Digital transformation is a key strategic initiative for every insurer. Digitalization holds great promise of both increasing revenue through increased customer loyalty, reduced costs and improved profitability.  Many insurers have begun defining a strategy and engaging on digital pilots but have encountered several challenges on their road to digitalization. The following highlights some of these key internal challenges and provides some recommendations to address them:

Legacy Technology

Insurers have processing systems that are often 20+ years old with deeply embedded business logic. Clearly, these systems cannot be easily ripped or replaced in total but insurers can look at building new capabilities using digitized business processes and applications. They can and should begin to look at using cloud technology for improved ability, performance and ease of maintenance. They can begin building “data lakes” to leverage more robust data. Similarly, they cannot rebuild or migrate existing data warehouses easily, but they can build analytic “sidecars” to support real-time analytics and their “hot” data needs. This will help as they transition to building new capabilities using the latest analytic technologies.


Slow Delivery

Insurance has always been conservative; even industry leaders are often more “fast followers” than “trail blazers”, compared to other industries. But insurers don’t have to digitize all their processes; they can selectively digitize processes or sub processes (e.g., for one product and line of business and apply to others using a “rinse and repeat” approach). They can also leverage development sandboxes to test new capabilities. Lastly they can use co-innovation approaches selectively with forward thinking customers, partners and collaborators. New product launches or new profit centers are great candidates.


Cultural Constraints

Change management is one of the hardest hurdles to overcome. Internal incentives and rewards can be developed for employees. External resistance from agents and intermediaries is more difficult, but can also be overcome by targeting innovators in existing partners, looking at new distribution partners and even adding additional channels or non-traditional digital partners.

Analytics are critical to digital success. Insurers not only need analytics technologies, but they also need improved analytics capabilities in modeling, data management and database management. And they need to include the use of real-time data and analytics throughout the customer life cycle, as well as the end-to-end supporting business processes. There will be winners and losers in the Digital Revolution; those who cannot adapt will be subject to acquisition by digital leaders.

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