How Insurance Companies’ Digital Transformation Can Assure Their Future
Over the next couple of years, insurers will be seeking to survive and accelerate longer-term recovery efforts to enable them to thrive as the world recovers from the global pandemic.
Insurers are aware that they still have much to do in 2021, after spending most of 2020 responding to the global pandemic. Losses have hit the Property and Casualty insurance business hard. While the global industry may yet rebound to growth this year, some property-casualty lines will continue to suffer.
Life insurance premiums declined by circa 6% in 2020 with a small recovery forecast for 2021. Annuity sales also took a big hit. Growth and profitability in both annuities and many non-term life insurance products will be impacted throughout 2021 and beyond by low interest rates.
Insurance post Covid-19
Over the next couple of years, insurers will be seeking to survive and accelerate longer-term recovery efforts to enable them to thrive as the world recovers from the global pandemic. Spending on digital transformation will continue but this, more than ever, needs to be intelligent investment with efficiency in all areas of the business being a key focus.
A recent Deloitte’s survey* found that 79% of respondents believe the pandemic uncovered shortcomings in their company’s digital capabilities and transformation plans. 95% of those surveyed were already accelerating digital transformation to maintain resilience.
New product development is key for successful insurance companies, such as the launch of more parametric policies (i.e. Lloyds of London’s new parametric “business interruption” cover). Insurers also have opportunities to innovate more in personal lines by using the big data at their disposal in a smarter way (bespoke policies, etc.).
The future is now
Many insurers are already running underwriting transformation programmes to better leverage artificial intelligence (AI), alternative data sources, and more advanced predictive models.
Increasing automation, expanding the use of AI in underwriting and enhancing predictive modelling will be key drivers for success.
By adopting new technologies and alternative data sources and establishing a connected partner ecosystem and a talent model that values technical claims handling and data science skills, insurers can make claims a more reliable customer retention driver and potentially a competitive differentiator. It’s no surprise that Zurich UK has teamed up with Carpe Data to automate and accelerate its claims processes and detect fraud using alternative data.
Regulation for areas such as Solvency, Conduct, Cyber Security, AI, Insurance Technology, etc. will have a significant impact on the industry over the next few years, with regulators being more demanding in ensuring standards are adhered to.
Existing privacy laws such as the European Union’s General Data Protection Regulation (GDPR), the California Consumer Privacy Act (CCPA), and the data-related rules from the New York Department of Financial Services (NYDFS) add to the insurance industry’s challenges around digital transformation, and data, heightening the risk of data loss/theft and data error.
As insurers transform their organizations it makes security, resilience, agility and regulatory compliance critical to their success. Cybersecurity tops the list among those surveyed by Deloittes in terms of an expected increase in investment to implement “zero trust” principles and “security by design”.
Cloud transformation projects are likely to increase, as building the cloud foundation allows insurers to rapidly and cost-effectively deliver transformation, implement advanced analytics, automation and move them towards continuous change delivery.
Building a compliant, data-driven organization to improve customer experience and maintain/increase competitive advantage requires a strong foundation that is secure and scalable, allows linkages to multiple internal and external data sets (possibly as microservices) via APIs, and supports advanced analytics and automation capabilities.
However, if introducing new technology and ways of working while increasing change velocity can’t be achieved without impacting customers, there is a danger that the battle to survive will be lost before the opportunity to thrive presents itself. This is why it is imperative that quality is not compromised.
Follow our blog to gain insight into how our services have supported digital transformations in the insurance sector, making organizations’ delivery of change more cost-effective and increasingly rapid, without quality of delivery and customer experience being impacted.
*Source: Deloitte’s Financial Services Centre