Digital Vision: Digital Insurance

Smarter Insurance

Could large insurers ever innovate like their InsurTech rivals?

At a Glance

How can large, complex insurance companies keep up with the rapid pace of change in the sector? Is digital innovation in insurance limited to the start-ups and spin-offs that grab the headlines? Or is there a way for the bigger businesses that have dominated the market to continue to be part of an exciting new future for insurance? Ahmed Sheikh, Director of Digital at RSA, looks for the answers.

5 Minute Read

Ahmed Sheikh

Director of Digital, RSA

The term ‘digital innovation’ is used a lot.

Within the insurance sector, it can describe everything from the digitization of a paper-based form, to the digitalization of an entire workflow. It is often used interchangeably with ‘digital disruption’ and the transformational change brought about by new entrants like InsurTechs.

Yet perhaps we should look at the term for what it really means. At its root, digital innovation is defined as the introduction of something new (e.g., a way of working, original or improved customer journeys, commercial approach, or tool) using digital technology or applications.

As opposed to ‘invention’, innovation implies that some form of value is added rather than the new thing being lauded simply for being new. And if this is our starting point then it is just as achievable by large, complex and traditional insurance as it is by nimble, cloud-native market entrants. It is all simply a matter of priorities.

Why the debate about who leads digital innovation in insurance?

The insurance sector is ripe for transformation and clearly lags behind other sectors in both digitization and automation. But the real reason is less to do with the sector itself and more to do with the fundamental transformation of the customer.

Experiences from retail to retail banking have changed expectations. People want quicker and more convenient services and digital technologies are facilitating these. There has already been some progress in insurance with the likes of hourly car insurance or streamlined life insurance cover. Much of this is attributed to start-ups or spin-offs that have been quick to identify an underserved (or poorly served) market segment and jumped in with one or two targeted product lines.

Certainly, these gaps in the market exist, and agile InsurTechs are possibly best-placed to rapidly develop and launch the products to fulfil these needs for obvious reasons. But if we take a step back and think about digital innovation that could have a massive impact on a huge number of people, then traditional insurance players are just as well-placed to do this.

What needs to change?

All too often, large insurance firms are seen as unable, or perhaps unwilling, to adapt and deliver digital innovation. Yet were they to do so, the effect on millions of customers would be on a scale that surpasses that of multiple InsurTechs combined.

All it takes is for some of the major players to change the way they think about disruption. Rather than look outward at all the new products launched by InsurTechs, there is an argument that looking inward at existing customer journeys could yield significant value, both in terms of customer retention and brand reputation.

With millions of customers and often hundreds of product lines, a shift in mindset towards customer journeys could deliver the impact that the term ‘digital innovation’ actually implies.

Where to start with digital innovation in a large insurance organization?

If we are talking about improving customer journeys in insurance, then there are some sizeable ones that could be tackled through digital innovation: Sales, Policy administration, Renewals, Claims. These are dependent on complex processes and risk models, not to mention layers of legacy technologies and institutional cultures that have built up over time. Changing them all at once is a nigh-on impossible task.

Still, if we ask which journey is likely to have the most impact from the customer’s point of view then we can start to hone in on what we might want to change. Claims seems to be the most obvious (but this may not be the case for all large insurers). Knowing that this is one area where retention (from a positive experience) and reputation (from brand advocacy) coalesce, the organization could prioritize digital innovation in this customer journey above all others, especially when you consider the impact when a major insurer with millions of customers improves its claims journey for even 50% of its customers.

How can it be done?

Clearly, tackling a significant customer journey like claims is not for the faint-hearted. You need buy-in from across the business, executive sponsorship, budget, and an understanding that this will not be an overnight process.

The demand to improve time to market for new products or services and keep in step with the speed of InsurTechs is encouraging large insurers to shift to a lean agile approach. Yet this will require time to overcome cultural and legacy technology obstacles. New use cases for cognitive technologies will require insurers to acquire the in-house skills to develop these capabilities, and being able to analyze and act upon the sheer volume of data (the ‘new oil’ for insurers) they have at their disposal will require new processes, systems, and platforms.

By revisiting the definition of digital innovation—introducing something new using digital technology or applications—it is clear that the focus is not as simple as introducing one new platform over another. It should be about how we institute change together across three fundamental areas of business operations:

1 The organizational and operational culture that defines the way that employees work and how they interact with customers (people)

2 The customer journey and the workflows that support (or hinder) positive experiences (processes)

3 The tools that enable change like artificial intelligence or machine learning for personalizing premiums or quicker claims resolution (technology)

Key takeaway

The first two are intrinsic to individual organizations. But on the last point, there is another element that could speed up digital innovation for larger, more complex insurance institutions and that is collaboration.

InsurTechs, cloud-native start-ups and even the Googles and Amazons of this world have already invested in new technology. If both parties are willing and able to collaborate—for example, through open APIs or as part of new, consumer-oriented ecosystems of partners—then there are reasons to be optimistic that incumbent insurers can be every bit as innovative in the market.

Digital Insurance – Further Insights

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Carol Houle, Global Head of Financial Services and Insurance, Atos