January 3, 2023

By: Sanjay K. Kanungo, Head of Insurance Package Solutions, LTIMindtree

Digital transformation for P&C insurers is more important than ever before because the risks of falling behind are far greater now. Every new wave of technology presents new possibilities of competitiveness. Now is not the time to slow down; it is the perfect time for digital acceleration.

Insurance as we know is a resilient industry and almost recession-proof. In 2020 amid economic uncertainty, insurers pushed more towards digitization compared to the previous years. This can certainly be attributed to the sudden changes in customer behavior during the pandemic. Thanks to the digital initiatives, we have witnessed several insurers grow by delivering better customer experiences. We have seen several insurers increase profitability by transforming operations and making data-driven decisions. Of course, there are ever-evolving ways insurers are trying to use advanced innovative technologies such as cloud, AI, ML, IOT, AR, VR, 5G, telematics, wearables, blockchain, drones, bots, etc., to gain competitive advantages for their businesses. It is worth noting an ecosystem of InsurTechs is helping carriers accelerate innovation significantly.

AM Best, a leading provider of financial services and insights to the insurance industry, in a recent report, pointed out that though the pandemic caused the insurers to expedite their innovation journey, many still struggle to deliver significant and measurable results. In the meantime, the gap between the digital capabilities of the leaders and the rest of the industry seems to be widening.

Catching up to the digital leaders

So how can insurers bridge this gap quickly? Successful digital transformation requires insurers to effectively apply both digital and leadership capabilities to deliver remarkable business advantages. A perfect blend of digital and leadership capabilities is required. One without the other is not effective. This is not new but a strong leadership with a clear vision, engagement, and governance to drive such a complex transformation is essential. Insurers need to assess this capability and make necessary adjustments. Digital capability, the other essential component, includes applying innovative technologies to improve different parts of the business incrementally. However, the rapid change in technology is a major challenge because it does not give the insurers the required time to adapt and master the previous technologies. To overcome this challenge, insurers need to have an agile mindset and follow a systematic execution approach instead of disconnected technology experiments.

Speeding up value delivery through digital channels

As the digital framework evolves continually, there are five key elements to systematically approach and execute digital transformation. It includes Core Platform, Operations, Employee Experience, Customer Experience, and business model.

Core platform: the foundation of digital transformation starts with implementing a well-structured and future-proof core platform that powers the insurer’s key business processes, including policy, billing, and claims. The digital elements cannot realize their objectives without a strong core platform. Market-leading core systems on the cloud, like Duck Creek SaaS, offer key advantages. It helps the insurer stay current in both technologies and content. While building a robust core digital platform, insurers need to pay attention to advances in technology and methodology to implement them. Sure, pre-built features, functions, and content coupled with low-code/no-code configuration capability, agile, DevOps, containers, and microservice technologie, make it easier to coordinate changes and innovate quickly, safely, and smartly without reinventing the wheel. But on the flip side, with advances in cloud computing, agile development methods, and external libraries, it is very easy to introduce inconsistencies that lead to siloed products that don’t scale very well.

The core platform must have three distinct digital functions that work together. The core platform must:

1. Serve as a strong foundation for operational and transactional systems for insurer’s key business processes, which is well-structured, flexible, and easy to change.
2. Provide an agile external facing platform that powers website, applications, third-party systems, and other processes that connect customers, brokers, agents, and the entire ecosystem in a multi-channel manner. It is more than just front-end development. It needs to work seamlessly with the core platform to perform key transactions like payments, entering new businesses, day-two transactions, and an agile self-service platform for delivering personalized experiences and conducting customer-facing experiments.
3. Support in-depth analytics and build and test algorithms without hurting the core operational systems.

Operations: operational excellence drives profitability. It is not just about back-office efficiency. It is also about enabling an engaging customer experience and supporting innovative business models with unique competitive advantages. In a digital context, it is about automating core processes, powering a connected operations framework, and facilitating data-driven decision-making.

Employee experience: employees are the greatest enablers of digital transformation. This has been duly highlighted during the pandemic. Insurers are beginning to use robotics and digital tools to enable the employee to work faster and smarter—without compromising safety. Insurers need to provide personalized training and skills development digitally to equip their employees to increase productivity and adapt to new technologies seamlessly in the future.

Customer experience: this is a classic digital transformation element that focuses on the customer’s perspective. Creating compelling customer experiences is necessary for achieving a competitive advantage and requires insurers to address three interrelated elements: experience design, customer intelligence, and emotional engagement.

• Experience design involves using tools such as journey mapping, customer personas, and practices such as design thinking.
• Customer intelligence involves integrating customer data across the enterprise to better understand customer behavior and using real-time analytics powered by machine learning to offer highly personalized interactions.
• Emotional engagement with customers is as critical as the experience. It involves enabling customer participation across the value chains, from R&D, product development, social media content creation to providing unique services.

Business model: insurers across the globe are looking for efficient ways to enhance their current business models without making major business changes. Adapting to the new market reality with new products is opening up new opportunities for insurers. Traditional insurers are spinning off InsurTechs with focused product lines with huge market potential. They are also providing information-based service extensions which require intelligent analytic capabilities, state-of-the-art service design, and customer device integration.

Wrapping up

Though insurers have several challenges to face while accelerating digital transformation, they will emerge as leaders if the right strategies, approaches, and tools are used. Insurers need an agile mindset with a systematic execution approach that takes into account the five key elements of digital transformation to accelerate innovation and impact business outcome. Insurers also need the right technology partners to thrive in the new normal. LTIMindtree partners with insurers of all sizes on all aspects of digital transformation to deliver real business value2.

References:
1. One Year In: How Insurers Are Doing on AM Best Innovation Assessments, May 10, 2021 by Jason Hopper, Edin Imsirovic

2. Accelerating Duck Creek’s Time to Value using Agile Frameworks, May 14, 2020 by Sanjay Kanungo, Chris Murphy