Digitization in Insurance: How this Process Transform Industry

With a net worth of $1.32 trillion in 2019 in the US alone, the insurance industry is one of the biggest and most competitive markets. Therefore, it faces a large number of challenges and requires a continuous search for innovation. Digital transformation was initially a trend to beat the competition and gain more customer satisfaction; however, nowadays, digitization in the insurance industry is not an option anymore — it's a necessity.

According to a survey conducted by Accenture in 2019, the vast majority of executives in the industry expect all insurance fields to go digital in the next five years. The current situation shows that insurers invest in technological innovations, and some are already benefiting from the shift. Insurance companies experience a 65% cost reduction, a 90% reduction in the duration of key processes as well as a 20% increase in conversation rates.

So why do insurers invest substantial sums of money in the digital transformation of insurance processes? A research made by Celent, a leading advisory firm, shows that executives embrace digitization in insurance because of the following factors:

This data demonstrates how overwhelmingly important it is to take this step and change your company for a better future. But how exactly will this process revolutionize your business, and what are the pitfalls?

There are a multitude of reasons for how insurance digitization can change the industry and turn it for the better. But what reasons are the most prominent? Which trends contribute to the improvements the most?

The main focus of current innovations in virtually any business is customer satisfaction. Businesses are shifting to being more customer-centric instead of product-oriented. Being used to technology, customers expect excellent service at any time and any place. They can make purchases via applications, file complaints via chats, and pay their bills online with just a couple of clicks. Insurance companies have to adjust to the trends and place their clients first.

Furthermore, becoming customer-oriented doesn't solely benefit your clients but also your company. By collecting instant feedback and forwarding it to brokers, you can help them do their jobs more efficiently and productively. Finally, end-to-end insurance process digitization involves implementing modern technologies like AI and data analytics, which will upgrade your marketing efforts and reach the exact audience you are targeting.

Besides enhancing customer experience and simplifying software for the users, digitization in the insurance industry also lays the groundwork for continuous improvement in the future. Implementation of technologies like machine learning, AI, blockchain, and many more will help insurance companies grow and innovate. What is the impact of these technologies, and how do they disrupt the insurance industry?

As already mentioned, there is a set of tools that needs to be adopted to carry out the process of digital transformation in insurance successfully.

AI plays a huge role in digitization in the insurance sector, especially when it comes to customer service. Due to AI systems, developers can enhance the front-end of the application and make it more personalized. Artificial intelligence can revolutionize the feedback analysis by alerting managers about the overall tone of a certain email as well as help companies identify potential fraud. It is capable of boosting customer retention, automating mundane processes, and even spotting new business opportunities.

Machine learning is a part of AI systems that focuses on machines that can learn on their own based on data analysis. Machine learning aims towards technology that allows machines to evolve by themselves, without any supervision from people. The main mechanism of this technology is to constantly collect and analyze data to determine common patterns and draw conclusions based on them.

How can it be of use for insurance companies? Machine learning will collect and evaluate a massive number of claims, which alone will enable them to detect potential fraud. Humans cannot physically analyze such amounts of data, and even if they could, it would take them too much time. Machine learning can do it by itself, without any human interference, and alert managers when a possible threat is detected.

IoT has been around for a while and has been helpful for many industries. Insurance companies have their reasons for implementing IoT technology, mainly data collection. In business, data is everything. By analyzing large amounts of data, you can predict almost anything and make smarter decisions.

How does it work? An insurance firm offers customers a "reward" in exchange for their data. For example, consumers will receive a discount if they share their data with the company. If they are willing to give access to their data to save some money, it's a perfect transaction for both parties.

Like almost every technology we mentioned above, this one is also about data. In order to build predictions, measure success or failure, establish the performance and customer experience, you need data. As a matter of fact, you need tons of data and tools to analyze it. By implementing technologies that help you generate and collect more data, you open the Pandora box that you need to deal with immediately. Structuring and organizing the data is the first important step in handling it.

Big data analytics lets you detect correlations and market trends as well as discover customer preferences and other hidden patterns. Based on this information, your company will become data-driven and make grounded and informed decisions when it comes to strategizing.

Blockchain technology creates a new and safe way of data storage and transfer that contributes to fraud prevention. Blockchain is built for better security and an increase in efficiency. Without going too much into detail, blockchain consists of "blocks" of information where each "block" is assigned a hash or code. Altering these blocks is incredibly difficult because hackers will need to change every block that comes after, as well as alter the hash itself. The reality is that a hacker will need to control over 50% of the computing power of the blockchain in order to coordinate an efficient attack, which is not worth the effort.

Now, when you've learned to collect and analyze your data, you need a platform to continuously display your results. A good CRM will build dashboards and reports both for managers and customers. It will also offer a number of functionalities for consumers like online payments, video chats, and claim reporting tools.

Insurance digital transformation requires a commitment of time and money as well as a thorough analysis of the company's values and goals. How to create a meaningful and sustainable strategy that will bring results?

First, everyone has to be involved and informed: from stakeholders and upper management to workers and customers. Having personalized interactions with customers, and building clear communication channels will help you receive constant feedback, keep your loyal consumers informed, and help them feel like they are part of the insurance transformation process.

Second, analyze your shortcomings and select the technologies you need to achieve your long-term goals. The sooner you invest in them and implement them, the faster will you benefit from these technologies. Third, you will need to hire new talent that have substantial experience with the digitization of the insurance industry.

According to the study conducted by a German insurer Allianz, the customer journey is more important than the actual processes behind it. In the pursuit of improving this journey, they decided to analyze the pain points and advantages of various journeys customers encounter across the industries: health claims, car accidents, etc. Allianz's executives came to the conclusion that most consumers prefer the combination of both online and offline experiences. For example, they are inclined to search for information about services and read reviews online but make the purchase at the office. By integrating this knowledge into their strategy, Allianz has improved customer experience and reduced costs.

A successful strategy always comes to customer experience. The adoption of digital transformation in insurance cannot be carried out without keeping the users in mind. What steps do your customers take until they complete the transaction? Firstly, they do their research online, read the policies, and reviews. Afterward, they contact the call center or chatbot to receive more information and ask the remaining questions. Finally, they complete the purchase either online or at the office. Understanding these patterns is a crucial step in building a system that will make these steps more seamless. This requires a technology that can accumulate data from various sources.

With this in mind, you will need software that facilitates customer needs and simplifies the process for them. The software should be able to monitor user interactions with the brand, including feedback and reviews. It should also help you establish the entire lifecycle of customer interactions, from learning about the brand until making the purchase. Finally, this system should create experiences for customers and help them get through the process quickly and easily.

As a part of digitizing the insurance industry, it is important to build systems that offer self-service so that customers can conduct their own research and learn about policies, make transactions, request services as well as complete purchases. Additionally, make sure your application or website is compatible with any device that your customers might use. Finally, channel all your customer data in one source by building a single customer identification system.

Let's take a look at the EDMOS project (Electronic Document Management and Ordering System). Having 5 locations, they had issues with communicating with each other, which inevitably led to lost orders, problems with processing and tracking orders as well as maintaining the workflows. Additionally, the company faced difficulties with updating insurance rate tables due to their outdated software. Aspirity is a software development company that helped the above-mentioned insurance firm reach its goals and mitigate the challenges of insurance digital transformation.

Aspirity developed one software to unite the three existing calculation systems. We gave access to the new software to the company's biggest lender. The lender then integrated the new calculator into its system. This step drastically increased the number of quotes calculated with the software. Finally, we connected the calculator to the third-party order management system to facilitate the automatic order information transfer, allowing for automatic and rapid order creation.

Having developed a new rate and quote management system, Aspirity reduced the risk of human error, automated the system to minimize the routine, and shortened the time spent on proofreading.

The advancement of technology and their variety will grow and grow, gradually reshaping the future state of every industry, including insurance. If you want to be ahead, you need to adopt tools and discover new ways to optimize and digitalize insurance operations.

At Aspirity, we understand the importance of constant innovation and the digitization of the insurance industry. Having handled many projects involving the implementation of new tools and the redesign of the old ones, we are fully prepared to meet your needs and help your company become a better version of itself.

Building custom software or have an existing one?

Aspirity is an offshore web development agency. We specialize in management, admin, and dashboard software.

If you have a custom software project — contact us for a confidential consultation or just read more from our blog.

If the article seemed interesting to you, share it with your friends