We talk a better game about digitizing than we play.
Insurers have been talking about going digital for a good decade now, and seemingly everyone says the pandemic greatly accelerated the trend over the past three years by forcing us all to interact remotely. Yet ACORD says it found in a recent survey of the 200 largest insurers worldwide that "fewer than 25% have truly digitized the value chain, while more than 10% are not appreciably leveraging digital technologies within their current business processes. Further, more than half of the insurers in the study are still exploring how digitization can be applied against their business model."
Bill Pieroni, president and CEO of ACORD, says: "The gap between those who have been prioritizing digitization, and those who have systematically underinvested, is now impossible to ignore."
And the report found "an unambiguous correlation between digital maturity and increased financial performance, as measured by both Total Shareholder Return and Indexed Relative Profit. The study also found that the performance gap between highly digitized insurers and laggards has continued to grow year-over-year, accelerated by the global pandemic."
Why so little action after so much talk?
As ACORD's Insurance Digital Maturity Study notes, some of the explanation is straightforward: Going digital is expensive, and many companies lack the scale to do so quickly.
Having watched any number of industries go digital since I started covering technology for the Wall Street Journal back in the mid-'80s, I'll add that the process is confusing. Where do you start? What should your priorities be?
Those are hard questions. Many industries tend to start based on where they are, and try to improve, rather than taking out a clean sheet of paper, designing a digital future and then working backward from that ideal to figure out how to get there. I'd say many insurers fell into that trap and had false starts as a result. They focused on issues such as updating core systems, which, while important, didn't do much to change the process of buying insurance or handling claims--the issues that matter most to customers.
The good news is that insurers have gotten the customer experience religion over the past couple of years and are moving past the false starts, to focus on what really matters. Many are even starting to probe the possibilities of a new business model: switching from the traditional "repair and replace" approach to one that uses the industry's vast stores of data and risk-management expertise to offer "predict and prevent" services that reduce or even end the need for indemnification.
The work will never be done, of course. Technology keeps improving, customer expectations always increase and competitors never stop threatening.
But I hope the ACORD study serves as a wake-up call. The New Year is coming, and I think some resolutions for 2023 are in order.
Cheers,
Paul