Insurers see digital transformation as a significant challenge that calls everything into question. They expect this transformation to involve substantial technology investments and a complete switch from physical to virtual channels. Many a times, insurance groups react to technology trends and what their competitors are doing, which leads to additional frustration.
Digital transformation is about taking advantage of new technology to capture opportunities and meet customer needs. It does not have to be disruptive. This is not a new challenge — computers and software have been around for decades and brought changes both to products and services. With digital transformation, carriers are finding it extremely difficult in terms of which opportunities to pursue and which ones to prioritize. Though in some cases, a paradigm shift is involved. But for most companies, transformation means incremental steps to deliver value proposition better.
Here are five common myths about digital transformation that explain what digital transformation is really about.
New technologies offer new ways for insurance companies to manage their customers’ needs. But, implementing a new technology just because it’s available is a wrong approach. Insurers must ask whether new technology can add value to the customer experience. They should review their business model from time-to-time and understand if it meets customer expectations. If not, they must evaluate their operations and optimize & automate, if required. But it doesn’t mean the insurance business model will change; it will remain the same – despite ongoing digitization.
For a long time, agents and brokers were used as intermediaries, and these roles still offer a lot of client interaction. Today, insurers understand that they need to know their customers to be able to meet their expectations, and so they are investing in the digital customer journey, chatbots, and digital products that help them gather relevant data.
There is no doubt that digital often reduces manual processes. But that doesn’t mean physical goes away completely. Carriers are looking for ways to create a combination of physical and digital channels – no matter whether customers have started their journey online or with a broker.
A common misunderstanding of digital transformation is focusing so much on technology and how it will impact on the future. Digital transformation is not just technology, but also about understanding your customers well and providing customized products and experiences that keep them around. Technology like AI will support this approach.
Many insurance companies understand this new way of doing business and providing “tailor-made products and services” to meet their clients’ needs.
Digital transformation may ultimately require changing back-end legacy systems, a major challenge for insurance companies that have had their systems in place for decades. The best approach is to develop new front-end applications, connect them to legacy systems through APIs and replace underlying legacy systems step by step.
Its time insurers should think of digital transformation less as a threat and more as an opportunity to grow. They should focus more on customer needs, organizational flexibility and must be ready for incremental change.