What Does “Digital Transformation” Really Mean?
The insurance industry has been under a great deal of transformative pressure lately, primarily in how we deliver our products and services to our customers and distribution partners. In that context, there has been a rash of buzzwords floating around the industry, with new ones added seemingly-daily. One of those buzzwords has become especially common as the world suddenly began to work remotely. That buzzword is “Digital Transformation”.
While we may hear the word and not bat an eye, do we really know what it means? We have been moving in a digital direction for years, so why the sudden attention?
The idea of Digital Transformation is not simply about going paperless or allowing customers to manage their policies online or through a mobile app, though these are valuable and components of a transformation. The idea itself is bigger than that.
What Digital Transformation really means is looking at how you develop, market and service policies, and finding a fully-digital path for all of it. That path includes employing tools and approaches that are flexible, responsive and scalable.
What does this look like in practice?
Digital Transformation means starting with a different relationship between the business and technology functions where one serves the other, and each is separate. Instead, start with a collaborative, integrated approach where IT is engaged in the strategic vision of the business, and working hand in hand with functional leaders on the path forward. Mixed teams of people from the business and technology functions jointly problem solve, implement, test and refine solutions iteratively together (and better yet, with customers).
It also means underlying your technology with flexible, scalable tools deployed through the cloud that are built to connect to each other through APIs so you can more-easily add capabilities without the need for heavy integration efforts or being stuck with a sea of screens and windows on everyone’s desktop.
The kinds of tools to deploy enable more straight-through processing, removing steps, side processes, rekeying and reconciliations across and between systems, or the need for in-person actions like physical check production and signing, mailing and scanning documents or having to send someone on-site to the insured. We see tools enabling these kinds of things coming to market rapidly now, like those allowing insureds to self-inspect their vehicle or property post-loss, digital payment solutions, electronic document signing and more.
You can take it a step further by rethinking your products themselves, and looking at whether the way they are structured, the things they cover and how they cover them are inherently holding you back from being more digital. An extreme example of this is looking at parametric coverage solutions in place of more traditional ones where adjusting can be highly – if not completely – digitized and automated. An event verifiably occurs, the value of the loss is predetermined in the policy itself, and a payment is automatically issued.
A less stark example is thinking about how your existing Commercial Lines products, like BOP, E&O or GL, apply to businesses that are fully-digital. Here, the transformation is less about how you as an insurer operate digitally, and more about how you serve those who operate digitally. This becomes more extreme if you think about something like autonomous, shared vehicles. While it may still be decades away, one day, people may not hold personal auto policies with that exposure moving into the commercial, product liability space. If you are heavily engaged in personal auto insurance and are not thinking about transforming your product offering, your position in the market will be threatened.
Digital Transformation ultimately is about two major shifting paradigms we face as an industry. First is how we work: our efficiency, ability to meet changing customer expectations, and whether our processes and systems are helping or hurting employee engagement is important and usually the main driver of Digital Transformation. Longer-term, the second shift becomes more critical as the world around us is also transforming. For insurers to stay relevant in an economy different from today, we must create offerings that speak to what that economy truly needs as it, too, transforms digitally.
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Bryan Falchuk Bryan Falchuk is the Founder and Managing Partner of Insurance Evolution Partners, an advisory and consulting firm helping the Insurance industry on the subject of innovation. A best-selling author, he has written for many top publications like Inc. Magazine, The Chicago Tribune, LA Times and more, been a guest on over 200 podcasts and radio shows, and presented multiple TEDx Talks. Bryan spent 20 years in the insurance industry, including time in McKinsey & Company's insurance practice and serving as CCO for a billion-dollar carrier before joining an InsurTech startup. With his unique experience in carriers, consulting and InsurTech, he founded IEP to help carriers evolve in a market facing disruption. Bryan holds an MBA from the Tuck School of Business at Dartmouth College and a BA in Economics from Bowdoin College. His best-selling book, The Future of Insurance from Disruption to Evolution, shares case studies of 7 carriers who innovated at a time of change and pressure in the industry.