Across industries, digital transformation is evolving thecustomer experience and redefining how companies do business. Butwhile the path to digital opens new avenues to customer engagementand a better bottom line, it also introduces adaptive challengesfor enterprises that must evolve their outdated operatingmodels.

Some industries — such as retail andentertainment — tend to have internal infrastructures thatsupport a rapid shift to digital. Other sectors find thetransformation more challenging due to industry-specific hurdlesinvolving tech readiness and internal cultural preparedness. Theinsurance industry falls into this latter category.

But for insurance enterprises, digital transformation hasreached a hinge moment. Today, it's no longer a question of whetherinsurers will pursue a digital strategy; it's a matter of what thatstrategy will look like. Without prioritizing digital innovation,insurers risk losing the competitive edge in a market increasinglydriven by customers' expectations of a highly engaged, customizable and personalizedexperience. But to meet these expectations, insurers mustconfront industry-specific challenge with a strategic approach.

Related: 5 hallmarks of insurance industry digitalleaders

A digital native-driven need

More than any other factor, customers — andspecifically "digital natives" — are the key driver behindthe need for insurance companies to prioritize digitaltransformation. As the so-called digital native generationcontinues on a path toward a dominant market presence by 2025, companies across industries are increasingly tailoringtheir user experience toward this generation's preferences andexpectations.

If there's a single characterizing feature of digital nativeconsumers, it's that they don't only welcome innovation, theyexpect it. Whether they're shopping at a clothing store, purchasinga car, or finding an insurance plan, digital natives are lookingfor an experience that's in line with their own engagement needs.And when it comes to insurance, today's consumers will spend theirtime finding the best solution: As a PwC survey of insuranceconsumers revealed, 71 percent of respondents said they conduct digital researchprior to choosing an insurance provider.

Industry competition is another key factor driving insurers toleverage sweeping digital strategies. For all the discerninginsurance customers out there who are prepared to research to findthe best provider, there are countless websites that make thecomparative insurance shopping process easy.

Related: 3 ways insurers can maximize their digitaltransformation

Adaptive challenges for the insuranceindustry

Yet despite the imperative to adapt to customers' future-driven expectations, theinsurance industry faces several sector-specific challenges thatcan stand in the way of positive steps toward true digitalempowerment. These hurdles include:

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      • Industry-wide tech resistance: Within thefinance industry in general and insurance in particular, resistanceto new technology is the norm. While part of this reticence isrooted in security concerns — finance is among the mostregulated industries, and companies worry about new developmentsthat could interfere with their ability to meet their regulatoryburdens — another part is simply habit. This is especiallytrue of insurance, which as an industry has become habituated toprotracted rather than timely tech adoption.
      • Over-reliance on outmoded methods: Digitaltransformation means striking a balance between manual processesand those that can be automated. But many insurance companies findthis balance difficult to achieve because of how deeply they'reembedded in legacy mainframe architectures.
      • Lack of qualified workforce: As one insurer case study revealed, it's often notonly IT equipment that's behind the times — it's alsoworkers. In the case study, the insurer approaching digitaltransformation had to confront the challenge of handling stafferswho were solely dedicated to mainframe work.

Related: A 6-step checklist for P&C industrydigital transformation

Insurance industry strategy

With more than a quarter of insurance consumers currentlybuying their policies online — andmore than two-thirds expressing readiness to use an insurer'smobile app — the customer-driven path to digital isalready well underway in the insurance industry. Now it's up toinsurers to keep pace. Here's some steps insurers can take tosurmount transformation challenges and adapt at the speed of theircustomers:

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      • Prioritize incremental tech adoption: Forinsurers entrenched in legacy systems and processes, theprospect of totally overhauling infrastructure is understandablydaunting. It's also not strategic. Instead of expecting rapidchanges, insurers should approach their transformation journey withan eye toward deliberate and steady adoption. One way to do this isto work with a managed solution provider to devise a phasedapproach to transformation — one that factors in the needfor gradual change.
      • Prepare people alongside processes: Insurerscan't achieve digital transformation without a workforce that's digitally-enabled. Often,that means reskilling workers who are accustomed to functioning ina mainframe environment. But insurers may also look to bring inoutside hires or contract third-party experts who can augment adigital-forward environment, including specialists focused on bigdata analytics and mobile app development.
      • Work toward IT/leadership alignment: There'sno quicker way to derail digital transformation progress within aninsurance company than to have a lack of strategic alignmentbetween IT stakeholders and the business' leadership. Insurancecompanies can avoid this tension by making sure IT stakeholdershave a seat at the table at all high-level techconversations. 

By taking strategic steps toward digital transformation,insurance organizations can lay the foundation to realize truevalue through a more customer-centric approach. As customers growto expect a more interactive and personalized experience, insurersneed 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."