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Today, we will take a loot at Digital insurance and the problems and benefits involved in this growing space in 2023.
The insurance industry is going through a digital transformation, which is changing the way insurers interact with their customers. The traditional model of insurance, where customers visit an insurance agent, fill out lengthy forms, and wait for weeks to get their policy, is slowly becoming a thing of the past. Today, digital insurance is gaining traction, and insurers are embracing technology to make the insurance experience more convenient, faster, and more personalized for customers.
Benefits of Digital Insurance
Digital insurance has made insurance more convenient for customers. With digital insurance, customers can get a quote, purchase a policy, and file a claim from their phone or computer. This means that customers no longer have to wait in line to speak to an agent or fill out lengthy forms. Digital insurance also allows customers to access their policy information from anywhere, at any time, making it easier for them to manage their policies.
Digital insurance has also allowed insurers to offer more personalized policies to customers. Insurers can use data analytics to analyze customer behavior and preferences to create policies that are tailored to each customer’s needs. For example, a customer who drives less can be offered a lower premium, or a customer who lives in an area with a high crime rate can be offered a policy with more comprehensive coverage.
Digital insurance has also made the insurance process faster. With digital insurance, customers can get a quote and purchase a policy in minutes. Claims can also be filed and processed faster, with some insurers offering instant payouts for certain types of claims. This means that customers can get the coverage they need quickly, without having to wait for a long time.
Problems of Digital Insurance
But the road to becoming a digital business is paved with difficulties, here are a few that insurers may encounter:
- Difficulty Executing a Connected Ecosystem: Insurers must focus on creating a connected ecosystem that can keep up with the fast-paced changes that digital transformation demands, while still delivering excellent experiences for customers, agents, employees and other business partners. Insurance companies are frequently perceived by consumers as traditional organizations, rich in heritage and knowledge but infamously slow to embrace digital change. It is imperative, therefore, to devise digital solutions that connect users to each other and can also connect each users’ multiple touchpoints together, including emails, website content, mobile, IoT, physical locations and others. Doing so enables insurance companies to stay competitive as they are able to offer the cohesive experiences that their users are demanding. Adopting a new ecosystem that marries digital and physical elements together can seem like a costly and mammoth task, but offers tremendous benefits if done well.
- Lack of Digital Agility: As the insurance market changes and digitalization increases, there is a necessity for insurance companies to become more agile and efficient in order to keep up with the sheer pace at which the industry is accelerating. It’s not just limited to one area of your company or solely the products and services you provide but across the board. You cannot deliver an agile experience when it comes to product purchasing by introducing a flexible pricing program like pay-per-use, for example, and not have also implemented digital agility in claim processes or your overall customer experience. In fact, the most effective digital transformations are those where digital technology improves efficiency and is embedded throughout the operations and organisation of the company – both in internal back-end operations and external, customer-facing portals. However, according to a report from Novaria, 93 percent of carriers still struggle to support these agile initiatives.
- Disruption from InsurTech: Insurtechs are a growing threat to the insurance industry. Not only are they multiplying, they are also disrupting the industry through product development and delivery, adding to consumers’ ever-changing expectations of digital integration and experiences. Research shows that as digital continues to evolve, consumer expectation of digital experiences also continues to rise and poor CX can be a deal breaker for new business.
In 2018 alone, global InsurTech investment surpassed $2 billion. The global market is expected to grow at an annualized growth rate of 41 percent from 2019 to 2023, disrupting the industry through product development and delivery, adding to consumers’ ever-changing expectations of digital integration and experiences. As insurtechs continue to rise, many could potentially launch their own insurance companies in the future, and in turn, bring a new line of competition to the market. This threat forces traditional insurance companies to try to become “future-proof” in an effort to stay ahead of the competition.
- Inoperable Systems: One of the biggest challenges is the lack of capability to adapt to future operating models. As new technologies and tools come onto the market, insurers have a hard time including or implementing them into their technology stack because of inoperable legacy systems. 68 percent of insurance companies see legacy systems as the biggest obstacle to digital transformation. This lack of integration prevents future integration of any tools and systems, which prevents future success. Although recognized as being a roadblock to digitalization, it’s also hard to switch off of legacy systems. Not only is it expensive to do so, there are also risks involved. Enterprises could lose valuable information and even disrupt critical business operations, which is why most insurers are reluctant to move off their legacy systems. But doing nothing will prohibit an organization’s ability to compete, cause security issues and drives up long-term cost in maintenance. Insurers will have to figure out their strategy for overcoming aging legacy systems if they want to be a successful digital business.