From the high street to the smartphone: How the insurance industry can keep pace with digital transformation and shifting customer demands

April 22, 2021 / 6 min read

The insurance industry is transforming at breakneck speed, with new and evolving customer expectations requiring a fundamental shift towards greater agility and digital-first service offerings, as well as a growing need for interconnected ecosystems. And this focus on rapid change is set to accelerate further. Recent C-suite surveys have shown Covid-19 disruption has accelerated digital transformation agendas by seven years. Companies will need to develop an end-to-end digital strategy that enhances both front- and back-end operations to keep pace, says Aaron Cole, VP European Operations at Verisk Claims.

Insurance service delivery has undergone extensive change, with customer convenience ushering in more and new technologies. Perhaps the biggest disruptor in recent years has been the number of aggregator websites that offer an easy way for customers to compare prices from a single source. These websites have become the norm for consumers to use – for utility services, banking services, and, of course, for insurance quotes.

man working on laptop

The banking sector, an industry with a mature digital strategy, serves as an example of what’s on the horizon. Some of the highest-rated banks are now the fully digital ‘challenger banks’ and start-ups, which only utilise real-life locations such as post offices and pay points for the minimal in-person interaction they require.

Don’t forget claims –it’s the back office that counts

Digital-first customer expectations have fundamentally changed front-end services and offerings, but it is important to include the claims process as a focus area for greater digitisation to keep insurers highly agile and competitive. While claims are positioned primarily as a back-end function, this is where customers are the most vulnerable and in need of assistance. The best digital front-end solution is forgotten in a second if insurers also offer a poor quality, non-digital claims service.

Better customer service is a constant industry goal

As an established industry, insurance has a compelling legacy of helping individuals and businesses recover from losses. But being established also means the industry bears the weight of entrenched and often inflexible systems. As claim volume rises and customers demand faster resolution times, the industry has struggled to part with legacy systems due to cost, complexity, and timeframes – instead relying on ‘throwing people at the problem’ by hiring and deploying more staff. That’s an expensive solution to a problem that only continues to grow when the business grows.

Insurers are also challenged across lines of business by increasing claims complexity. In the motor sector, an increase in vehicle damage repair costs has significantly outpaced insurers’ ability to increase premiums – impacting the bottom line of both insurers and their supply chains.

Bringing insurance into the digital-first world

All this is happening against a backdrop of consumers’ rising smartphone dependency for everything from banking and paying bills to making travel plans. Where other industries have been able to push forward at speed with digital solutions, the insurance industry is still maturing when it comes to deploying end-to-end digital processes. Insurers who successfully deliver on a digital vision will quickly enjoy significant competitive advantage.

Insurers are now looking to connect previously siloed operations, improve claims handling efficiency, and reimagine their customer-facing digital presence. Many insurers are hiring ‘digital directors’ with the specific aim of radically overhauling day-to-day operations with the latest generation of technology.

Balancing the customer experience with operational efficiency and industry change

PwC’s latest Insurance CEO Survey revealed that insurance leaders are more comfortable with the impact of industry disruption, but 39 percent are still “extremely concerned” with the speed of technological change – highlighting customer experience, core technology transformation, and intelligent automation as the three focus areas to prioritise and channel investment. And rightly so.

Although previous industry cycles have been generational, typically lasting 10 to 15 years, today’s digital transformation and fast-moving trends encompass many generations. It is vital that insurers develop a digital strategy without delay to avoid under-serving a broad base of policyholders and prospective customers.

This drive towards end-to-end digital transformation shouldn’t be at the expense of the customer experience – it should instead be shaped by it. The Covid-19 pandemic has demonstrated many customers are happy with the shift to low-touch digital services with 24/7 availability. All industries need to look beyond digitising internal legacy systems to ensure they also deliver a flawless, customer-friendly digital experience every step of the way – and insurance operations are no exception.

Making the leap with minimal disruption to your business

It’s challenging for some insurers to pursue change in a core business area. Digitisation involves so much more than moving the furniture about: updating technology is often very expensive, and employees are already trained on, and familiar with, existing systems and processes.

But insurers risk being left behind by more agile competitors and leaner InsurTech startups that aren’t hindered by legacy systems. Competitors are quickly positioning themselves to meet and exceed ever-rising customer expectations: smartphone-centric convenience, greater personalisation, and high levels of service across multiple channels – including straight-through policy processing and fast claims resolution.

Achieving a digital vision requires a partner that understands the industry

All insurers can take heart that the most advanced insurance technology solutions on the market today are designed to mitigate fears over business disruption and ‘rip and replace’ challenges. They reduce the complexity of digital transformation projects through close integration and are capable of effectively sitting on top of existing systems where necessary. Selecting the right technology partner that understands how existing systems, business units, and workflow link together is a vital step towards avoiding disruption.

Linking people, processes, and advanced technology creates more efficiencies

By linking together people, processes, and technology across the life of a claim – from first notification of loss (FNOL) through resolution – insurers can achieve dramatic improvements. For example, settlement times can be reduced from several weeks to a single day, peaking at less than ten minutes in the fastest instances. By introducing automation to routine processes, Artificial Intelligence (AI) and Robotic Process Automation (RPA) can supplement claims handlers and enhance the best practices already in place. A digital platform combined with appropriate AI and RPA can enhance productivity and allow employees to focus on tasks that truly require human expertise.

Let’s look at the triage stage of a motor claim, when adjusters identify if the vehicle is repairable or a total loss. This used to take several days, requiring an engineer inspection post-FNOL, followed by a full assessment before the final claim decision. By embracing a self-serve approach, policyholders may contribute evidence for the claim and remain fully apprised in a transparent process providing feedback in seconds rather than days or weeks. Insurers benefit by incurring lower loss adjustment expenses and greater customer satisfaction.

Where next? The road to right-touch claims

Broader AI applications are certainly on the horizon, with the technology already being applied to specific areas of the claims cycle and in limited customer-facing roles. But beyond these ‘latest and greatest' technologies, many insurers are assessing how best to integrate existing systems and link together operations across the business. That’s a vision for further simplifying customer interactions and delivering a seamless, more personalised digital experience that many customers now expect as standard.

The natural evolution of this is a concurrent shift to ‘right-touch’ claims – striking the perfect balance between automation, careful handling of complex claims, and providing human interactions where needed to assist the policyholder. By adopting a right-touch approach, insurers can harness high levels of automation to consistently identify meritorious claims and fast-track claims that require evaluation, without falling victim to low-value fraud.