Rise Of The Digital Insurer
Retailers risked being left in their competitors' dust if they didn't stay on top of digital trends. The smartest retailers have created seamless experiences for their savvy, digital consumers - whether online or in-store.
Believe it or not, the same is true for the expectations of digital consumers and their insurance companies. Whereas retailers can turn on a dime and react very quickly and effectively to consumer preference, with the insurance industry, it's a different story. That's because the insurance business is extremely predictable and runs on a very basic premise: that an army of actuaries utilize algorithms to determine rates for policyholders. If something such as a natural disaster occurs and the companies must pay out on some policies, those companies simply adjust the rates they charge to everyone. So the insurance company is always, always coming out on top no matter what transpires in the world.
But a new study commissioned by Infosys and performed by Forrester Consulting sheds new light on consumers' response to unsatisfactory service from their insurers. The study included a survey of 180 significant insurance firms. The results were remarkable: insurance IT organizations will be in the 'digital hot seat.' It is no longer sufficient to have a vision alone, according to companies surveyed.
While 47 percent of the participating companies strongly believed that digital can play a major role in their growth, they actually have to execute their digital visions if they aspire to achieve their business goals. 44 percent agreed that digital can drive a unified customer experience, but over 60 percent highlighted that they are hindered by poor quality of customer insights - meaning that some insurers could be making wrong choices in their digital investments. Nearly 75 percent of the business and IT decision-makers surveyed indicated that their IT teams would be leading digital initiatives for their firms. That's promising news, but one wonders if these firms are being reactionary instead of being proactive.
Insurers are faced with thin operating margins despite all the work their actuaries do to re-adjust rates. That's why adoption of the right digital tools is vital for them. It gives companies advantages that they never knew existed. Through these tools, not only can insurers use technological solutions to understand risks better, they can also price products more competitively. Add to this situation the advent of Big Data in the insurance sector and these firms are making more impactful decisions than ever before.
Yet insurance companies give new meaning to the term 'legacy system.' The survey found what its authors refer to as 'fundamental structural problems' that threaten insurers' digital success. Even though many insurers have admirable digital ambitions, the study found structural issues that are fundamental to the industry and generally impede digital transformation. For example, one in five respondents mentioned competing business priorities over digital. Another 55 percent mentioned past 'stumbles' when it came to executing digital marketing projects.
Some of the oldest and largest insurers have legacy computer systems from a bygone era. Some of them are even taking the difficult step of migrating code out of mainframes to business process management software and to enterprise software in order to create smart, agile, next-generation organizations. That's good news. The more quickly these companies focus on their consumers - in the same way retailers do - they will understand them more and therefore be able to offer insurance products that are more relevant to their consumer base.