The insurance industry needs to make the big digital leap
Is digitalization finally making its way to the insurance sector in a big way? Mikko Helin, Director of Business Development at Tieto Financial Services, argues that the insurance industry must take the digital leap and explains how the benefits of digitalization for insurers and customers go hand-in-hand.
The insurance industry was one of the first to take advantage of computer technologies. A couple decades ago, insurance companies were large-scale early adopters of data processing, calculation and ICT software. How times have changed. In this era of fast and scalable digital transformation—defined by cognitive automation, mobile solutions, big data, the internet of things, etc.—the insurance industry is lagging behind other industries. The banking sector, for example, has offered multi-channel digital services for decades. This development was partly driven by the frequency of customer interactions, which can occur multiple times more often with a bank than an insurance provider.
Why has it taken so long for insurers to embrace digitalization?
For some time, insurance companies have been in the starting blocks when it comes to digitalization. Typical digital projects in the insurance sector have been individual digital services, mobile service pilots or bloated core system renewals driven by end-of-life threats. Meanwhile, truly game-changing innovations have been absent. It is much easier to develop something shiny and new that is isolated from the core operations, rather than redesign all business and operational processes. Major digitalization also requires changes in thinking and culture. Some organizations are also trapped between two cultures—the new “go ahead and innovate” culture and the traditional, old-fashioned business culture.
But there is some hope! At least one strong sign shows digitalization is finally taking off on a larger scale across the insurance industry. Our new contract with the Finnish insurance company LähiTapiola covers IT service transformation to cloud services, but most importantly, it develops their customer experience and streamlines business operations. Ultimately, what happens “above” the cloud is more important than the actual cloud services—that is, firms should focus on what services are offered as well as how, to whom and where. Generally speaking, the insurers that thrive in the coming years will utilize digitalization in unforeseen ways.
Digitalization improves the most important asset – the customer experience
I have seen various projects and strategies that either emphasize improving the customer experience or improving operations and the combined ratio for insurance companies. These factors go hand-in-hand throughout the entirety of very few projects, which does not make any sense because there is no actual conflict between efficiency and customer experience.
Specifically, insurance companies cannot afford to disregard digitalization for one very simple reason: digital services improve customer service and the customer experience while enhancing operational efficiency.
For example, when customers are comparing insurance policies, they want real-time access to service details and conditions from any mobile device. When desired services are found, customers want to make purchases at that moment. The digital service and sales process and content must accommodate this by offering a fluent and easy buying experience. No branch visits or even calls should be necessary. Unfortunately, many Nordic insurance companies do not offer this kind of end-to-end experience.
Another example is the insurance claims process, which is a predominantly unpleasant experience for customers. If the processes are not simple and instead complicate unfortunate situations even more, disgruntled customers will find coverage elsewhere. Effective and customer-orientated self-services can facilitate timely claims resolutions in obvious insurance cases, while the more exceptional and multidimensional cases can be left to claims handlers. The claims handling process should also direct customers to the right hospitals, repair shops or other service providers; this process can be optimized and made real-time through digital services. Again, this well-functioning process keeps customer happy, but it also streamlines and drives operational efficiency.
Turning talk into action
Digitalization should be a no-brainer for the insurance industry. Automated self-services and digital sales processes bring efficiency, offering the best of both worlds for all parties without any conflicts of interest.
By embracing the full possibilities of digitalization—offering better, faster and more consistent multichannel services and making the insurance decision-to-purchase, service and claims processes more transparent—insurance companies can optimize their most critical competitive advantages: trust and a superior customer experience. And all these goals simultaneously support the race for efficiency.
Clearly, 2016 has to be the year insurance companies finally make their big, long-awaited digital leap.