Digital Transformation in Insurance

The entire financial sector is undergoing a paradigm shift with digitalization, and the insurance sector is no exception. Automated services, personalized policy offerings, improved customer experience, and accelerated time to the market for new products are some of the shining features making insurance providers flock towards digital transformation. The kingpins of the insurance sectors are now making data-driven decisions intending to provide omnichannel services. The COVID-19 pandemic has further accelerated the demand for digitalized insurance solutions. Data and digitalization have become the core of every business activity, and adaptation is the call of time.

According to McKinsey analysis report, digitalized insurers increased from 1% to 70% in just five years in Europe, whereas the growth has been 20% from 0% in the United States (U.S.). Insurtechs have observed significant acceleration in growth as compared to traditional insurers. Digital transformation in insurance has increased customer acquisition through direct online channels.

Technology presents many possibilities, and customers love the choice of doing business at a preferred time and place through desired channels. The availability of more options and easy comparisons are making the market’s competitiveness challenging. Insurers worldwide are reinventing themselves to achieve operation and customer excellence while mastering agility in the digital economy.

How Has the Digital Transformation of Insurance Changed the Industry?

1. Artificial Intelligence (AI)-Enabled Chatbots

For a better customer experience, the insurance industry adoptedAI. This has completely changed customer interaction as basic information can be exchanged as needed through Chatbots and digital assistance. Policy underwriting requires less time with AI and machine learning (ML) capabilities. AI, including chatbots, can help insurers save up to $1.3 billion by 2023.

2. Automation of Processes

Shifting from the legacy services where the procedure used to be lengthy and included tons of paperwork, the new insurance solutions are innovative and fast with automated operations and claims processes. Insurers can efficiently process claims via mobile app, and policyholders can pay premiums from anywhere. The synchronous operations increase sales, productivity, and profits. Automation can help reduce the cost of the claims processby 30%.

3. Personalized Services

AI and ML create a seamless experience for agents and customers. These services are tailored as per the need of the customers. Instead of switching between applications, customers can use a single application to pay bills, file claims, or view policies. Brokers can also avail all information and receive details in one view. AI allows insurers to access more precise reports in a shorter period. Around 25% of the insurance industry will be automated by 2025 using AI and ML.

4. Dynamic Marketing

Digital transformation in insurance has boosted the growth and success of marketing efforts. With the help of data analytics and AI, insurers can easily reach the targeted audiences through social media.

The digital transformation of the insurance providers is helping them become more agile and scalable. It provides service providers with an opportunity to move faster, be more innovative, and perform better. The transformation brings innovative insurance solutions that promise more productivity and profitability.

Successful Implementation of Digital Transformation in Insurance

1. Xceedance

Xceedance helped a U.S.-based insurance company providing homeowner’s insurance products and services strengthen its end-to-end claims management. Xceedance leveraged data and technologies to solve operational issues. Xceedance’s leading-edge technologies helped the client capture and document claims communication. It allowed the insurers to be more responsive to customers, save time and be cost-effective.

2. Lemonade

Lemonade is a U.S.-based digital home insurance provider that claims buying coverage takes less than two minutes. It helps the customer get a personalized policy, and the approved claims are quickly paid directly to the connected bank. The transactions are seamless, and policyholders can manage everything through their robust mobile application.

3. Youse

Caixa Seguradora is a Brazilian financial leader who innovated and built Youse, a digital insurance business, to stay competitive. Youse offers home, motor, and life insurance as a direct-to-customer digital insurer. With its strategic launch, the digitalized business strategy claimed 30% of Caixa Seguradora’s market share. Action-centered investments in digital customer acquisition and intelligent user experience, Youse successfully acquired more than 100,000 customers by the third year of its launch.

4. Root Insurance

Root Insurance is an AI-enabled motor insurance provider based in the U.S. Here, the good riders can save up to $900 per year by just safe driving, as the platform uses real-time road data. The tech-savvy insurance company offers a feature-rich app through which drivers can cut their premiums in half or even more. Every policy includes roadside assistance, and users can manage everything online. They have a digital trip tracker that collects data regarding driving habits, including speed and time. Root Insurance uses the collected data to provide better calculated and tailored risk coverage quotes.

Conclusion

Many small and medium enterprises are now leapfrogging by digitally transforming their core systems. The digital transformation in insurance brings improved cost efficiency, customer acquisition, and policyholders’ experience. It brings in operational agility and helps insurers achieve significant competitive advantages. Digital transformation in insurance is not the thing of the future, but what is happening today. The question is how much ready are you for the change.