How insurers can ride the platform wave to success
In the high-stakes arena of the insurance industry, insurers are battling for dominance on various fronts. Even as soaring inflation and the resultant costlier claims put pressure on profit margins, a digital tsunami is reshaping the industry landscape. Groundbreaking technologies and nimble insurtech players are bringing innovative distribution and service models to the arena, and incumbents are having a hard time keeping up. Add skyrocketing customer expectations to the mix, and insurers have no choice but to step up their game.
Digitally driven CX is key for growth and profitability
To retain their competitive edge, insurers must focus on digitally driven consumer experience (CX). A Forrester study commissioned by EdgeVerve found that revenue growth is tied to customer obsession. Decision-makers at customer-obsessed companies reported 1.6 times faster revenue growth, 1.7 times faster profit growth, and 1.6 times better customer retention.
For insurers, improving CX requires driving ease and effectiveness across all processes, especially policy issuance and claims. Take the case of a large U.S.-based healthcare insurance company that services about 39 million people. Their complex claims and ticketing operations needed heavy manual intervention. Delays in processing led to a backlog of 70,000 records and impacted customer satisfaction. Deploying digital technologies helped them accelerate processing and clear the backlog in record time. They now process 250,000+ monthly transactions across 80+ processes. Digital transformation has helped improve CX and productivity while delivering an annual saving of $6 million.
Harnessing emerging tech to create customer and business value is a top priority for insurers, and they have steadily upped investments in digital transformation efforts. However, spending more on digital transformation does not equate to success. The Forrester study found that over half of industry decision-makers haven’t achieved the desired outcomes from their digital endeavors. The question is, what is blocking this value?
The challenge of extracting value from digital investments
The challenges to digital transformation value realization are deeply ingrained in the structural and cultural fabric of insurance organizations. These include:
Disconnected, legacy systems: 71% of decision-makers say that connectivity across data and network silos is essential for effective digital transformation. However, achieving this connectivity is a complex task, given the deeply entrenched legacy systems in many insurance firms. These outdated and often inflexible systems impede new technology integration. The resulting fragmented technology landscape hinders the seamless flow of data across processes.Data challenges – siloes, security concerns, and quality issues: Insurers are grappling with fundamental data management challenges. Siloed data, concerns about data security, and the prevalence of data quality issues undermine the trust and reliability of digital systems. The lack of trusted and timely data leaves advanced analytics and artificial intelligence applications paralyzed and unable to drive innovation and efficiency.Lack of strategic direction: While most insurers are already using AI/ML, the focus is on immediate operational gains at the expense of more strategic outcomes. This ‘point-solution’ focused approach misses opportunities for innovation in product development, customer engagement, and market competitiveness.
While most insurers struggle with these challenges, a few have mastered the art of leveraging digital and AI to unlock growth. These advanced insurers are 1.6 times more likely to agree that their transformation efforts have been very successful. So, what are they doing right?
How advanced insurers are winning at digital with a platform approach
Insurers acing digital transformation are looking at tech adoption from a new lens. Instead of focusing only on technology, they are integrating business, IT, and partner ecosystems to deliver seamless end-to-end customer journeys. Platform models that facilitate seamless connectivity across systems, streamline data flows, and enhance operational processes across the business ecosystem are central to this approach. In the Forrester survey, nearly 80% of advanced insurers said that a platform-based strategy will accelerate the progress of their digital transformation initiatives.
By utilizing platforms, these insurers are able to build comprehensive visibility across both internal and external landscapes to drive automation and efficiency. Improving access to insights is a key digital transformation priority for insurers in the next 12 months. Platforms also serve as a conduit for data-driven intelligence for making informed decisions that align with market demands and customer needs. For instance, a global insurance provider streamlined the information flow in their business and improved the ‘submission-to-quote’ ratio by 5%. By optimizing and automating the submission data extraction and clearance process, they also reduced manual efforts in submission clearance by 40%.
A proactive embrace of AI technologies underscores the strategic pivot towards a platform-based model. These insurers recognize the transformative potential of AI beyond operational efficiencies, harnessing it to anticipate market shifts, identify new revenue opportunities, and deliver superior customer experiences at scale. The platform approach amplifies these benefits by offering an environment conducive to the effective application of AI, enabling insurers to leverage technology to its fullest potential.
Key recommendations for digital transformation success in insurance
The platform-based strategy is key to future-proof insurer success. It facilitates connectivity and integration, transforming complex, siloed insurance operations into agile, data-driven enterprises. Here is how insurers can get started down this road:
Align transformation roadmap with tech strategy – rethink and renew strategy to focus on serving customers Build connectivity that drives a customer-centric tech strategy by creating a synergy between business needs and IT priorities. Prioritize AI and automation capabilities that remain accountable to customer and employee outcomes, such as augmenting human potential and providing proactive, personalized customer experiences at scale. Embrace emerging technologies such as GenAI with clearly defined and prioritized use cases. Optimize partner ecosystems to drive accountability and efficiency while co-creating new approaches.Leverage a platform strategy to capture value through efficiencies, insights, and growth.
Imagine you want to write an epic story quickly. What would you rather use – a dusty, old typewriter or a voice-activated AI assistant that can turn your musings into coherent text? That story is currently being written in the insurance sector. The biggest question for CXOs is whether they are ready to shed their old, cumbersome processes and systems in favor of agile, efficient platforms to craft a new narrative—one where efficiency, customer satisfaction, and innovation write the plot.
