While insurers see the need to adopt digital technologies as part of their business models, many are uncertain how to actually achieve it. Further, many do not know where they should focus their goals and resources, according to Accenture’s Digital Innovation Survey.
Implementing long-term digitalization strategies helps an insurer stay ahead of its competitiors in an ever-evolving market. It also involves transforming the value chain, developing new partnerships, creating a customer-centric business model, and leveraging data capabilities for personalized experiences.
This is easier said than done. Insurers are aware of the importance of implementing an integrated, enterprise-wide plan of action, but many underestimate the potential bottom-line impact of digital transformation, Accenture says.
While there is also no one-size-fits-all approach to digitalization, four guiding principles can help insurers take advantage of digital technologies and further enhance their competitiveness while working towards long-term goals.
1. Get the basics right
Certain basic capabilities are required in today’s market in order to successfully compete. Broadly speaking, these capabilities commonly relate to the creation of a multi-channel experience, customer orientation and personalization, operation simplicity, and agility and superior execution.
But to a greater or lesser degree, these capabilities apply to every strategy of the insurance value chain. Insurers have to master them in order to compete in today’s markets, but further, to prepare for a bolder future transformation that reconceptualizes the entire business.
2. Define a clear strategy and business model
Insurers should make informed decisions when it comes to business goals. Simply knowing where the company wishes to be within the marketplace within the next several years can help insurers form achievable, actionable goals moving forward.
Assess the disruption to trequire changes to thehe current business model, and decide what model that goals should work toward. Redefine the nature of the partner– including intermediaries, distribution partners and other third parties. For many insurers, this may will change how it leverages and scales its digital capabilities in support of partners.
However, insurers also must be honest about their digital maturity and their capabilities. In order to have an effective plan of action for developing new capabilities, have a detailed picture of the value chain and state of digitization it needs to achieve in each component.
3. Develop and nurture a customer-first digital culture and organization
Changing management and executive sponsorship will play an important role in developing a digital culture that is customer-centric, Accenture reports.
In this regard, respondents to the survey reported a wide range of barriers to digital strategy execution. Among the most common include legacy systems (42%), lack of the right skills (30%), lack of investment (28%), reluctance to upset traditional distribution channels (26%) and lack of internal agreement on the business case and priorities (26%).
Moving forward, strong leadership, talent and organizational change management will be critical in overcoming these barriers.
4. Test and learn continuously to fine-tune all elements of the road map
Defining the right value-generation model and organization is crucial, but factors must be constantly recalibrated in line with experience and market shifts. Accenture says that the best approach includes quick wins, and the use of prototypes to support a test-and-learn approach that can be scaled up later.
But doing this requires insurers to focus on digital investments that will be noticed and valued by the customer. Further, they should provide business outcomes that justify the investment.
Implement innovations and investments that enhance the customer experience, and more importantly, new business models, in the form of pilots or limited-scope projects. A few examples include mobile small-ticket insurance, peer-to-peer insurance and usage-based connected insurance.
While this approach is not prescriptive, it indicates that quick wins within a broader framework of digital transformation could be used to allow insurers to improve current digital performance while working toward long-term goals. In essence, this is what digital leaders in the industry are already doing.
Furthermore, it is important to emphasize the key attributes of an effective digital strategy: agility and flexibility. By their nature, the forces of disruption are unpredictable, and insurers have to build their business and operating models that can quickly and effectively adapt.