Rajesh Pd Shrestha

Head of department, IT

Siddhartha Premier Insurance Ltd.

Digital Transformation in Insurance Industry

To win in today’s crowded and hyper-competitive insurance market requires speed, efficiency, and ease of use. That means going digital — and though this is not a simple process, by employing a smart strategy, every step will move you closer to reaping the benefits of digital transformation.

The trick is not to get overwhelmed — you don’t have to make the transition all in one. Consider digital transformation a journey, rather than just a destination, and collect the benefits along the way.

Historically, the insurance industry has been notoriously sluggish in its adoption of new technologies. The ideas of optimizing workflows, moving to an online interface, or even processing claims same-day once seemed impossible. That is, until the worldwide digital transformation of all industries, and now the digital transformation of insurance.

For insurers, digital transformation is “the process of using digital technologies to create new — or modify existing — processes, cultures, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.”

Today’s consumers simply demand speed — they want instant gratification, and in the case of insurance, that means immediate policy quotes, claim payments, and communication.

Where will digital transformation of the insurance industry go in the future is largely unknown. But experts believe the biggest impacts will be felt across claims processing and underwriting, powered by new developments in web based software, mobile applications, artificial intelligence (AI) and the Internet of Things (IoT). These tools, and more, are part of the process of today’s insurance digital transformation.

But what is the insurance value chain? The insurance value chain includes the components of insurance that companies generate value from. Think of it as all the points across which directly carriers and customers interact. Those interactions also encompass customer self-service functions, which are of the utmost importance to today’s consumer. When we speak about the insurance value chain, we are referring to

· Product management

· Sales and distribution

· New business underwriting

· Claims

· Payments

· Customer Service

How Digital Transformation is changing the Insurance Industry

1. Efficient – The first and most obvious effect of digital transformation on insurance is the efficiencies it enables. Primarily powered by AI and its related technologies of machine learning and predictive analytics, almost every facet of insurance operations have been optimized for speed. Claims can be processed via an application instantly, and policy writing can be done in less time. Digital transformation is also speeding up customer service, where live chat and digital assistants are helping customers in their most important times of need.

2. Personalized – Customers today expect service and attention where and when they want it. They also expect it to be suited to their needs, and personalization is now the status quo across all industries. Digital transformation is empowering insurers with the tools they need to give customers excellent service without overextending their resources. AI and machine learning create a seamless personalized experience for customers and company alike. Customers can pay bills, view policies, and file claims via an application, and company can receive and process all information on their end under one system. No more waiting on the phone, wondering if your claim is received and being processed; digital technologies are giving customers instant feedback and helping company do their jobs more efficiently and effectively. Digital transformation in insurance is also helping to personalize marketing efforts. Robust data analytics and AI systems can tailor and target marketing efforts for insurers, using the power of social media to reach audiences that can truly impact.

3. Scalable – The digital transformation of the insurance industry is also helping it to become more scalable at both the front end and back end of operations. While insurance historically could be a bit “clunky,” technology today has made it flexible to current demands. On the customer-facing front, insurers today offer service everywhere and anywhere via self-service interface and can collect valuable data from customers via web based applications, web portals, mobile apps, IoT-enabled devices etc. On the back end, this technology is collected and helps company make more accurate decisions on underwriting, policies, new product offerings, and more.

Challenges of digital transformation in insurance

The digital transformation of the insurance industry is well underway, with insurers embracing digital technologies to drive efficiency, improve customer engagement and create new business opportunities. However, digital transformation is not without its challenges, and insurers need to be aware of the potential pitfalls as they seek to digitize their businesses.

The main challenges insurers face in digital transformation include:

1) Data privacy & security

This is one of the main challenges as insurers hold large amounts of sensitive customer data. This data is increasingly being stored in the cloud, making it more vulnerable to cyber-attacks. In order to protect this data, insurers need to have robust security measures in place, such as data encryption and multi-factor authentication.

2) Infrastructure

In order to support digital transformations, companies need the right IT infrastructure and processes. This can be a significant investment for insurers, who need to ensure that they have the right skills and capabilities in-house to achieve IT modernization goals.

3) Regulatory

A major challenge for insurers is the regulatory environment. Insurance is a heavily regulated industry, and digital transformation can bring about changes that may fall foul of existing regulations. 

For example, the use of data analytics to price insurance products could be seen as discriminatory if certain groups of people are charged higher premiums based on their data profiles. Insurers need to work closely with regulators to ensure that their digital transformations are compliant with all relevant regulations.

4) Operational risks

Digital transformation can lead to increased operational risks, as processes become more reliant on technology. Insurers need to have robust risk management processes in place to mitigate these risks. 

Overall, digital transformation presents both challenges and opportunities for insurers. While there are some risks that need to be managed carefully, digital transformation provides an opportunity for insurers to drive efficiencies, engage with customers in new ways and create new sources of revenue.