It's no secret that the pace of change is acceleratingexponentially in the insurance industry. It's also no secret thatthe digital journey is overloaded with danger and risk.

The industry has little consensus on what defines a "digitalstrategy." Most insurers typically mean agent portals, customerportals, corporate sites and online marketing. In the broadestsense, however, digital represents the evolution of business andhow it interacts with customers and stakeholders.

"While no insurer needs a strategy to 'be more digital' for itsown sake, nearly every insurer needs a strategy to write moreprofitable business, more efficiently, and digital channels andcapabilities are a key part of delivering on that strategy,"Novarica's Mitch Wein,  principal in the insurancepractice, and Steven Kaye, research and knowledge systemsmanager, write in "Preparing for Digital Transformation."

New expectations are that insurers and their agents and brokerscan interact in real-time. Insurers historically have failed tomeet that need. Change can be gradual and evolutionary, orimmediate and revolution. Expectations should be realistic andcommunicated clearly to achieve results.

Novarica released a 6-step checklist to prepare for thedigital transformation. Read the steps on the followingslides.

1. Identify key trends and businessprocesses that will be affected

Numerous trends will be game changers. Do you know what theyare?

• The Internet of Things (PC360: "The Internet of Things: What the heck is athing?")
• Social media
• Big data (PC360: "What is big data and how should you useit?")
• Cloud services
• Mobile
• Security

Take a step back from the hype (no, not everyone will have aself-driving car in 2015) and understand what business benefitswill arise. For example, collecting additional data from socialmedia may not be worthwhile if there are restrictions on how thatdata can be used, Novarica says.

2. Identify strengths, weaknesses,opportunities and threats

• Strengths include tech capabilities, organizational structureand company culture.
• Weaknesses arise around organizational blockers, legacyrestrictions and lack of vision.
• Opportunities must be communicated to ensure organizationalbuy-in and investment. Typical opportunities are related to newmarkets, customer retention, greater efficiency and higher businessflexibility.
• Understand threats to how they relate to new andnon-traditional competitors, such as Google. Also weigh how threatsimpact cost structure and product flexibility.

3. Understand maturity of key practice areas (business& application architecture)

• Learn if business architecture exists and whether there is anunderlying business capacity model supporting the area.
• Application architecture includes a target or reference.Governance process must be in place to ensure that the solutionsbeing built fit into the long-term strategic vision.
• Security is a differentiator in a digital organization. Whattypes of security processes are in place, are they funded and howmature are they? Data leakage prevention, threat assessment andinvestigations are key elements to a successfulprogram. 

4. Conceptualize future business capabilities andneeds

Find ways to focus on what matters to the organization:

• What does the company want to do or need to do?
• What is the business' mission statement and what are itsgoals?
• How does the enterprise want to modify its interaction withcustomers, business partners and regulators?
• What are the competitors doing and when will their solutionshit the market?

It may be helpful to keep a legacy policy administration systemand slowly decouple key functionality from it, such as documentdelivery, underwriting rules, rating engines or business analyticsto achieve incremental business changes. 

All business drivers, including speed to market, projectdelivery excellence, target operating models, compliance,multi-channel distribution, direct growth, customer centricity,pricing, efficiency and data should be reviewed and then mapped totech drivers.

5. Optimize project prioritization process

Understand how projects are prioritized and how scope, time andbudget are factored into this process. Differentiate between"business as usual" projects, projects to update old technology,new business propositions and investments made for reusableassets.

Determine whether the business case supports digitaltransformation and what percentage of projects is related to this.The Novarica report authors say CIOs should ask themselves, "Howare investments between a digital future and keeping the lights onbalanced?"

6. Adopt a test-and-learn culture for digitaltransformation

Know the difference between core IT systems and fast ITenvironment.

Core IT uses traditional waterfall methodologies and takes along time to evolve. Fast IT can be evolved through agile processesand are disposable. 

In digital, we need a fast IT that can be deployed and testedquickly, and determined to either work well or not work at all anddiscarded. This does not mean to evoke the anything-goes Wild West,the authors caution, because even fast IT has rules to follow.