Insurance industry challenged by digital future
New report finds insurers must transform digital capabilities to keep pace with rapidly expanding market demands.

The insurance industry is at an inflexion point. Digital technology is transforming the way insurers do business, impacting the entire value chain. While rapidly emerging technologies are crucial enablers when applied with rigor and clarity of vision, we are still seeing many insurers focused on product and channel silos, and facing significant challenges from legacy systems rather than unlocking value for their customers and investors.

Our new report, “Transforming insurance: Securing competitive advantage”, delivers a vivid picture as market players respond to the changes that are transforming all aspects of their business. Based on interviews with insurance leaders globally, the report highlights the sector’s priorities and progress, in particular firms’ digital maturity, to meet the digital challenge, including insights into gains in adapting to customers’ mounting digital preferences.

The report reveals the below five inter-related issues insurers are facing, and suggests practical solutions to overcome them to secure a competitive advantage.
  • Operating in an increasingly digital world
  • Making the best use of the vast amounts of data now available
  • Taming the challenge of legacy systems
  • Keeping the business secure given increased cyber threats
  • Attracting and retaining the people needed to drive change – and where to get started
Our study shows that the insurance industry clearly recognizes the need to reinvent operating models to respond to and capitalize on digital technologies in order to unlock value for customers and investors. It also shows that insurers are struggling to develop digital strategies that align with their business objectives and to resolve legacy infrastructure and business processes. At the same time, digital advances, the rise of social networks and the ‘internet of things’ are having a transformational impact on the volume, variety and velocity of data available, adding further complexity.

There is a massive 108 percent increase in the number of respondents who want to use digital technology to enter new markets in the next three years as compared with the previous three years. This increase reflects growing digital ambition but also significantly raises the stakes. It suggests the need for more than digital transformation. Such a transformation represents a massive cultural change.

Significant barriers to overcome
Respondents understand that emerging technologies can enable them to reinvent dated operating models and product delivery channels or perform sweeping re-engineering of end-to-end management. Yet there are some significant challenges to achieving this.

The transformation of the insurance sector is unfolding against a backdrop where a majority – or 65 percent – of respondents feel the regulatory environment does not yet support product and channel innovation.

In addition, while more than two-thirds of respondents in the report say their digital strategy goes beyond their website, only just over one-third say their digital initiatives are aligned with their company’s strategic objectives.

Insurers also face some intensely practical challenges when it comes to implementing a strong data & analytics (D&A) strategy:
  • some 31 percent of respondents said the leading challenge with data analytics is capturing reliable data and 35 percent cited legacy systems as the underpinning issue
  • over half of the respondents identified human barriers – obtaining management buy-in, sourcing talent or training existing talent to set up and manage D&A infrastructure and having the right talents to analyze date and provide insights – and not technical constraints, to implementing a D&A strategy.
There is a widespread acknowledgement in Asia Pacific that there is a shortage of insurance talent and retention is a real issue. Business leaders are beginning to realize the importance of improving their ability to attract and retain the best people in order to remain competitive in the face of new market entrants.

The path to enabling digital innovation
Transforming Insurance identifies some new paths to overcome challenges. Among the tactical recommendations for success, the report advises insurers and intermediaries that:
  • digital is about people: digital experiences do not have ‘users’ – they live with people in a more intimate and direct relationship than software from an earlier generation
  • don’t be afraid to fail: but learn to fail swiftly and safely by building a ‘test, learn and experiment’ culture
  • agility is king: quickly obtain consumer feedback in order to refine products, service or back office solutions
  • embrace risk: learn to take on measured, acceptable levels of risk in order to innovate
  • keep a sharp eye on emerging trends: watch not only competitors but other sectors to identify threats and opportunities and develop creative, tailored responses.
As the digital revolution goes into full swing, insurers must fundamentally change their organizations. They must rope in multiple stakeholders to drive change, attract and reward talent, build a truly agile and collaborative culture, leveraging technology from strategy to core processes to build sustainable competitive advantage.
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