Digital transformation initiatives have the potential to drive customer engagement, open up new revenue streams and improve time to market on new products and services, but the insurance sector has been slower than most industries to adapt.
Insurance company leaders are coming around, however, and have begun to pursue digital transformation in earnest. What's driving interest in such projects across the insurance industry, and what tangible benefits can organizations expect once these projects come to fruition?
Where Change is Happening
Like nearly every other major development to come along in the insurance industry, digital transformation is largely about customer acquisition and retention. Digitization provides new opportunities to improve the customer experience and create a competitive advantage. Thanks to the proliferation of connected devices, mobile phones and online portals, today's customers have grown accustomed to a certain level of convenience and self-determination in every phase of life. That means getting the service they want on their own terms through their preferred channels.
As Informatica's Andrew Joss explained, customer demographic shifts have also had a profound effect on the demand for digital transformation initiatives. For instance, as millennials overtake baby boomers as the single largest generation, insurance companies will need to tweak their services and engagement strategies to match their preferences. That means greater access to account information via digital platforms like mobile applications and cloud-based portals. Self-service capabilities will also be key as millennials are more accustomed to managing aspects of their accounts without directly interacting with customer service representatives.
How to Successfully Approach Digital Transformation
The good news is insurance companies have made up a lot of ground in a relatively short amount of time. A 2016 survey of 200 senior-level insurance executives -- jointly conducted by Mergermarket and Willis Towers Watson -- revealed that insurers spend 40 percent of their overall research and development investments on digital technology.
Willis Towers Watson CEO Rafal Walkiewicz stated that the first step to digital transformation is to lay out a clearly defined strategy. From there, companies can experiment with different projects and look for external opportunities to expand digitization through partnerships or even acquisitions.
There are a few key areas to focus on at the outset of a digital transformation strategy. Gaining strong traction early on is critical to showcasing the value of digitization and cultivating executive support.
Mobile applications: Creating new customer touchpoints is a pillar of digital transformation. Today's customers expect to access important account information with their smartphones or other mobile devices. Mobile-optimized online portals are a good start, but a dedicated mobile application is an even better way to provide users with a streamlined, easy-to-use platform. Apps are also great sources of customer data, offering even more opportunities for targeted engagement.
Internet of Things: Insurance companies are in a fantastic position to capitalize off of the IoT. Sensor-based technology could provide an enormous amount of information to insurers, informing the development of more profitable and accurate coverage plans. Many insurers have already leveraged this technology to their advantage. Some auto insurance providers, for instance, give customers the option of installing sensors in their vehicles that monitor driver behavior and performance. Customers who display safe driving behavior, such as following the speed limit and coming to gradual stops, are offered discounts on their insurance costs. It's a fantastic way to create a competitive advantage over other providers.
That's just the tip of the iceberg, of course, but insurance companies that take that first step toward digital transformation will reap incredible benefits in both the short and long term. Akamai helps insurers manage identities and access for their customers, agents and workforce with our scalable and flexible identity platform. Our consultants work with your team to help map out the priorities and workflows that will enable a smooth execution of your digital transformation and deliver the technology you need to centrally and security manage the vast number of identities that are delivered by online apps and services.