Digital transformation is rapidly changing the way businesses across all industries operate. For insurance companies, digital transformation poses both exciting new opportunities and potential challenges that must be taken into account in order to make the most of this large-scale shift. From customer service optimization to streamlining internal processes and more, there are a number of key areas where insurers can benefit from implementing meaningful digital transformations, but success isn’t guaranteed without a comprehensive plan.
Below we will explore some of the major challenges associated with such processes for insurance providers so that you can create an effective digitization strategy for minimizing risk and maximizing opportunity.
10 Insurance Digital Transformation Challenges
Insurance companies must think holistically in order to truly transition from analog to digital. Digital transformation goes beyond technology and requires the insurance organization to understand how it needs to use data, analytics, customer experience management and process automation to support its customers’ current and future needs.
Here are some of the main challenges that insurers face when implementing digital transformation:
- Lack of a Unified Technology Platform
Insurance companies need to move away from outdated systems and technologies to adopt modern solutions that are built with an open architecture for integration across disparate systems. Insurers also need to ensure their technology platform can support the different business functions such as marketing, operations, sales, customer service etc. Investing in custom insurance software could be the best way to gather all insurance related operations and processes at one place.
- Inadequate Data Analytics
Insurers rely on data to accurately assess risk and set premium rates for customers. If insurers are relying on inaccurate or incomplete data, they may be unable to accurately evaluate risk and could end up charging too much or too little for coverage. Insurers need to have the ability to use the advanced data analytics to gain insights into customer needs and behaviors, identify trends, and create better products for their customers. Whether it is a funeral insurance agency or an insurance agent offering car insurance, investing in advanced data analytics tools can help grow greatly.
- Limited Automation & Process Efficiency
Insurance is an ever-evolving industry and companies are always looking for ways to gain a competitive edge. But most companies are unable to use automation efficiently. Insurance companies need to find ways to automate manual processes like claims administration, underwriting, policy renewal and customer service. This will help them move away from manual processes that are time-consuming and inefficient.
- Customer Experience
The insurance industry has traditionally lagged behind other industries in delivering a good customer experience due to its archaic processes, lack of online self-service capabilities and limited product choice. This leads to poor user experience in this digital world. Insurers need to focus on delivering customer experience that is tailored to the individual customer and provide a range of products to meet their needs.
- Difficult Integration
As insurers adopt new technologies, they need to ensure that these are integrated with their existing systems in order to maximize efficiencies and reduce costs. Sometimes integration causes serious conflicts with current systems to reduce overall efficiency. This requires significant effort and often requires expensive consultants to help with the integration.
- Limited Digital Transformation Talent
Insurance companies need to ensure they have the right talent in place to lead and implement a successful digital transformation strategy. This includes roles such as data scientists, project managers, software engineers and customer experience experts that can help drive the process. Lack of talent and experts is one of the key challenges insurers face when it comes to digitization.
- Short-Term Gains Over Long-Term Strategy
Insurers need to focus on the long-term benefits of digital transformation and not be tempted by short-term gains. Too often insurers are lured in by a low cost solution, but fail to understand the potential costs associated with maintenance and upgrades in the future. When considering digital solutions, insurance companies must look for easily scalable and adaptable solutions to gain long term benefits.
- Resistance to Change
As with any major change initiative, there will be resistance to digital transformation within the company. Some staff may view it as a threat to their job security or feel uncomfortable with the new technology and processes. Insurers need to have clear policies to support employees during the transition, so they can understand how they will benefit from the changes.
- Security & Privacy Risks
With the increasing use of technology, there is a greater risk of security vulnerabilities and data breaches. As insurance companies deal with ample sensitive customer data and information, oftentimes they fail to protect customer data. Insurers need to ensure that the systems they implement have adequate safeguards in place to protect customer data and prevent unauthorized access.
- Budget Problems
As with any business transformation initiative, digital transformation requires a significant upfront investment in technology and resources. Most insurance providers are unable to pay huge sums for digital solutions. When considering advanced automation solutions they need to ensure they have the budget to implement and maintain a successful digital transformation strategy.
Overall, insurers need to understand the challenges of digital transformation and be prepared for the journey ahead. With the right technology, resources, talent and a well-defined strategy, insurance companies can reap the rewards of digital transformation and become more competitive in the changing landscape.