Across industries, digital transformation is evolving the customer experience and redefining how companies do business. But while the path to digital opens new avenues to customer engagement and a better bottom line, it also introduces adaptive challenges for enterprises that must evolve their outdated operating models.
Some industries — such as retail and entertainment — tend to have internal infrastructures that support a rapid shift to digital. Other sectors find the transformation more challenging due to industry-specific hurdles involving tech readiness and internal cultural preparedness. The insurance industry falls into this latter category.
But for insurance enterprises, digital transformation has reached a hinge moment. Today, it's no longer a question of whether insurers will pursue a digital strategy; it's a matter of what that strategy will look like. Without prioritizing digital innovation, insurers risk losing the competitive edge in a market increasingly driven by customers' expectations of a highly engaged, customizable and personalized experience. But to meet these expectations, insurers must confront industry-specific challenge with a strategic approach.
A digital native-driven need
More than any other factor, customers — and specifically "digital natives" — are the key driver behind the need for insurance companies to prioritize digital transformation. As the so-called digital native generation continues on a path toward a dominant market presence by 2025, companies across industries are increasingly tailoring their user experience toward this generation’s preferences and expectations.
If there's a single characterizing feature of digital native consumers, it's that they don't only welcome innovation, they expect it. Whether they're shopping at a clothing store, purchasing a car, or finding an insurance plan, digital natives are looking for an experience that’s in line with their own engagement needs. And when it comes to insurance, today's consumers will spend their time finding the best solution: As a PwC survey of insurance consumers revealed, 71 percent of respondents said they conduct digital research prior to choosing an insurance provider.
Industry competition is another key factor driving insurers to leverage sweeping digital strategies. For all the discerning insurance customers out there who are prepared to research to find the best provider, there are countless websites that make the comparative insurance shopping process easy.
Adaptive challenges for the insurance industry
Yet despite the imperative to adapt to customers' future-driven expectations, the insurance industry faces several sector-specific challenges that can stand in the way of positive steps toward true digital empowerment. These hurdles include:
- Industry-wide tech resistance: Within the finance industry in general and insurance in particular, resistance to new technology is the norm. While part of this reticence is rooted in security concerns — finance is among the most regulated industries, and companies worry about new developments that could interfere with their ability to meet their regulatory burdens — another part is simply habit. This is especially true of insurance, which as an industry has become habituated to protracted rather than timely tech adoption.
- Over-reliance on outmoded methods: Digital transformation means striking a balance between manual processes and those that can be automated. But many insurance companies find this balance difficult to achieve because of how deeply they’re embedded in legacy mainframe architectures.
- Lack of qualified workforce: As one insurer case study revealed, it's often not only IT equipment that’s behind the times — it’s also workers. In the case study, the insurer approaching digital transformation had to confront the challenge of handling staffers who were solely dedicated to mainframe work.
Insurance industry strategy
With more than a quarter of insurance consumers currently buying their policies online — and more than two-thirds expressing readiness to use an insurer’s mobile app — the customer-driven path to digital is already well underway in the insurance industry. Now it’s up to insurers to keep pace. Here’s some steps insurers can take to surmount transformation challenges and adapt at the speed of their customers:
- Prioritize incremental tech adoption: For insurers entrenched in legacy systems and processes, the prospect of totally overhauling infrastructure is understandably daunting. It’s also not strategic. Instead of expecting rapid changes, insurers should approach their transformation journey with an eye toward deliberate and steady adoption. One way to do this is to work with a managed solution provider to devise a phased approach to transformation — one that factors in the need for gradual change.
- Prepare people alongside processes: Insurers can't achieve digital transformation without a workforce that's digitally-enabled. Often, that means reskilling workers who are accustomed to functioning in a mainframe environment. But insurers may also look to bring in outside hires or contract third-party experts who can augment a digital-forward environment, including specialists focused on big data analytics and mobile app development.
- Work toward IT/leadership alignment: There’s no quicker way to derail digital transformation progress within an insurance company than to have a lack of strategic alignment between IT stakeholders and the business' leadership. Insurance companies can avoid this tension by making sure IT stakeholders have a seat at the table at all high-level tech conversations.
By taking strategic steps toward digital transformation, insurance organizations can lay the foundation to realize true value through a more customer-centric approach. As customers grow to expect a more interactive and personalized experience, insurers need to adapt alongside them.
Simon Ratcliffe the principal consultant at Ensono. Look for Simon on Twitter: @ITEvangelism. In the YouTube video posted below, Ratcliffe addresses "Digital Transformation Drivers and Challenges."