Like pretty much every industry, digital transformation in property and casualty (P&C) insurance is massively reshaping the space. Technologies such as telematics, big data, and digital communications are converging to create previously unimaginable market opportunities and threats.
Digitization is causing a rethink of the customer experience in P&C insurance, largely because consumers have come to demand a level of digital service due to what is being offered up in other industries.
We’re On the Cusp of Profound Digital Transformation in P&C Insurance
Although customer expectations might be that P&C insurance companies tend to be laggards when it comes to digital transformation of the insurance, it only takes innovation from one or two players to adjust those expectations and force all other companies to adapt or fall behind.
Furthermore, the needs of consumers are changing when it comes to insurance.
Younger generations are driving less and buying homes later or not at all, so products need to reflect these new ways of living while still maximizing income for the insurer. If traditional insurers don’t meet these needs, consumers are more likely to turn to upstarts who have done a better job of figuring them out.
What Digital Transformation in Insurance Looks Like
With these challenges in mind, P&C insurers need to be thinking about how digital transformation can help them to evolve their business models to enhance the customer experience and better understand their customers.
Much of this transformation will rely on using data insights to personalize customer offerings, as well as providing self-service tools and automation to improve efficiency and reduce costs.
Let’s take a look at some of the ways the P&C insurance industry is leveraging new digital technologies on both the consumer and business sides and how digital capabilities are enabling new products and supercharging existing business models:
1. Adapting to Consumer Needs With Digital Insurance
The insurance industry has exploded with new products and services over the past decade to tap into emerging trends, such as ID theft protection and insurance for ride-sharing passengers. It has also begun to offer self-service apps to make the customer journey smoother while reducing the workload for customer service staff.
Insurers going down the path of introducing new products and apps need to ensure they are thinking about customer demand first and technology second. Digital technology is a great enabler, but the business case must exist before rushing ahead with a technical transformation to your product and service offering. Don’t delay, because your customers will be easily swayed by a seamless digital experience that gives them easy access to all the products and services they need.
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2. Personalizing at Scale With Telematics
Telematics allows a consumer to take data directly from their device and send it to their insurer. This could come in the form of vehicle data that determines whether a customer’s car insurance needs to be higher or lower. The idea is that the insurer uses predictive analytics to provide that customer with the optimum protection and pricing, while maximizing their bottom line because there is less to do in assessing a customer’s profile.
There are concerns around telematics, many around privacy, but adoption is growing nonetheless. Furthermore, by encouraging safe driving habits, telematics could play a huge role in reducing accidents, thus cutting the number of payouts insurers need to dish out (and making people safer!)
Telematics is not just about black boxes in cars. It can also connect to in-home video cameras to conduct digital inventories of home contents and with utility equipment to track energy usage.
Not all consumers will be comfortable with it, but it’s likely to be a win-win situation for those that are.
3. Offering Usage-Based Insurance Pricing
As well as being used to determine a consumer’s risk profile, data analytics through telematics can also be used to offer what’s called usage-based insurance pricing. This means that real-time data being fed back from customer devices can provide an accurate picture of how much insurance they actually require.
For example, rather than taking a broad-brush approach to calculating how much time a customer is spending on the road, insurers can use telematics data to charge customers based on exactly how much driving they do.
For customers who drive very little, their costs will be minimized, providing a competitive advantage for insurers looking to entice cost-conscious consumers.
4. A Hot Trend for Digital Transformation in Insurance: Automating Service With P&C Chatbots
Chatbots are being used in many industries that require customer service at scale, and there is plenty of opportunity in P&C insurance.
Chatbots use artificial intelligence (AI) technology to automate customer interactions through a messaging platform, providing customers with the information or service they need without having to employ a real person to do the job.
Not all customers like speaking to a chatbot, but the hope is that this resistance will recede once the technology gets smart enough, and it could result in huge cost savings for insurers. In P&C, chatbots could be used to help customers choose insurance policies and walk them through claims processing.
What’s Holding Back Digital Transformation in the Insurance Industry
Despite the massive opportunities, Business Insider research found that fewer than one in three insurers believe they have the capabilities required to digitally transform the customer experience.
Here are some of the most oft-cited reasons why insurers struggle to move the needle on the insurance digital strategy:
Poor Change Management
Digital transformation, by its very nature, requires that companies are capable of achieving major change. This is harder in industries that have not been required to update their business models to stay relevant, and insurance falls squarely into this category.
Change management means having the organizational structure, workforce skills, and company culture in place to make digital transformation possible.
Leadership communication needs to champion digital transformation at every turn and there needs to be a solid long-term plan for digital adoption.
Reliance on Legacy Systems
Insurers have been able to coast by with outdated core systems because industry trends and consumer behavior didn’t require them to modernize. That’s now changing fast, and insurers are being caught out with legacy systems that make digital transformation a non-starter.
Before becoming serious about digital transformation, insurers must first bring their backend infrastructure up to date by effectively adopting technologies such as cloud and virtualization.
Modern systems allow insurers to provide highly complex digital offerings without having to create convoluted, expensive, and bloated IT environments to support them.
Lack of Training and Skills
Insurance is not likely to be the first choice for IT professionals looking to work at the cutting edge of technology, and for this reason, there has been a dearth of expertise in the space.
It will be hard for insurers to innovate in areas such as AI, IoT, and telematics if they don’t have the skills and training to make it happen. They need to focus on attracting and retaining talent by creating digital-first cultures and providing opportunities to drive digital transformation in the insurance industry while gaining first-class training.
At Netsurit, We’re Supporting the Dreams of the Doers
Now that you have an overview of the key opportunities and challenges in P&C insurance digital transformation, we’d love to help you learn more. Here at Netsurit we have IT specialists with industry-leading expertise in insurance digital transformation. Contact us today to get started.