But while some have embraced the digital transformation journey, others are still on the starting blocks. Jim Bruce, customer transformation and senior insurance director of Salesforce, discusses what’s stopping these firms, how they can overcome the obstacles and the potential impacts should insurers fail to invest.
Why have some insurers been slow to invest in digital transformation?
One reason that comes up frequently is the complexity of existing infrastructure. This can be due to existing implementations or integrations among large insurers or insurance groups, or brokers that have come through various mergers or acquisitions with divergent business activity. What they are left with is a huge legacy of infrastructure and they tend to get bogged down with understanding this and getting it right before moving on to the next stage.
Another factor is that keeping up with the latest regulatory requirements is often seen as a greater priority. Many insurers don’t have huge capacity in terms of transformation capabilities, so, in my experience, anything up to 80% of existing change capability can be taken up by legacy projects and keeping pace with regulatory requirements.
The digital skills gap is another example. It is not necessarily industry specific, however, many businesses simply do not have the digital capabilities and talent within their business to deliver on the vision of digital transformation. A statistic I recently found stated that more than 40% of new job end-to-end roles in sales and marketing require digital proficiency, however, only around 20% in the UK and Ireland have the skills required. This is consistent with my experience and is a challenge that is very common within our Industry. There are such vast opportunities for investment in re-skilling and embracing new talent and ways of working.
Many insurers won’t figure out how to [bridge] this gap going forward because [they] acknowledge, even if they went fully digital, the skillsets within their organisations are probably not of sufficiently high standard to manage that currently.
It tends to be a crawling rather than walking pace of change.
The first stages in [countering these issues] is to acknowledge them. There are general insurance pricing practice changes and a heavy lift on some of the regulatory pieces the industry must pick up and change across the organisation. There is a duty on us to acknowledge and empathise, but at the same time we also must move the industry forward. This is where we need to focus and share insights, we have come across by building everyday digital capability. The current workforce and future talent will require these skills, so we have to be able to fulfil this need.
What new products do you see coming to the fore; and how integral is digitalisation to insurers being able to adopt and benefit from these innovations?
Mobile apps are one area where there is an immediate opportunity to transform claim settlement and automation. This will shift the traditional model of insurance companies in the coming years and improve our capability to understand and possibly eliminate risk.
We are moving towards the realm of claims elimination, and in some areas really understanding a pay-for-use objective. Preventative health and wellbeing measures will have a growing impact on the health sector, for example.
Looking for a proactive way in which we can avoid risk, rather than sticking with the traditional insurance model, will bring innovation across industries, changing the existing algorithms, analytics and underwriting requirements.
Should insurers take digital native and innovative start-ups seriously?
It would be dangerous not to. Some of the start-ups from 20 to 30 years ago are playing an active role in today’s market. It’s inevitable that when they’re building convenience and affordability into their solutions these companies will play a larger role in the future.
What we often see now is some of these really innovative start-ups and thought leaders that have been subsumed into larger brands continuing to drive innovation inside those organisations.
There are certainly some very innovative start-ups that will boom in the coming years.
How can automation and self-service help insurers achieve their digital ambitions?
There’s a huge demand for greater affordability, convenience and immediacy. These things are fed by consumer demand. We order things from Amazon and expect them within 24 hours, but we don’t expect to pay more for the convenience. There is still a place for human intervention, but we have to apply that where it is most appropriate, such as for more complex and personal claims.
The consumer will still drive the direction of travel in how we develop and deliver propositions to the marketplace – and that is exciting. That’s where digital innovations can really prosper in terms of robotics and artificial intelligence. I often hear of Digital Transformation being prioritised for ‘back-office’. As someone very famous once said: “You’ve got to start with the customer experience and work back toward the technology — not the other way around.”
What advice would you give to any insurer that has either not started, or is beginning its digitalisation journey?
Many may not feel they are ready at this stage, that they don’t have all the information and skillsets available to them to embark on that journey. You have to take the first step in order to succeed and a number of insurers are struggling with this.
Another piece of advice is: don’t quit. If at first it doesn’t quite succeed, try again. Be tenacious, make sure you trial new things to find the process that’s right for you. You will have to be precise and careful going through that journey, but at the very least take the first step. For those who haven’t begun, I urge them to do so as quickly as possible.
