While it might not trigger a passionate discussion around a dinner table, there’s no doubt insurance is a necessary part of life. Whether you drive a car, own or rent a house, or booked a holiday - it’s likely that we’ve had to pay for insurance at some point in our lives. And it is that necessity that drives the value of the industry, which stood at $5.8 trillion in 2020.
As an industry, in the past, it was a little bit like the products it sold - a little safe, dull, and stable. There was still a lot of paperwork and, as anyone who has had to make an insurance claim in the last few years may testify, notoriously slow service.
However, the digital era is now catching up. Insurers face a new wave of competition as younger, more innovative companies began to make inroads into the market. Together with the challenges posed in 2020 and into 2021, digital transformation is taking hold of the insurance industry.
A recent survey from KPMG showed that 85% of insurers were experiencing an acceleration in moving towards digital technology in the last two years. However, the same study suggests nearly half of CEOs were finding this transition challenging and failing to see a clear vision of what it could be in the future.
By embracing digital transformation today with a clear vision could put your insurance company ahead of the competition.
In this post, we will look at what digital transformation means, what it takes to achieve this goal, and how APIs add the crucial finishing touch. But first, let’s take a look at some of the benefits digital transformation can bring to insurers:
- Greater efficiency: One of the hallmarks of the digital era is high efficiency. For insurers that could be the ability to process claims through apps, policy writing can be conducted through AI and machine learning, and customer service can be speeded up through live chat,
- Responsive personalization: You might ask, “what does that mean?” In short, it’s the ability to respond to customers personally, in real-time. Technology allows insurers to interact with individual claimants and policyholders through apps and other communication channels. The improved customer service leads to higher retention rates, and therefore, higher recurring revenue.
- Increased flexibility: By adopting the latest technology, insurers can adapt to the changing times around us - such as extreme weather events, political uncertainty, and economic instability. The digital era allows for better forecasting and predictions, which can help insurance companies prepare in advance.
With these benefits in mind, there’s little doubt that embracing the digital era is the way forward. But what does it look like?
What Does Digital Transformation Mean?
In a nutshell, the digital revolution has forced insurers to become more interactive, flexible, and efficient. The days of relying on legacy and stability have gone; now it’s the era of technology and innovation. Cloud-based software, remote working, and increased accessibility are the order of the day.
In essence, digital transformation is about moving from a paper-based operation to one driven by fluid data management and adopting the latest digital technology. As we’ve explained in the past, it is a combination of digitization and digitalization that drives today’s economy - and are crucial components of digital transformation.
Digitization in the Insurance Industry
In short, digitization describes the format your information is held in. For instance, an insurance company wants to move its client records from paper to PDF format - this is a digitization process. For the insurance industry, this is a critical first step towards digital transformation.
Insurance relies almost entirely on information; whether it’s medical records, criminal background checks, drivers’ licenses, it needs access to these records to determine premiums and decide on claims. By placing information into digital formats, insurers will be able to improve accessibility and security simultaneously.
A good example scenario could be an insurance claim being made by a client, so the team needs to find the client’s records quickly to respond. If it is being held in paper format, it would require someone to go to the storage area, find where it’s supposed to be, pull the file out, and then go back to the desk.
Now, most insurance companies will have moved on from such extremes. However, a fully digitized system could find such records in seconds - just with a little bit of information from the client, like a surname or zip code. If this is not happening at your insurance company, then you are missing out on some other key advantages:
- Traceable information: It is essential that information is traceable and that any changes to records are updated in real-time.
- Higher accuracy: With an integrated approach, an update in one data set can automatically be applied in all the other data sources, leading to higher accuracy and minimal human input.
- Increased usability: As the digital era takes hold in the insurance industry, data is the fuel behind the transformation. With a completely digitized set of data, insurers will be ready to move to the next step of digitalization.
- Improved data governance: Given the importance of data governance in today’s digital economy, it is crucial to retain complete control of all information within your organization. Digitization will lead to better visibility and higher data security.
Digitalization in the Insurance Industry
Digitalization is a term that applies to digitized processes that are driven by data. Examples could include claims management software, billing platforms, and other operational solutions. In essence, it is the visible component of digital transformation in which all stakeholders see and experience.
The idea is to digitize the end-to-end journey of all aspects of insurance, from the minimum viable product to the policy offerings, right through to the final claims. This requires an integrated approach and utilizing the best possible software for each part of the business.
It can be as basic as task management software for internal teams to more complex CRM platforms designed to handle as many as thousands of customers at one time. The trick is to develop a strategy and mechanism to get the different platforms to integrate and work in sync.
Switching to the cloud is another way to make this transition to digital easier and more manageable. Using cloud-based software will facilitate remote working, enable access from anywhere, and have greater integration capabilities.
However, cloud technology cannot do all the work alone.
APIs Driving Innovation
While cloud technology represents a leap forward in integration, it is APIs that add the finishing touch. Even the most open software needs support to integrate successfully with other platforms with multiple data sources and formats.
And that’s where APIs come in. They are effectively the refineries of integration, taking the raw data before processing and refining it to be used in different platforms.
This enables insurers to manage their data better and, for instance, be able to integrate their CRM with claims management software. The APIs role would be to filter and format the data so that each can be used for the other - automatically and in real-time.
APIs can also support a steady transition to the digital era by taking data from old, legacy systems and refining them to be used in its replacement, cloud-based solutions.
By using an advanced API management platform, insurers can optimize their APIs, synergize operations, and ensure a clean, accurate set of data. The end result will be a slick, responsive, and dynamic insurance company outpacing your competitors.