Going Beyond Incremental Transformation in Insurance

Most transformation programs include a focus on efficiency or process improvement. All of this progress proves incremental, at best.


Disrupt or get disrupted. More than ever, that's true for incumbent insurers today more than ever because of the rise of insurtechs and the rapid shift in customer expectations.

It is not as if large incumbent insurers are unaware of this shift. The challenge facing them is overcoming the inertia and finding ways to transform their operations and business models beyond incremental improvements.

Incremental transformation is an oxymoron but reflects the reality

Global investment in insurtech startups totaled $10.5 billion in the first nine months of 2021, and traditional insurers are feeling the heat from the disruptive business models and innovative offerings from these digitally native startups.

Traditional insurers are impeded by technical debt. When they leverage digital technologies, those benefits are often incremental because of legacy burdens. Most transformational programs are laced with initiatives focused on internal operational efficiency, cost reduction or improvement of existing processes for a better customer experience. All of this progress proves incremental, at best.

See also: 2022 Resolutions to Foster Innovation

What would disruptive innovation look like?

Large incumbent insurers must transform their business models by challenging some of their principles. They need to begin charting a destination and create a vision for the organization. 

Some of these transitions can be disruptive, internally as well as externally, such as the following:

1. From agent-based models to total customer ownership

The traditional agent-based models worked well in an era where distributed ownership was the de facto model for offering a personal touch to customers spread all over. Digital technologies offer insurers the ability to offer highly personalized services without intermediaries by enabling total customer ownership.

2. From risk mitigation to risk prevention

The broader market trends toward casualty prevention and general safety are rapidly changing insurers' underlying risk management paradigm. Automotive safety equipment and healthy living mechanisms are examples in auto insurance and health insurance, where insurers must strategically partner with manufacturers and service providers. Insurers must shift focus from traditional reactive underwriting to strategic risk management. 

3. From drawn-out underwriting to single-click policy issuance

Insurtechs, price comparison providers and aggregators are compelling traditional insurance product leaders to offer near-real-time underwriting. Customers expect single-click purchase of insurance products the same way they do in other aspects of their lives. Automated ingestion and processing of customer documents and supporting media can enable quick and accurate extraction and processing of relevant information. Real-time underwriting, when combined with analytics, can make this possible. 

4. From hindsight-based risk profiling to foresight-based risk assessment

With increasing data sources and the improved ability of insurers to gather intelligence, insurers are now faced with the challenge of processing larger sets of parameters for risk assessment. On the other hand, increased uncertainty means that such parameters are not the true indicator of impending future risks. Hence, historical trends are giving way to predictive insights as a means of risk assessment, both in terms of personal risk profiles as well as broader risk spreading.

5. From multi-stage claim assessment to digital real-time claim approval

Traditional assessments of claims involved multiple checks and balances and surveys. The availability of mobile devices for real-time capture of claim proofs along with locational accuracy, drones for surveys and automated image and video processing combined with artificial intelligence (AI) for claim assessment can truly transform the way claims are processed. 

Real-time underwriting, single-click product purchase, drastically reduced claim approval cycles, optimized costs and real-time availability of risk profiles and claims data can enable insurers to offer divergent insurance products that could not be conceived earlier.

See also: Creating Room for Innovation

A platform approach is pivotal

Most transformation opportunities didn't seem real until digital technologies made them possible. However, just because these possibilities look feasible today doesn't mean that they are easy to accomplish.

Success in any of these areas, let alone all of these together, requires a concerted effort that is consistent across the organization. Insurance providers need a cohesive and agile operational strategy that is backed by a platform that can support these transformational processes and systems across the enterprise. 

This is critical because, even if an insurer implements mobility for omnichannel engagement, the underlying process needs to be integrated and nimble. Similarly, speed and accuracy remain compromised without access to the appropriate context in the form of documents and media and real-time intelligent processing. The same is true for other digital technologies, such as AI and analytics. In short, integration is key. 

A platform-based approach addresses the end-to-end customer journey while integrating all the digital capabilities that are part of the disruptive innovation jigsaw.

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