How Digital Transformation is Helping Insurance Companies
With digitalization going mainstream across all industries such as Healthcare, eCommerce, BFSI, Insurance, Airlines, Logistics, etc. these industries continue to leverage various digital technologies to deliver more personalized customer experiences. Thus, these insurance companies are now more focused to serve their customers by enabling personalized insurance products and services to meet their ever-changing preferences.
Moreover, by adopting digitalization, insurance companies are shifting from traditional IT systems to Cloud-based systems, thus reducing their operational costs and at the same time improving the customer experience (CX) with services made available 24×7. According to Swiss Re Institute’s latest Sigma Report, “The insurance industry is forecasted to return to premium growth of 2.1% annually on average in real terms in 2023 and 2024 following total global premiums falling by an estimated 0.2% in real terms in 2022 due to inflation, which remains the key concern for insurers.”
Business Benefits for Insurance Companies Embracing Digital Transformation (DT)
- Improves CX with innovative products and services: Improves customer experience and engagement as more personalized products and services are enabled for the customers
- Streamlines Business Operations: Automation is helping insurance companies to streamline operations by reducing paperwork and manual dependency. Further, insurance businesses are using AI, ML, and RPA to automate underwriting, quicken claim processes by reducing costs and accelerating quicker turnaround times
- Reduces Operational costs: Digitalization ensures a reduction in operational costs due to shifting toward cloud-based solutions
- Delivers Data-driven insights: Improves insurance businesses’ competitive edge by better analyzing customer data with effective predictive analytics data
- Makes more Agile and adaptable: Helps to become more agile and stand ahead of the competition with improved decision-making with data-driven insights
- Ensures seamless partnerships and collaborations with third parties: Digitalization is helping insurance companies to enhance their collaborations with third parties and external stakeholders for mutual benefits with well-defined products and enhanced services
Which are the major Insurance industry activities impacted by DT?
Policy Management Online (anytime/anywhere): With digitalization, insurance companies have reached paperless mode as online portals are made available with seamless digital apps for customers. Policyholders can manage their policy documentation, and coverage details, make changes and updates, and renew their policies on the go with the self-service portals.
Seamless Digital Claims Processing: For insurance companies, claims processing forms the most critical aspect. Digitalization has simplified and accelerated claims processing significantly. With online claim portals available, policyholders can submit their claims online by uploading the required documentation. Automated Underwriting: With Digitalization, the underwriting processes have been automated with advanced algorithms and data analytics thus reducing manual underwriting. Today, insurance companies continue to leverage the latest digital tools to analyze applicant’s data, and assess underlying risks if any, thus making underwriting decisions more efficient and accurate.
Predictive Modeling: Today insurance companies can use vast amounts of data to gain deep insights and make informed decisions by leveraging data analytics tools and advanced predictive modeling methods.
Fraud Detection and Effective Risk Management: Fraud detection forms another major part of the insurers but with digitalization, these companies can leverage advanced tools for effective risk management and fraud detection.
Challenges Faced by the Insurance Industry
According to an article by name ‘2023 Insurance Outlook,’ by Deloitte Insights, the report states that the road ahead for the insurance sector is dotted with multiple hurdles—rising inflation, interest rates, and loss costs; the looming threats of recession, climate change, and geopolitical upheaval; and competition from InsurTechs and even noninsurance entities such as e-tailers and manufacturers, to name a few. In addition, some of the other technical insurance industry challenges include:
- Insurance businesses continue to face challenges with data privacy and security
- As Insurance regulations change across countries and regions, this is another important challenge these businesses face
- Increased operational risks due to automation costs
- Inaccurate claims and settlements in some instances
- More frauds with some insurance claims
Therefore, businesses should embrace digital transformation and leverage effective Agile and DevOps methodologies along with leveraging important software testing methods and practices to overcome these above challenges.
What are the three predictions by research analysts for the Insurance sector in 2023 and beyond
- Expects Real premium growth to slow down: As global GDP forecasts show a downturn, similar activity and growth projections have also been observed across life and non-life businesses. Real non-life premiums globally are expected to grow by 2.2% in 2023 — down from a 3.3% growth expectation while non-life premium growth in emerging markets will outstrip that of advanced economies, with estimated real growth of 3% in 2022 and 4.2% in 2023.
- Inflation and recession fears to increase operating expenses and claims costs: As inflation rates continue to zoom, it will impact the insurance entire value chain (from customer acquisition costs to claims expense and indemnity) significantly. Due to the supply chain delays, there is a likely hood of increased operating costs especially for the auto and property insurance sections.
- More increased insurance products around healthcare and wealth protection: Undoubtedly, people’s health and financial well-being have become less secure post-COVID arena. It is likely that in 2023 and beyond, there might be an increasing growth opportunity for insurers to expand their portfolios across health and wealth protection insurance products, which might showcase more demand.
Conclusion
The insurance sector is the most happening sector today that continues to evolve with the core digital transformation and is helping them to change their traditional ways of doing business by enabling new personalized products and services. Digitalization is helping insurance businesses to become more agile and competitive, streamline their operations with automation, and mitigate risks, and is driving innovation within the industry, thus delivering improved CX with personalized offerings like never before.
