Digital Transformation in the Insurance Industry
November 1, 2022 •Oak Street Funding
Client experience platforms, digital payments, and virtual assistants are just a few of the digital transformations impacting the insurance industry. The growth of technology can be measured by the number of vendors promoting digital products at industry conferences. Technological advances will continue at an ever-increasing pace and agents who want to remain ahead of the curve will find ways to embrace the digital transformation.
How is digital transformation changing the insurance industry?
There are three primary areas of digital transformation impacting the insurance industry: data analytics, predictive analytics, and artificial intelligence.
Greater data analytics allows insurers to detect fraud, measure customer satisfaction, and increase lead generation. Insurers are swimming in data and data analytics software helps glean the important trends from the data to guide decisions.
Predictive analysis uses historical patterns to predict future trends and identify potential markets. Insurers can use lessons learned from previous claim issues and create plans for handling similar claims in the future.
Artificial intelligence takes data analysis a step further by making assumptions based on data analytics to make predictions beyond human capabilities. This allows the industry to shift from “detect and repair” to “predict and prevent.”
Why is digital transformation important in the insurance industry?
The adoption of data analytics, predictive analysis, and artificial intelligence are necessary for the insurance industry to remain relevant. Consumers have come to expect digital services for shopping, entertainment, and travel and the insurance industry is no different. Digitalization allows insurance agencies to provide the services customers want without exhausting their resources.
What are the pros and cons of digital transformation?
The digital transformation allows for streamlined operations, hybrid client connections, increased automation, and greater personalization.
- Streamlining - Virtual assistants reduce the burden of back-office tasks and allow employees to focus more on sales and service.
- Hybrid client connections - With chat and video integration, customers can choose to meet in person or virtually.
- Automation - Automation services allow you to turn claims around more quickly. Additionally, automation makes renewals simpler for customers, making them more likely to renew instead of shopping for another provider.
- Personalization - Personalization gives clients more of what they want. Digitalization allows you to more easily develop a plan that is unique for each customer. Customers appreciate custom products and services, so they aren’t overpaying or under protected.
As with any innovation, there are cons of embracing digitalization that insurers should take into consideration.
- Initial costs – The initial costs of implementing a new technology or software may be high. These technologies are new and come with high development costs that developers will try to recover with their initial sales.
- Implementation – Implementing new technology can be challenging and time-consuming. Employees may need extensive training and merging data from one system to another can be frustrating.
- Security risks – New technology poses greater risks for data breaches. It may be necessary to purchase more advanced cyber protection systems to protect you and your clients’ data.
How to prepare your agency for digital disruption
There are so many digital products and services available for insurance agencies that it can be overwhelming to choose the best fit. To prepare for the digital disruption, agents should consider these best practices:
Some companies will try to sell you a package of many solutions when your agency is only ready for two or three. Determine ahead of time what your capacities are and then look for a provider. Talk to other agents in your area to find out what they recommend before making a final decision. Lastly, make sure the vendor you choose is scalable, meaning as your agency grows, will they be able to grow right along with you?
Adopting new technology may cause some pain points for your employees and customers. To mitigate the difficulties, frequent communication about the changes will be important. Listen to employee and client complaints and questions with an open mind. Change can be frightening for some people and knowing someone is listening will help alleviate their fears. When possible, share how the changes will benefit your employees and customers to help them overcome their aversions to change.
Consider implementing new technologies one at a time. Prioritize the technology that will have the most immediate benefit for your employees and clients. Then, once the implementation is complete, move on to the next technology. This approach will help those reluctant to change because they are adapting to changes in smaller increments.
How will you know that the new technology is successful? Before adopting a new technology, determine the KPIs (Key Performance Indicators) you will use to benchmark if the technology is successful. For example, if you are adopting a claims automation software, your KPI could measure decreased processing time. You will need to determine the KPI the software must meet in order to see the ROI you are expecting.
The new digital landscape will require agents to embrace innovation or be left behind. The future is full of exciting potential, and the benefits of digital disruption are numerous.
Disclaimer: Please note, Oak Street Funding does not provide legal or tax advice. This blog is for informational purposes only. It is not a statement of fact or recommendation, does not constitute an offer for a loan, professional or legal or tax advice or legal opinion and should not be used as a substitute for obtaining valuation services or professional, legal or tax advice.