4 Challenges in Moving to Digital Insurance

A recent PwC report indicated that 44% of insurance leaders surveyed did not believe existing insurers would survive in their current form. The industry is shifting at a rate that threatens the very survival and profitability of many insurance companies. 

In response to this, many companies are striving to embrace digital insurance. But digital as a business priority isn’t just about digitizing systems—although that does play a key role—it’s about the more inside-out process of digital transformation. That means: 

• Creating great, cohesive customer experiences across digital and traditional channels to build customer loyalty.
• Using digital platforms to improve operations, increase revenue, and reduce costs.
• Tracking data to enhance analytics and using automation and to provide great customer-centricity.
• Allowing insights from data to direct new products, better suited to consumer needs.
• Integrating new technologies to improve legacy systems.
• Anticipating digital trends to build a future-thinking strategy.

Challenges that Prevent Successful Digitalization 

Transforming into a truly digital business is difficult. Here are a few challenges insurers may encounter:

1. Difficulty executing a connected ecosystem. Insurers must focus on creating a connected ecosystem that can keep up with the fast-paced changes that digital transformation demands, while still delivering excellent experiences for customers, agents, employees, and other business partners. Consumers perceive insurance companies as traditional organizations, rich in heritage and knowledge but infamously slow to embrace digital change. Insurers must change this perception, creating digital solutions that connect users and can also connect each user’s multiple touchpoints, including emails, website content, mobile, IoT, and physical locations. Doing so enables insurance companies to stay competitive. 
2. Lack of digital agility. As the insurance market changes and digitalization increases, insurance companies need to become more agile and efficient to keep up with the industry's accelerating pace. And this isn't limited to one area of your company or the products and services you provide but across the board. You can't deliver an agile product purchasing experience by introducing a flexible pricing program like pay-per-use, for example, without also implementing digital claim processing or enhancing your overall customer experience. In fact, the most effective digital transformations are those where digital technology improves efficiency and is embedded in the very operational framework of a company itself, both in internal back-end operations and external, customer-facing portals. According to a report from Novaria, however, 93% of carriers still struggle to support digital initiatives. 
3. Disruption from InsurTech. InsurTechs are a growing and disruptive threat to the insurance industry. Research shows that as digital continues to evolve, consumer expectations of digital experiences also continue to rise—and poor CX can be a deal breaker for new business. As InsurTechs grow, many have the potential to launch their own insurance companies in the future. This threat forces traditional insurance companies to try to become “future-proof” to stay relevant.
4. Inoperable systems. One of the biggest challenges insurers face is the struggle to innovate to the latest technology, most often because of inoperable legacy systems. 68 percent of insurance companies see legacy systems as the biggest obstacle to digital transformation. This lack of integration prevents future integration of any tools and systems, ultimately roadblocking future success. Moving away from legacy systems isn't easy, however, involving both expense and risk—the wrong technology choice could involve losing valuable information and the disruption of critical business operations. But doing nothing will prohibit an organization’s ability to compete, cause security issues, and increase long-term maintenance. Insurers have to figure out their strategy for overcoming aging legacy systems if they want to be successful. 

Every industry faces challenges in the digital age. But as the insurance industry continues to evolve, insurers must become insurance innovators in order to overcome these challenges and prepare for the future.