As an industry, insurance is lagging in the technology space
Less than one third of insurers report digital transformation as a success.
But 89% of insurers believe that the main reason to transform is to communicate across a customers’ preferred channel.
Moreover 41% said that they anticipate implementing artificial intelligence (AI) in the next year.
These were the findings from EXL’s recent report on “Digital intelligence: achieving the promise of digital insurance.”
EXL partnered with Harvard Business Review Analytics Services on a survey of more than 800 global executives across the spectrum.
The firm believes that bridging the gap between expectations and outcomes requires digital transformation.
It stated that while insurance companies are “prioritizing customer engagement, recognizing that winning wallets is essential when growth is challenging.”
Insurers do not align with other industries is the percentage of pilot projects and proofs of concepts.
As an industry it lags behind partly due to legacy systems.
The Insurance Outcome Gap
It’s senior vice president, Nigel Edwards talked to Insurance Times about the Insurance Outcome Gap looking at the main challenges for insurers.
- Premium pressure
- How to deliver change in an uncertain world
He said premium pressure particularly in motor is certainly one challenge.
Explaining that motor premiums in the UK are lower than last year, referencing the challenges that RSA have had in the last year.
Edwards added that product differentiation and customer experience were key to profitability.
The industry is facing a dilemma, which is “how to deliver change in an uncertain world,” he cited Brexit, mergers and acquisitions, all as catalysts.
“We are also seeing a lot of executive churn, at all levels, and particularly in the London market there is an aging skills base. At some this needs to be replenished and restocked but also reinvented for the digital world,” he explained.
Acknowledging that insurance is a traditional business, he said: ”The industry has been slow to adopt as its insulated from digital technology but globalsation is having an impact on that.”
“Insurance policies are difficult to engage with, it becomes a trial having to fill out lots of forms manually, having to go through the emotional cycle of revealing many personal attributes. Therefore, customer engagement has been low because it’s a one-time event and that hasn’t driven a culture of digitalization.”
The report listed potential reasons for digital failure:
- Culture: senior management to front line
- Internal resources: people, investments, training, program management
- Technology: legacy or digital
- Data: usability, hygiene, access
He said that everyone is concerned about “ripping out or re-inventing legacy systems.”
But he pointed out that very rarely is there a “golden data source” meaning that the systems do not allow a single view of a customer.
However, many of these things are changing.
Edwards added: “There is the threat of disintermediation amongst the broker community, their knowledge is their value. So digitalisation can be seen as a threat.
“Similarly, with underwriters, their knowledge is their selling point. But also putting yourself in the shoes of brokers and underwriters, you have to be able to trust the technology,” and ensure that data is codified.”
That’s something he said will take some time to catch on where technology serves as an enabler to underwrite more profitable business.
Trust is key
But he said it’s also about trust, “it’s about using algorithms used to codify data.”
“In order to take cost out insurers need to have a nice seamless customer journey.”
He gave the example of creating new markets and manufacturing new products.
However, most insurance is sold on a policy by policy basis, an example of this is the gig economy who have different needs meaning policies need to be individually tailored to suit shift patterns and flexible working.
He touched on “insurtech in its many guises” seeing it in three different ways: external operations such as IoT, internal operations ie: machine learning and the impact of new entrants that lead with a technology slant.
Edwards said that new technology entrants are driving this change as both a threat and a scale for insurers.
He added: “The propensity to orchestrate all these things around the customer and their data are crucial to drive customer experience and efficiencies.”
EXL is an operations management and analytics company. It has an industry focus in insurance, utilities, banking, logistics, healthcare and transportation.