At the 2016 IASA conference, held in San Antonio, Texas - Novarica, Erie Insurance and ValueMomentum collaborated to present a session titled ‘Digital Journey: From Strategy to Implementation’. Matthew Josefowicz, President/CEO Novarica, a widely-published and often-cited expert on insurance and financial services technology, was one of panel members in the session who shared perspective on what does digital mean for property and casualty industry.Learn more about their session, Digital Journey: From Strategy to Implementation, here.
Digital transformation and P&C insurance
There has been an increasing trend among organizations to undergo digital transformation to meet the modern customer expectations, sending ripples of transformation across industries. P&C insurance too is impacted by the changing customer behavior because of digitization, putting the industry under pressure to transform in order to stay relevant in the market. Traditionally, the insurance industry is slow to adopt technological innovations, thanks to its risk-averse culture. However, it can no longer undermine the innovations the new entrants are bringing to customer engagement and the benefits they are reaping as a result of it. While the P&C insurance industry is gradually gearing up to digital, there is still a lot of confusion prevailing around digital.
Digital is not just mobile or omni-channel!
Speaking at the session, Matthew Josefowicz emphasized that digital is not just enabling mobile or omni-channel services. Digital is about reimagining the relationships between information, people and processes to provide modern experiences to
customers, partners and stakeholders. Matt shared that as part of their research when they asked insurers about ‘What does digital mean to them?’, the answers were inconsistent. Matt further added that while working with some of their clients on creating digital strategies, he would start by asking them: what do they intend to achieve with their digital strategy? What are different customer experiences they are trying to create? What are the problems they are trying to solve? What is their digital strategy directed at and what falls under the rubric of their digital strategy? Answering these questions would help insurers set out in the right direction for achieving digital success.
P&C insurers need to look at all the processes of digital transformation from a purpose standpoint rather than thinking about processes simply to enable an IT or sales function. In fact, experience is the product in digital, associated with buying insurance, customer service, claims service, and pricing & coverage - the product is not risk transfer at a fair price as conventionally P&C insurers would think.
Challenges in digital transformation
It’s true that Innovation is disruptive by nature and there is an increased risk of failure associated with it. IT leaders tend to contemplate to take the plunge given the high stakes involved. But Matt quoted, ‘an industry that can accept the fact that 60-70% of the policies they write are going to cost them more than they earn in premiums, can accept that 20-25% business initiative they launch might fail. Everybody says that the insurance industry is a risk-averse industry, but they are happy to accept more than 50% loss ratio. That does not sound like a risk-averse industry. Actually, it sounds like an industry that is very comfortable in managing risks. The insurance industry may take the approach of managing operational risks than underwriting risk like many other industries are doing.’
Matt further added that the traditional P&C insurers’ business processes and functional designs are built around gathering information from the field, analyzing it, making a decision, and then communicating the decision back to the field. All of the traditional distribution networks, marketing materials, portal, email, phone, fax, etc. are basically there to solve this information flow problem. Digital transformation would provide P&C insurers an entirely new perspective to solve this information flow problem in different ways. Insurers are not supposed to solve this problem by building a portal or mobile app, rather Insurers need to solve the overall communication and analysis problem first and then work on developing the technology to solve this problem. This should be done while visualizing how this technology is going to evolve in the future.
Digital is one of foundational capabilities along with data & core
Matt concluded by stating that digital is one of three foundational capabilities in insurance business along with data and core. These three foundational elements need to work together to support development of innovative business practices. Thus success of digital would depend on how flexible the ‘core’ policy administration system is in launching new products rapidly into the market, its ability to accept data from digital channels, and how effective the ‘digital’ channels are in managing and acting on the data as result of analysis.
P&C insurers need to remember that the product they want to deliver leveraging digital is ‘a strong experience’ and the processes that support these experiences should have defined purposes. If customers have positive experiences, satisfaction goes up and higher satisfaction leads to higher customer retention, increase in sales, and things that matter from business growth perspective.
You can watch Matthew Josefowicz, President/CEO Novarica share his thoughts on why P&C insurers need to think beyond mobile and omni-channel while thinking about Digital, by playing the below video:
WATCH FREE THE FULL VIDEO OF THIS SESSION
If you are inspired by the takeaways of the post and want to learn more, click below to watch the complete recording of the session.