Five Steps Insurance Companies Can Take to Survive Digital Transformation
As industry moves increasingly towards digitization and automation, the Internet of Things is changing how business is conducted around the world. And while some industries are moving toward the future more quickly than others, most leaders understand that the traditional way of doing things is standing in the way of staying competitive.
Leaders must be more sagacious than ever, watching not only disruption from within their own industry but for potential of disruption to come from unexpected sources. Just ask Kodak, which filed for Chapter 11 in 2012 after digital cameras and camera phones overtook the market share the company dominated for 128 years.
The insurance market is large and complex. The US treasury reported $1.1 trillion in premiums in 2013, a number increasing as more individuals and employers buy health, life and property-casualty insurance.
Tech-savvy millennials, already worth almost an estimated $200 billion a year in spending power, and likely to outnumber baby boomers by 2030, should be driving strategic decisions when it comes to innovation. And state-by-state regulation complicates matters further by tying carriers to compliance at every turn. Navigating these factors doesn’t make change easy.
So where do companies begin?
Getting started can be the hardest part. Here is a list of five first steps to get your insurance company on the road to the future.
- Build a vision. A vision is a prerequisite for long-term success. Having a vision for your company will align you with the right solutions to help you transform your business. Yogi Berra said it best: “You’ve got to be very careful if you don’t know where you’re going, because you might not get there.”
- Create a plan. Once a vision is established, your goals, objectives and resources should be outlined clearly within a plan to achieve it. Plans should address functionality across departments and include a strategy to encompass distribution channels such as agents, brokers and third-party administrators.
- Know the cost/benefits. Cost-benefit analysis should be standard practice but, surprisingly, it’s often overlooked. Weigh out the costs, both quantitative and qualitative, and measure them carefully against the benefits. While most financial costs are incurred upfront, the benefits of powerful automation can be realized quickly and have far-reaching effects. There will likely be cost savings on the maintenance and support of other legacy systems. If there has been any M + A of other insurance companies, there may also be multiple systems to support. But without careful analysis, you won’t have a basis for deciding which investments are worth making, and which not.
- Ensure buy-in. If everyone understands the benefits and challenges at hand, they’ll be prepared to work through new challenges as they arise. The whole point of transformation is that a significant change is taking place. Most people resist change unless they’re convinced there’s something in it for them. Getting people excited about the outcome and the efficiencies they can expect will ensure that employees are allies, not roadblocks.
- Choose the right solution. By the time your organization has completed the first four steps, the right solution may become clear. Examine the strengths and weaknesses of your top choice. Is it based on industry best practices? Can it be integrated with existing core systems? Is it scalable? And perhaps most importantly, does the solution have a knowledgeable team behind it to ensure your success?
The insurance space has been slower than others to invest in innovation, but that is changing. Disrupters both helpful and hindering act as signposts toward the kind of technology that carriers are no longer just considering but implementing.
Automation is leading to straight-through processing and end-to-end solutions that are turning tedious manual processes and workarounds into opportunities for untapped growth. The future looks bright, but insurers have to look towards it in order to reap its benefits. More and more of them are doing just that.