The past few years have turned digital disruption into a hot topic for insurance. Carriers find themselves bombarded with information about a looming revolution for insurance, in which technology remakes distribution — and upends traditional business practices and customer relationships as a result.
While many carriers thought they were preparing for digital transformation, they were, in fact, already in it. And then the pandemic accelerated technological change even more rapidly.
Insurers, agents and customers now occupy a world where digital disruption has come for insurance. The wave has passed. Now, savvy insurers need to ask if new technology is supporting core goals and how to make insurance distribution easier for everyone.
The insurance industry spent so many years preparing for digital disruption that the transition from preparation to conclusion can be difficult to pinpoint. What does it mean to live in a post-disruption insurance world?
Now that digital disruption is a daily reality, “all executives must understand the impact of these technologies and ensure their organizations are positioned to unlock their potential,” write Krish Krishnakanthan and fellow McKinsey researchers. Bracing for future disruption allowed insurance leaders to stay rooted in traditional methods of doing business; integrating into present disruption, by contrast, requires leaders to let go of traditional methods in order to embrace new tools for reaching established goals.
Acknowledging that change is already here can be difficult. Managing a digital transformation can be even tougher. “There is no rule book that will guarantee an easy ride,” note McKinsey senior partners Tanguy Catlin and Johannes-Tobias Lorenz. Digital disruption goes to the core of how insurers do business, raising questions about carriers’ core values, agents’ role and contributions, and customers’ expectations and needs.
Some insurers are already diving headfirst into the new digital world. Insurtech funding hit new record highs in 2021, according to Forrester senior analyst Jeffery Williams. Most insurers are no longer pretending digital disruption won’t affect them; instead, they’re taking stock of the tools they already have and exploring ways to improve their technological access and their ability to support the value-adding work of agents and the relationship-building demands of customers.
There is no part of the insurance business that this disruption doesn’t affect. Insurers, therefore, will need to rethink their approach at every level of business in order to ensure that technology makes it easier to meet goals and fulfill key values.
The primary question in a pre-disruption world was: “What’s coming and what does it look like?” In a post-disruption world, attention shifts to a new question: “How does existing technology fit and help advance our core values and goals?”
For example, insurers seek to build healthy organizations over time. They also seek to serve customers in ways that build customer loyalty. The ways in which an organization uses its technology should enhance both of these goals at once, rather than undermining either of them or failing to affect them, writes Gary Shaw, U.S. insurance practice leader at Deloitte.
It’s important to start with a view of the goals and values to be supported. Once the vision is clear, a wealth of new technologies are available to help carriers, agents and customers find common ground and build a mutually beneficial and satisfying insurance relationship.
In his article at Insurance Thought Leadership, Damco Solutions’ Vice President of Insurance Practice Faheem Shakeel lists a number of available tools to help insurers meet their goals, including:
As with any tools, however, these new digital realities are neutral with respect to any insurance carrier’s values or goals. Carriers must decide which options to embrace and how to apply them to a given situation in order to reach their desired results.
In the midst of transformation, insurers may benefit from hitting pause in order to reconsider the foundations of their business and the ways in which new technologies may be used to advance essential elements. By aligning core values with technology in a post-disruption insurance landscape, insurers can determine whether their digital transformation is truly serving their customers or merely represents the acquisition of tech for tech’s sake.
“The key lies in staying true to your company’s mission and values while updating operating models that enable maximum efficiency and customer satisfaction,” writes Sunil Patro, CEO and founder of SignEasy.
For years, carriers and agents faced warnings that the insurance industry could not avoid digital disruption. Now that digital disruption is a reality, carriers and agents find it “impacting every aspect of insurance companies’ operations, from internal processes to the products and solutions they deliver to customers,” writes technology lawyer Dino Wilkinson, a partner at Clyde & Co. It’s time to stop bracing for change and start embracing change by refining the use of tech and re-aligning investments with core values.
Insurers no longer need to imagine which technologies might arise or how they might change the work of insurance. Now, carriers, agents and customers are all interacting with existing tech and asking whether these tools help them meet their respective goals.
In an IBM study, 56 percent insurance executives rated agility and flexibility in operations as a top priority. These respondents “placed the ability to act decisively ahead of such considerations as improving data transparency, securing data systems, and establishing greater accountability,” writes Mindy Raf.
Another question to ask is whether the technology is helping carriers and agents meet customer expectations. “Digital natives are causing customer expectations to rise significantly in terms of the quality and agility of insurers’ digital offerings,” note Simon Behm and fellow researchers at McKinsey.
Meeting customers’ expectations will be a must in the coming years. Technology plays a key role in this process, as insurance customers come increasingly from the ranks of digital-native generations who expect seamless service in a digital environment.
“The viability of the insurance industry is vitally connected to these customers. If we lose touch with them, both current and future, we lose business,” writes Denise Garth at Majesco. New tools can make it easier to reach these customers, but insurers must implement them thoughtfully.
Technology has the ability to transform how carriers approach distribution, how agents add value and how customers interact with their insurers. It also has the ability to drive growth on an insurer’s bottom line. Research by Violet Chung and team members at McKinsey found, for instance, that “digital leaders increase revenue at five times the rate of other companies and total shareholder returns by two times.”
Five years ago, digital leadership meant being the first to embrace new tech. Today, with digital disruption in place, digital leadership means asking which technological tools are doing their job to make distribution easier.
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