Digital transformation is already an overused buzzword these days.
But that doesn’t mean digital transformation is all hype.
In fact, digital transformation is an immediate-action priority for senior leaders across the industry thanks to technological change, intensifying competition and fast-rising customer expectations for velocity, accuracy and personalization. Increasing cost pressures, the need for new products, and expanding regulatory requirements are also forcing insurers to act.
Early adopters have embedded digital capabilities across the organization to improve efficiency, increase speed to market and generate richer customer insights in targeted areas. But to become truly digital, insurers will need to move boldly in:
- Revisiting business models
- Acquiring customers through new channels
- Creating essential user experiences
Few insurers are now equipped to adapt to the new digital ecosystem and changing customer expectations. In fact, EY insurance consumer research shows that more than 80% of customers are willing to use digital and remote contact channels, though many insurers still lag in these areas. Digital transformation is as much about organizational capacity for change as it is any specific technology.
That’s why insurers should think in terms of the following nine enablers of digital transformation:
Achieving the full value of digital transformation requires core transformation, according to EY. (Photo: iStock)
No. 9: Innovation
Innovation is intrinsic to the strategies, operations and culture of digital insurers. Insurers that can’t adapt rapidly to changing customer expectations, shifting marketplace dynamics and continuous disruption will run the risk of significant market share loss and even obsolescence. Thus, insurers must increase their ability to move to market faster and instill a "fail fast" and "test and learn" mentality across the organization to drive competitive advantage. Establishing an innovation function to fund, incubate and launch new capabilities is another worthwhile step toward digital transformation.
No. 8: Agility
Dynamic cross-functional collaboration is necessary to rapidly develop new products and experiences and to deploy new technology. High costs, long timelines and wasted effort from traditional development approaches must be eliminated. Integrating teams across functions can lead to faster speed to market, quicker time to value and — ultimately — competitive advantage, while also helping insurers overcome the digital skills gap.
Insurers must identify leaders with a digital mindset and develop strategies to attract and retain them. (Photo: iStock)
No. 7: Workforce and digital culture
Workforce transformation must be a strategic priority if insurers are to establish an adaptive, "disruptor" culture with a new generation of workers. Insurers must identify leaders with a digital mindset and develop strategies to attract and retain scarce digital talent, while preparing the existing workforce to adapt to the digital world. In some cases, technology will execute work that is handled by humans today. Affected workers will either move into elevated positions, or leave the organization. The good news is that as the aging workforce in insurance retires, technology is well-positioned to fill those gaps, as opposed the difficult and costly effort of bringing on a new and younger workforce.
No. 6: Experience design
Compelling omnichannel experiences represent a baseline for success in meeting customer expectations and winning critical “moments of truth.” Loss of brand value and damaged customer relationships result from poorly designed digital touch points or inconsistencies across channels. Insurers must link innovative experiences to operational processes and enabling technologies to effectively engage customers at key points in their journeys.
EY research indicates digital transormation will deliver tangible results in cost reduction, productivity and more. (Photo: iStock)
No. 5: Data and analytics
Analytics can be applied across the insurance value chain to generate highly relevant real-time insights and spark decisive actions. Insurers must access and act on the wealth of new data available for better, faster and more informed decision-making at all levels of the enterprise. To support adoption and usage, organizations must also integrate analytics with decision engines to apply contextual factors and deliver actionable insights to the front lines.
No. 4: Digital architecture
To meet evolving needs and rising expectations of digitally savvy consumers, digital insurers need fully flexible and modernized architectures and platforms. They must have technology that supports speed and scale and enables rapid innovation cycles and superior real-time experiences. "Platform-as-a-service" models are likely to help more insurers operate with more agility.
EY says the most effective digital transformations are those that balance near-term value with long-term evolution. (Photo: iStock)
No. 3: Digital governance
Effective digital transformation is a large-scale enterprise effort and thus requires proper governance. Operational teams need access to empowered decision-makers who can quickly resolve conflicts. Solid but flexible governance is necessary to quickly adapt to changing needs and goals, while also creating clear ownership and accountabilities and defining the rules for issue escalation and resolution relative to decisions about new technology deployments, experience design and data management.
No. 2: Customer activation
Digital insurers use digital and social tactics to share new value propositions and activate consumers with personalized messaging and offers. However, the proliferation of sales and service channels does not mean insurers should merely push content out. Instead, insurers should provide incentives and nurture community through compelling experiences and services that align to consumer needs. They must marshal cross-divisional capabilities and resources to satisfy the full range of consumer needs, while leveraging data to gain insights into what customers want and how they can be engaged.
No business is immune to a cyber breach in the digital age. (Photo: iStock)
No. 1: Cybersecurity and risk
Comprehensive cybersecurity solutions can protect integration and access points, but defenses are only as strong as the weakest link. With cyber criminals using more sophisticated techniques, the risk of severe financial and reputational impacts grows. Insurers must identify and document all data flows with third parties, as well as all internal and external applications used to collect, process, store and transfer customer information. Insurers must also perform regular reviews of all controls, while designing and testing comprehensive incident response plans for data breaches.
The digital transformation endgame
The insurer of the future will look, act and be structured very differently than today. Digital transformation is the path forward – both in terms of specific, near-term performance improvements and long-term profitability gains. Yes, the deployment of new technologies will be essential to success, but these organizational enablers are just as important as they will help insurers generate more value from every dollar they invest in digital change.