal shows understanding of both the problem and feasibility of a digital solution. The bespoke nature of certain risks at Lloyds means it’s still more efficiently managed outside a digital risk exchange. Therefore, using one would not solve a problem and the transformation would be destined to fail before starting.
Insurers need to bring together experts from across their business and beyond to ensure they remain focused on solving problems. If the underwriter of tomorrow is to seamlessly interact with technology and data, then any digital solution must make their lives easier not more complicated.
As companies look to digitally transform larger and more complex elements of their businesses, a focus on solving problems will be crucial to ensuring the solution delivers the intended benefits.
Turn the vision into reality
Starting and embedding digital transformation is a known challenge for the industry still draped in history and seeking a new breed of talent. Converting visions of the digital future into tangible and successful transformation is the final hurdle for insurers on their digital transformation journey.
Insurers need to create an environment in which their transformation can flourish. They must show courage to embark on a digital transformation journey and remain bold throughout, not allowing themselves to be hampered by the presence of legacy systems or fear of failure. Insurance companies must adopt rapid decision making and become agile to changing requirements in order for digital transformation to be successful.
Technology hubs such as Zurich’s Innovation Foundry3 have facilitated innovation and the introduction of the technological world into the insurance space. However, the insurer of the future must have an embedded digital culture throughout the business and with a focus on bringing people along the journey.
Organisations can be confident that by following these three steps they can develop their businesses in the digital age and gain maximise value from digital transformation initiatives.
Moorhouse has a proven track record of helping major private and public sector organisations through their transformation journeys. Whether it’s defining the purpose of your digital transformation, optimising your digital journey or developing the insurance operating model of the future – we help clients turn their vision into reality.
To discuss how we can help your organisation, please contact Andy Hemsley.
For more information please email firstname.lastname@example.org