The 3 phases of digital transformation in insurance

Digital is certainly one of the most commonly used buzzwords in the insurance industry today (along with InsurTech and AI). CEOs tout their digital investments in earnings calls and shareholder/member letters. Digital initiatives abound, with projects showing up in plans for all parts of the business. Articles and conferences are fully devoted to the notion of digital insurance.

It seems like digital transformation has taken the insurance industry by storm.

A few years ago, it was not even on the radar for most insurers. But by 2016, based on SMA Research, about 50 percent of insurers in North America had a strategic initiative to become a digital insurer. And for 2018, that figure has jumped to over 90 percent.

What does digital mean?

But amid all the excitement and activity, there is an important question to consider: What does digital mean?

The broad analysis is that digital is fundamentally a business initiative, whose scope should be enterprise-wide. There has been a progression in the industry regarding the view of digital. At first, many companies focused on digital enablement for distribution channel partners. The next stage was often providing more digital capabilities to policyholders.

Ultimately, many have discovered that they cannot be truly digital in the way they interact with the outside world without digital data and processes inside the enterprise.

3 phases of digital transformation

Taking a different and longer-term view of digital transformation, SMA believes the industry is going through three phases: Digital assets, digital experience, and digital transformation. For each of these three phases, there are important implications for data, processes, and workflows.

1. Digital Assets: Establishing the digital foundation

Insurers have captured, converted and created digital content for decades, but there are still vast amounts of paper in the industry. There is still great potential to leverage much more digital content generated during traditional business operations.

Add to that the new data sources that are springing up everywhere as the world becomes more digital and more connected. Emerging technologies such as the Internet of Things, drones, autonomous vehicles, wearables, and many more are creating huge amounts of both structured and unstructured data. The ability to capture and manage all this information and incorporate it into business workflows will become even more essential.

2. Digital Experience: Making digital visible

In this stage, insurers innovate and change processes to take advantage of digital assets. They’ve often made the digital content visible to prospects, producers, and policyholders via portals. Business intelligence and analytics are more broadly applied to gain a deeper understanding of operations and opportunities. The ability to rapidly find the right content and make it available in the right formats is vital during this stage.

3. Digital Transformation: Fully leveraging digital capabilities

The full benefit of digital transformation can be realized when the insurer has become more digital across the enterprise. Developing the sophisticated capabilities to capture, create, and manage digital assets for every part of the business, capitalize on new data sources, and leverage digital content for internal operations as well as external communications provides a platform for success in the digital age. It becomes easier to rethink the business and deploy new products, new channels, new business models, and new operational processes.

InsurTech and digital

In addition to understanding the three phases of digital transformation, it is instructive to explore the relationship between InsurTech and digital. InsurTech startups are catalysts for industry transformation, and they are digital by their very nature, either as a digital agent/broker or MGA, a digital startup insurer, or a tech company that leverages new data sources and analytics to create new solutions.

These startups are bringing innovation and new ideas to the industry. Most are looking to partner with incumbent insurers or tech players to better understand the intricacies of the insurance business – the regulations, the forms, the processes, and the workflows, etc. It is also mandatory that new solutions and new data sources be able to integrate with those already in place at an insurance company.

The heart of digital

As insurers strive to become more digital, partner with InsurTech startups, and transform into more agile organizations, one aspect of the business is key: The systems that manage digital content, workflows, and transactions. The core systems and the ECM/content services solutions must be modern and must enable rapid integration.

If these systems are not built based on modern architectures and are lacking in extensive insurance implementations and experience, the grand strategies to create and leverage new capabilities are for naught. Much of the mission-critical digital content – in both structured and unstructured formats – is managed by these solutions. Don’t overlook or marginalize them, because these systems are truly the heart of a digital insurer.

Mark Breading is a partner at Strategy Meets Action. Mark is a recognized expert in advanced technologies and their implications for the insurance industry. He has exceptional knowledge of the customer experience, analytics, digital content management, and maturing and emerging technologies. You can follow him at @BreadingSMA on Twitter.
Mark Breading

Mark Breading

Mark Breading is a partner at Strategy Meets Action. Mark is a recognized expert in advanced technologies and their implications for the insurance industry. He has exceptional knowledge of the... read more about: Mark Breading