Technology plays a fundamental role in how businesses improve to gain a competitive advantage. Corporations, particularly insurance carriers, face more technological innovation and choice than at any time in history, leading to rapid digitalization of traditional, legacy business and giving rise to new “digital business” models that are reshaping the competitive landscape. How well insurers manage and sequence their individual migrations and overall enterprise transformation to digital business will determine their success or failure in the new digital world.
According to a recent study by Gartner, Inc., “By the end of 2016, insurers leading in digitalization will financially outperform slower digital adopters by 100 percent.” While insurance executives have always had to address rapidly changing market conditions, economic fluctuations, new technology and ongoing regulatory demands, they must now contend with the growing competitive threat of digital business.
While many understand the importance of this threat and the need to transform, they are all asking the same question, “What precisely is the scope of digital business for my company, and what do I need to do now to position my company to grow and thrive in the future?”
Making digital business work for you
Empowered by new technology and digital connectivity, consumers now require a new level of personalized service from providers when purchasing insurance. With pervasively connected devices like smartphones and tablets providing easier access to online information, buyers are leveraging non-traditional sources such as social media, search engines and YouTube to learn about carriers and their products.
Individuals expect their policies to be customized to meet their unique needs. While this may seem intimidating to insurers, this information can be used to set a company apart from its competitors. It presents a new growth opportunity for the carriers that can engage their customers directly and also arm their agents with the right tools to best respond to changing customer buying behaviors and preferences.
There are four key components for insurers to reshape their digital business approach and become more customer-centric, giving insurance customers not only a better experience, but the feeling that they are receiving a unique service perfectly aligned to their needs:
Establish a customer segmentation strategy. Moving toward demographically refined, behavior-based customer segmentation models enables insurance carriers to better tailor products and services to specific customer demographics and engagement preferences.
Mine policyholder and household data. Carriers possess massive amounts of household data, primarily accessible via event-driven views. This data can be more thoroughly mined to identify the most profitable policyholders and opportunities to increase product penetration per household.
Apply predictive analytics. Robust analytics can help carriers determine a customer’s propensity to buy additional products at any given time, converting every customer touch point into a potential opportunity. A business-driven master data management framework that enables structured and unstructured data capture and analysis is critical.
Develop customer-focused business processes. A customer-centric insurance company organizes its processes to support a unified and seamless customer experience across all channels, with differentiation provided by target customer segmentation.
Underpinning all of this is the power of enabling technology. The insurance industry must gain the same degree of flexibility, speed and agility as seen in digital business natives, like Uber and Airbnb.
The right balance separates winners and losers
Integrating a customer-centric approach does not mean wiping the legacy slate clean and starting over. Successfully implementing a digital business strategy requires a balanced approach that combines legacy system and process modernization with the implementation of new, digital solutions.
Although most strategies are unique, common structural elements will enable insurers to move from traditional operating models to a digital business model. Property and casualty, life and annuity, and reinsurance companies can position themselves to succeed in their digital business strategies by focusing on the following common elements:
Cloud. Embrace it. Cloud computing provides organizations with platform agility and sourcing flexibility that over time will increase competitive advantage. Convenient, on-demand network access to shared pools of computing resources save money while improving flexibility with “pay-as-you-go” or “as-a-service” offerings.
Mobile. Today’s customer is always on-the-go, but expects all of their personal information, such as policy details, at their fingertips. Mobile engagement provides a rich user experience and better service to customers, while extending the scale and reach of a company’s products and services, regardless of the customer’s device preference.
Data. This is the fuel powering the new digital era. Implementing a business-driven master data management and analytics strategy to optimize insights will improve business performance and help gain an edge on competitors. Data management also enables carriers to incorporate new sources of external data to selectively absorb and draw insight from new digital technologies, such as wearables and telematics.
Security. An essential component to implementing any digital business strategy. Insurers must proactively protect their enterprise from global asymmetrical threats. Understanding the changing nature of threats and applying in-house and managed services to combat them is an essential step to mitigating potential risk and fallout.
Digital business is an approach, not a solution in and of itself, and each company’s strategy and resulting solutions will be unique. However, these common digital business elements will establish a foundation for greater customer centricity, improved agility, and increased flexibility. Insurance organizations that cultivate these attributes will realize a measurable, sustained impact on their business performance and speed to market.
The digitalization process may seem daunting — migrating legacy systems to the cloud, optimizing data centers and meeting increasingly diverse client needs — all without the slightest hint of a disruption in daily operations. Becoming a digital business is a big change, but by changing business processes, not overall business models, it can be a seamless transition that is worth the effort and investment.
Like it or not, the new digital era is upon us. So explore the possibilities and embrace the change that will help elevate your business.