Digital transformation is already an overused buzzword thesedays.

But that doesn't mean digital transformation is all hype.

In fact, digital transformation is an immediate-actionpriority for senior leaders across the industry thanks totechnological change, intensifying competition and fast-risingcustomer expectations for velocity, accuracy and personalization.Increasing cost pressures, the need for new products, and expandingregulatory requirements are also forcing insurers to act.

Related: Insurance 2017: Priorities for innovation,automation and transformation

Early adopters have embedded digital capabilities across theorganization to improve efficiency, increase speed to market andgenerate richer customer insights in targeted areas. But to becometruly digital, insurers will need to move boldly in:

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      • Revisiting business models
      • Acquiring customers through new channels
      • Creating essential user experiences

Few insurers are now equipped to adapt to the new digitalecosystem and changing customer expectations. In fact,EY insurance consumer research shows that morethan 80% of customers are willing to use digital and remote contactchannels, though many insurers still lag in these areas. Digitaltransformation is as much about organizational capacity for changeas it is any specific technology.

That's why insurers should think in terms of the following nineenablers of digital transformation:

Achieving the full value of digital transformation requirescore transformation, according to EY. (Photo: iStock)

No. 9: Innovation

Innovation is intrinsic to the strategies,operations and culture of digital insurers. Insurers that can'tadapt rapidly to changing customer expectations, shiftingmarketplace dynamics and continuous disruption will run the risk ofsignificant market share loss and even obsolescence. Thus, insurersmust increase their ability to move to market faster and instill a"fail fast" and "test and learn" mentality across the organizationto drive competitive advantage. Establishing an innovation functionto fund, incubate and launch new capabilities is another worthwhilestep toward digital transformation.

Related: Innovation can overcome growth obstacles forinsurers

No. 8: Agility

Dynamic cross-functional collaboration is necessary to rapidlydevelop new products and experiences and to deploy new technology. High costs, longtimelines and wasted effort from traditional development approachesmust be eliminated. Integrating teams across functions can lead tofaster speed to market, quicker time to value and— ultimately — competitive advantage, while alsohelping insurers overcome the digital skills gap.

Insurers must identify leaders with a digital mindset anddevelop strategies to attract and retain them. (Photo:iStock)

No. 7: Workforce and digital culture

Workforce transformation must be a strategic priority ifinsurers are to establish an adaptive, "disruptor" culture witha new generation of workers. Insurers mustidentify leaders with a digital mindset and develop strategies toattract and retain scarce digital talent, while preparing theexisting 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 leavethe organization. The good news is that as the aging workforce ininsurance retires, technology is well-positioned to fill thosegaps, as opposed the difficult and costly effort of bringing on anew and younger workforce.

Related: 3 insurance technology trends for building customerrelationships in 2017

No. 6: Experience design

Compelling omnichannel experiences represent a baselinefor success in meeting customer expectations and winning critical"moments of truth." Loss of brand value and damaged customerrelationships result from poorly designed digital touch points orinconsistencies across channels. Insurers must link innovativeexperiences to operational processes and enabling technologies toeffectively engage customers at key points in their journeys.

EY research indicates digital transormation will delivertangible results in cost reduction, productivity and more. (Photo:iStock) 

No. 5: Data and analytics

Analytics can be applied across the insurance valuechain to generate highly relevant real-time insights and sparkdecisive actions. Insurers must access and act on the wealth of newdata available for better, faster and more informed decision-makingat all levels of the enterprise. To support adoption and usage,organizations must also integrate analytics with decision enginesto apply contextual factors and deliver actionable insights to thefront lines.

Related: The impact of more data on the claims handlingprocess

No. 4: Digital architecture

To meet evolving needs and rising expectations of digitallysavvy consumers, digital insurers need fully flexible andmodernized architectures and platforms. They must have technologythat supports speed and scale and enables rapid innovation cyclesand superior real-time experiences. "Platform-as-a-service" models are likely tohelp more insurers operate with more agility.

EY says the most effective digital transformations are thosethat balance near-term value with long-term evolution. (Photo:iStock)

No. 3: Digital governance

Effective digital transformation is a large-scale enterpriseeffort and thus requires proper governance. Operational teams need access to empowereddecision-makers who can quickly resolve conflicts. Solid butflexible governance is necessary to quickly adapt to changing needsand goals, while also creating clear ownership and accountabilitiesand defining the rules for issue escalation and resolution relativeto decisions about new technology deployments, experience designand data management.

Related: New digital era for insurers[infographic]

No. 2: Customer activation

Digital insurers use digital and social tactics to share new value propositionsand activate consumers with personalized messaging and offers.However, the proliferation of sales and service channels does notmean insurers should merely push content out. Instead, insurersshould provide incentives and nurture community through compellingexperiences and services that align to consumer needs. They mustmarshal cross-divisional capabilities and resources to satisfy thefull range of consumer needs, while leveraging data to gaininsights 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 canprotect integration and access points, but defenses are only asstrong as the weakest link. With cyber criminals using moresophisticated techniques, the risk of severe financial andreputational impacts grows. Insurers must identify and document alldata flows with third parties, as well as all internal and externalapplications used to collect, process, store and transfer customerinformation. Insurers must also perform regular reviews of allcontrols, while designing and testing comprehensive incidentresponse plans for data breaches.

Related: How social engineering fueled the cyber-attackbusiness

The digitaltransformation endgame

The insurer of the future will look, act and be structured verydifferently than today. Digital transformation is the path forward– both in terms of specific, near-term performanceimprovements and long-term profitability gains. Yes, the deploymentof new technologies will be essential to success, but theseorganizational enablers are just as important as they will helpinsurers generate more value from every dollar they invest indigital change.

Learn more in EY's recent report.

See also:

When worlds collide: Insurers andInsurTech

3 wise cybersecurity solutions for2017

5 cybersecurity problems facing mid-size insurancecompanies