Digital Transformation drives Insurance Industry growth

Ever since the pandemic-led lockdowns, digital transformation has become a buzzword for every industry, from manufacturing to transformation and healthcare to financial services. Growing customer expectations in terms of accessibility to service quality, the insurance industry is continuously evolving and upgrading technology to meet these expectations as consumers expect speed, efficiency and accuracy in all transactions. 

Digital insurance itself is not a new concept anymore as the newer players entering the market have sought to make it a major differentiating factor and succeeded. Those who were slow off the blocks are being forced to keep pace or got acquired and have since adopted digital transformation initiatives of the acquirer. Since innovative technologies have already changed customer experiences, their expectations too have surged whereby the old independent agent model has lost ground to a more direct digital model of operations. 

At the core of this digital transformation program is a need to provide a faster, multi-channel service on a 24/7 basis. And, technology advances made over the past few years, has made a hitherto daunting task of converting a complex business operation into a digital friendly process both achievable and manageable. This, despite the fact that being one of the oldest financial services businesses in the world, it was the slowest off the block to digital transformation. Today, digital underwriting uses artificial intelligence, machine learning, internet of things, predictive analytics and blockchain technology to stay ahead of competition besides having an efficient CRM to manage daily operations. 

From a customer's perspective, these technologies have resulted in multiple changes, right from streamlined operations to easy customer interactions, and automatic claims processing. As for brokers, they are now able to aggregate all their data to work faster and more accurately while the decision makers use the digital transformation tools to bring new and customized products to the market for existing customers and innovative ones to lure new consumers. The four specific areas where digital transformation has made a crucial impact are listed below: 

● Enhanced efficiencies - Powered by artificial intelligence and big data analytics, the insurance operations have now been optimized for speed and accuracy. Claims can be processed almost instantly while policy writing gets completed in a fraction of the time it used to take earlier. Customer service quality benchmarks have risen as live chats and digital assistants provide valuable information to the clients at the click of a button.  

● Product personalization - Customers today expect service where and when they need it besides expecting the insurance companies to provide them with products that are customized to their requirements. With the use of AI and ML, companies offer customers all services at the click of a few buttons - from paying bills to filing claims and receiving alerts on its status. These technologies also help insurers personalize products as well as its marketing via social media platforms. 

● Enhanced scalability - These technologies have made the insurance industry more nimble at the front and back end resulting in a broader scale of operations than was possible when each claim had multiple human checkpoints. Self-service dashboards and apps are par for the course while internet-of-things (IoT) products and wearables collect real time data which helps more accurate decisions on underwriting. 

● Better agility - In a sense, the digital transformation exercise is akin to future proofing, given that as these new technologies evolve, so will its uses in the insurance industry. If AI and ML laid the foundation, blockchain technology generates smart contracts and predictive analytics provides insurers with options for a faster launch of new products into the market. 

What we have witnessed over the past few years is just the start. The global AI market size, which was valued at $2.74 billion in 2021 is projected to touch $44.74 billion by 2031, growing at a compounded annual rate of 32.5%, says a report by Allied Market Research. This growth would be fuelled by a steady spike in AI / ML investments by insurers that maps to customers' growing preference for customized products, the report says but warns that growing cost of AI deployment and the insurer's paucity of skilled resources could slow down the process of digital transformation over the next few years.

However, another report by McKinsey says the insurance industry needs to adopt a three-pronged strategy to prepare for future change. These include: 

● The senior leadership in the industry need to invest time and resources to build a deeper and better understanding of AI / ML related technologies through more elaborate pilot programs around use cases. 

● They should create a comprehensive data management strategy around both internal and external data sets. These need to support the agile development of new analytics insights and capabilities in a cost-effective manner.

To achieve these outcomes, the first and foremost effort of insurers must focus on creating the right talent and technology infrastructure. The talent and the mindset accompanied by skills would become critical for the next generation of success stories. The industry would require a unique mix of workers who are technologically savvy, creative and willing to work in a process that is continually evolving around a semi-automated and machine support bunch of tasks. 

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