What Should Insurers Expect to Gain from Digitization?
More than half of the world’s largest insurers are exploring how digitization can support their business model according to ACORD, the global standards-setting body for the insurance industry. However, their 2020 Insurance Digital Maturity Study shows that 50 percent of major insurers have only partially incorporated digital solutions into their rate-making, underwriting, and claims processes.
Alarmingly, 13% of insurers in the report are not leveraging digital technologies in their business processes at all.
Arguably, the gradual and cautious adoption of digitalization in the insurance industry stands in contrast to the growing number of consumers who expect to purchase and manage their insurance policy through digital channels in real-time. The digital transformation process can be complex and challenging; however, developing and delivering insurance products and prices using the latest digital technologies presents insurers with an opportunity to achieve their business objectives in a manner that is smarter, faster, and safer. Insurance companies seeking to effectively digitize their most mission-critical processes will need to deploy analytics with automation and speed-to-market capabilities that leverage artificial intelligence (AI) and machine learning (ML) models.
Three Elements of Insurance Digitization
How should insurers begin to digitize their operations in order to realize value now, as opposed to a year or longer?
Insurers should begin with an integration of a single, end-to-end, analytics-driven system that can enhance an insurer’s existing ratemaking and execution capabilities. It is imperative that insurance companies adopt a rating engine that can deploy multiple analytical models and rating structures, as well as leverage current and emerging data sources. Advanced systems that operationalize vast amounts of data using AI offer a holistic modeling process for pricing, product personalization and underwriting and can drive consumer insights as well as new product offerings in real-time.
Next, insurers need to ensure that their analytics-driven systems are deployed in an automated and integrated manner to realize value almost immediately. AI-driven systems that can run “what-if” simulations, perform real-time monitoring, and determine the right personalized bundle of products within a matter of seconds are critical for successful digitization in insurance.
Finally, integrated analytics-driven systems need to be able to enhance an insurer’s speed-to-market capabilities. The ever-changing nature of the industry makes it challenging, if not impossible, for insurance companies to deliver prices that are current and competitive without a significant degree of automation during the ratemaking process. Carriers are challenged by legacy IT systems and processes that hold back their perception and ability to digitally transform their business. In addition, meeting the requirements for regulatory filing can be automated to reduce errors, ensure governance and speed. Iterative deployment of an analytics system requires legacy systems to be engaged alongside cloud computing and seamless IP integration. all of which provide insurers with the ability to react to consumer needs in an agile manner, with rates that reflect market conditions and are delivered to consumers at the right time, through the right channels.
The Power of Digitization
How do insurers know that their digitization strategy is working?
With the right digitization strategy, insurers should expect a significant increase in automation that enables them to provide consumers with highly personalized products at a competitive price, and that are filed and deployed automatically instantaneously and fully tested. To that end, automated systems cut down the time it takes to deliver new rates from months to days. Customer satisfaction, retention and trust– long-term customer value – should steadily and visibly increase alongside a carrier’s ability to reach business targets and increase market share. Furthermore, when using digital channels to deliver rates in real-time, insurers need to ensure that their systems can ensure governance and compliance over the entire rate-setting process. In addition, insurers should expect to realize significant savings in resources, minimal error rates, if any, and a visible improvement in customer satisfaction.
All insurers want to engage with and serve their customers through life stages and life-changing events. To do so, insurers must understand their changing needs as soon as consumers experience them, and act immediately, not weeks or months later. Based on customer segment knowledge, using automation enabled by predictive analytics, AI and machine learning models, insurers should be able to predict, offer and adjust the insurance policies and add-ons across all P&C personal lines.
As insurers work to incorporate digital solutions into their ratemaking, underwriting, and claims processes, they are faced with the challenge of selecting among a wide range of technologies in the marketplace. Key to selecting the right solution that will drive an insurer’s digital transformation is about asking the right questions. Can the solution maximize the value of the technological advancements and help insurers reach their business objectives in a fully governed, faster and smarter manner?