Becoming A Digital Mayor: Revolutionizing The Insurance Industry

The insurance industry is eager to launch a digital transformation strategy, with 64% of insurers surveyed in KPMG’s 2020 CEO Outlook: COVID-19 Special Edition, prioritising investment in new technology and digitisation. However, many insurance leaders are overwhelmed by the amount of technology available and don't know where to start. So, what are the key steps to becoming a digital leader in the insurance industry?

Firstly, it's important to recognise that becoming a digital leader is more about changing company paradigms and ways of thinking, rather than solely focusing on technical know-how. A digital transformation strategy can take many forms, each involving different levels of complexity, time, resource commitments, financial investment, and risk.

Secondly, understanding the four stages of insurance digital maturity is crucial. From record-keeping and processing to digital and platform operations, each stage presents unique challenges and opportunities.

Thirdly, customer-facing development and no-code platforms are essential to overcoming barriers and becoming a digital leader. Creating seamless, user-friendly experiences and integrating business and technology teams are key to success.

Lastly, digital transformation doesn't have to be a massive undertaking. Asset-light innovation, capability enhancement, digital NewCo creation, and enterprise transformation are all potential paths to becoming a digital insurer.

Understand the four stages of technological development in insurance

To become a digital leader in the insurance industry, it is important to understand the four stages of technological development in insurance.

The first stage, record-keeping, began in the 1980s when technology was introduced to insurance companies to help with efficient record-keeping. Technology was not a business driver at this stage but rather a cost of doing business. It was not integrated into the core business activities and was seen as separate from the business teams.

In the second stage, technology began to be used in core business activities to increase efficiency. Personal computers allowed for the use of technology beyond just storing data. Small, individualized programs evolved into large software applications, usually proprietary applications hosted on company servers. Technology leadership started to play a more significant role in companies, although it was still separate from the business teams.

The third stage saw technology become a key driver of business growth. With the widespread adoption of the internet and mobile devices, technology teams were integrated with business teams, and online channels became the focus. Technology began to define how business was conducted rather than simply supporting existing processes.

The fourth and final stage is the platform stage, where technology becomes the core of the business. Instead of being separate entities, technology and business are fully integrated. AI and machine learning play a prominent role, and technology can make choices for the business, such as identifying fraud in insurance.

While these are the four stages of technological development in insurance, it is important to note that most insurance companies are stuck between the processing and digital stages. The legacy code trap and the limited availability of coding skills are key barriers to an insurance digital transformation. However, by focusing on customer-facing development and utilizing no-code platforms, insurance companies can overcome these obstacles and become digital leaders in their industry.

Learn about the barriers to an insurance digital transformation

The insurance industry is traditionally risk-averse, which creates a barrier to the adoption of new technologies. This, coupled with the fact that insurance leaders are often overwhelmed by the amount of technology available, means that many insurance companies are stuck somewhere between the processing and digital stages of technological maturity.

One of the key barriers to an insurance digital transformation is the legacy code trap. An application that started with a few lines of code may have grown to include hundreds of thousands, if not millions, of lines of code as core applications become more complex. Making changes to that type of legacy application requires an enormous amount of troubleshooting, especially in a highly regulated industry like insurance. Every change must be thoroughly tested to ensure that it does not negatively impact another area of the application. The smallest changes can take months or even years, creating a major obstacle to growth and transformation.

Another barrier is the limited availability of coding skills. Skilled programmers are increasingly expensive and difficult to recruit. When applications are entirely dependent on the advanced coding skills of experienced technical employees, costs skyrocket and the organization's ability to innovate and meet customer expectations is limited by its ability to recruit coders.

Other barriers to insurtech and the industry's efforts for digital transformation include:

• Regulatory compliance
• Claims processing and fraud
• Risk assessment and underwriting challenges
• Inefficient change management
• Talent shortages and training challenges

Focus on customer-facing development

To become a digital leader in the insurance industry, it is important to focus on customer-facing development. Customers today are aware that they have options and are used to seamless, user-friendly experiences. They will not tolerate a cumbersome, inconvenient onboarding or claim submission process – they will simply opt-out and move to a competitor.

To create a seamless experience, it is crucial to view the customer experience as an integrated journey across platforms and departments, rather than a series of disconnected steps. This means that IT teams must interact with customer-facing teams to design processes that meet customer needs at all touchpoints and connect with the workflows of the customer-facing teams.

There is no one-size-fits-all solution as each type of customer has unique needs. For example, a customer with a simple request may prefer an automatic process with minimal touchpoints, while a customer with a complex claim may expect a lot of interaction and frequent touchpoints. The only way to craft the right journey for every customer is to fully integrate business and technology teams.

In the age of social media, creating positive customer experiences is more important than ever. A bad customer experience can be quickly amplified and can be disastrous, whereas an excellent customer experience can become a key differentiating factor for your company, even when all other elements are equal.

To improve the customer experience, insurance carriers should focus on knocking down silos between traditional lines of business and functions. They should also work proactively with adjacent industries to jump-start product and service innovation, enhance capabilities with cutting-edge technologies, and reinvent their long-standing culture.

By modernizing and streamlining infrastructure, operations, and business models, insurers can develop a more forward-looking approach to risk modelling, assessment, analysis, and mitigation. This will enable them to elevate technological and operational excellence, innovate product solutions, and broaden the insurance value proposition, making the insurance safety net more reliable, accessible, and resilient.

Embrace no-code platforms

The insurance industry is facing a challenging time. With consumers facing greater cost-of-living pressures and the global economy facing a potential recession, insurance is likely to be adversely affected. As a result, insurers need to find a competitive edge. One way to do this is by embracing no-code platforms.

No-code platforms are becoming increasingly popular among insurers as they allow them to migrate away from legacy systems and the burden of manual coding. They also enable insurers to keep up with demand and improve their service delivery models without sacrificing quality.

No-code platforms offer a range of benefits to insurers. They are tailored to the insurance industry, with all the key workflows and processes already built in to help automate the entire insurance value chain. For example, automated renewals can be configured so that when the renewal staging date passes, the system automatically collects third-party and fire underwriting rules and generates and sends the necessary documents. This saves underwriters time and allows them to focus on higher-risk policies.

No-code platforms also enable insurers to build quote journeys, automation rules, documents, rates, and email templates more easily. They make it much easier to make changes to applications, as a change to an application does not impact other applications as long as the interface between the applications remains the same. There is no need for time-consuming and cumbersome testing of the entire system, and changes can be made quickly and easily without risk.

In addition, no-code platforms can help insurers find innovative solutions during the IT skills shortage. As the global demand for talented developers increases and supply decreases, no-code platforms allow insurers to cultivate talent in-house rather than outsource it. This not only cuts down on costs but also enables insurers to affect change faster.

No-code platforms are also more flexible when it comes to customer and policy data, meaning they can break down silos of information and offer more personalized products. This is a key way for insurers to remain competitive in a challenging market.

Learn from the four archetypes of digital transformation in insurance

To become a digital leader in the insurance industry, it's important to understand the four stages of an insurance company's digital maturity:

Record-keeping

In the 1980s, technology was introduced to insurance companies to aid in record-keeping. It was not yet a business driver, and technology staff were separate from and held in lower regard than business teams.

Processing

As personal computers became more available, technology began to be used for core business activities, making existing processes more efficient. Small, individualised programs turned into large software applications, usually hosted on company servers.

Digital

Technology became a key driver of business growth, with online channels becoming the focus for both personal and commercial products. Technology teams were integrated with business teams, and technology began to define how business was conducted.

Platform

At this final stage, technology becomes the core of the business. It is fully integrated with the business, rather than being a separate entity. AI and machine learning play a prominent role, and technology providers can manage core infrastructure, allowing in-house teams to focus on customer-facing application development.

Most insurance companies are stuck between the processing and digital stages. To become a digital leader, focus on customer-facing development and no-code platforms. No-code platforms are designed for "citizen developers" who have limited technical skills but understand business requirements. They enable non-technical staff to create applications, allowing highly trained developers to focus on mission-critical applications. This results in agility and scalability, helping insurance companies remain competitive and meet dynamic customer needs.

While there are only four stages of digital maturity, there are three prevalent digital archetypes in the insurance industry today:

• Digital Opportunist: Insurers that have recently embarked on their digital journey. They may be interested in expanding their digital footprint and staying current with digital trends, but they retain some level of scepticism about the potential of digital transformation. Therefore, they have not allocated substantial resources to these efforts.
• Digital Adopter: Insurers that have evolved beyond the Digital Opportunists. They have a more rigorous and well-defined perspective on digital distribution and operations, and have already experienced some success with digital campaigns or products. These insurers have built dedicated digital teams and capabilities, experimenting with different types of distribution and operations models.
• Modern Insurer: Insurance companies for which digital is intrinsic to their core business. It is often easier for these businesses as they are born digital natives. However, there is an increasing number of Digital Adopters that have understood the full value of digital and are now shifting their focus to holistically modernising their core business.

By identifying which archetype an insurer fits into, a tailored plan can be formulated to support their desired transformation journey, particularly in terms of technology requirements. For example, a Digital Opportunist may have used simple off-the-shelf systems, while a Digital Adopter may have more advanced but less flexible bespoke systems.

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