Tag Archives: digital transformation

Did You Use the COVID Down Time?

The pandemic led to a burst of home remodeling, and some insurers have likewise found themselves in the middle of a dramatic remodeling project. Choices must be made. Which remodeling projects will modernize and optimize the business, and which ones will create a whole new business next door? COVID and its digital pressures have compressed previous time assumptions. Many initiatives and investments that were set for a three – to five-year path are now moved to 18 months or less.

For decades, the creation and evolution of insurance markets and products unfolded at a slow and steady pace. Insurers’ technology, data and processes were adapted to take advantage of these opportunities – sometimes through technology updates, extensive customization or through new technology. The result of this approach was highly customized and costly systems that did not adapt quickly to market changes. They became increasingly unresponsive to market shifts or opportunities. Companies managed and lived with slow transformation because everyone was in a similar position — new products took 9 -18 months or more to build and launch. Adding new distribution channels could take 6-12 months. These long timeframes slowed and limited market, revenue and growth opportunities because not only were they long but expensive.

But the market is much different now. The pace is significantly different. The types of change have expanded. The constantly changing risks, customer behaviors and expectations, technology-driven capabilities, new sources of data, and blurring market boundaries have increased insurance market demands for new products and services that the old technology cannot support. Today, insurers must be able to launch new products in weeks, new capabilities in days, new channels in weeks or days, and new rates or rules in hours. 

Majesco’s recent Strategic Priorities 2021 report looked at both “traditional” market trends and new and emerging market trends. Insurers continue to show the highest levels of action in the “traditional” market trends, where Cyber risk/data security and Creating value-added services moved past the Planning/Piloting stage and into implementation. Most continue to plan and pilot the use of New data sources for pricing and underwriting, something insurance customers, especially Gen Z and Millennials, want based on our consumer and SMB research.

Encouragingly, strong advances in Creating new insurance business models were made in the Planning/Piloting stage with the strongest year-over-year jump of all the trends (see Figure 1). 

Lower Activity Among Emerging Trends

Within the newer or emerging trends, insurers continue to consider offerings for the Sharing/gig economy, Embedded insurance, and On-demand insurance, maintaining similar levels of activity as last year. Microinsurance and Parametric insurance show the lowest levels of interest. While low this year, we suspect that parametric insurance will see a rise next year due to an increased interest in UBI insurance as a result of changed behaviors and less driving.

Figure 1: Insurers’ responses to opportunities created by technology and market trends

The concern with these low levels of activity is that they represent blind spots for insurers as compared to the market potential and customer demand. 

Embedded insurance, which is estimated to account for 25% of the worldwide market by 2030 with $700B in GWP, shows significant gaps between customers and insurers. (See Figure 2.) Only 13% of insurers offer or are implementing embedded insurance and only 38% are considering or planning/piloting it. The 60% gap between customer demand and insurer offering for Gen Z and Millennials reflects a major blind spot and market opportunity for those who can respond quickly. Offering what their parents bought and have is not necessarily what they want or need! 

See also: The Rules of Digital Transformation

These blind spots reflect the challenge for insurers to respond to a new generation of buyers who want different products via different channels to meet a new era of customer needs and expectations. 

Figure 2: Customer-Insurer gaps in embedded and on-demand insurance

Fortunately, some insurers are actively taking advantage of these opportunities. While likely offering traditional products as well, insurers offering new products lead significantly over others who are not. The only trend that is aligned between traditional and new is Cyber risk/data security and it isthe only trend where those who only offer P&C products do not come in last or second to last compared to those who offer new products, L&A/Group products, or multiline products. 

This highlights the risk for the P&C-only segment. If they remain focused on only traditional products they will lose out on new and rapidly growing market opportunities.

Platform Technologies

When it comes to the specific technologies that power the insurance platform, we’re seeing the strongest and most consistent adoption of mobile and Cloud/SaaS, while Digital Experience Platforms made a sizable jump year-over-year (see Figure 3). The results we’ve seen for Cloud/SaaS in our research are consistent with the trend SMA has also found: in their 2019 P&C Core Systems Purchasing Trends report, they noted that 84% of core system deals were deployed in the Cloud, and 32% of these cloud deployments were multi-tenant SaaS.

APIs and AI/Machine Learning are entering the Planning/Piloting phase, the tipping point for more widespread implementation and adoption. Microservices and Low Code/No Code Platforms are still in the early stage of adoption. These two critical components give the insurance platform its unique ability to adapt quickly to new market opportunities by making changes to components of insurance processes (microservices), rather than having to change an entire siloed process, and by opening up configurations to a wider audience of citizen developers (low code/no code).

Figure 3: Insurers’ levels of activity in adding platform technologies

All three Customer Engagement technologies – Digital Payments, Social and Chatbots – saw significant year-over-year increases in activity, driven by the sudden need to implement effective self-service capabilities in response to COVID. In particular, the increase in digital payments highlights the acceleration to open banking and innovative payment technology companies. 

In a recent InsurTech Forum article, it was noted that open banking has encouraged competition and innovation by requiring banks to share data with third parties such as payment technology companies and by creating customized payment methods through new apps and data streams that will be difficult for companies (sellers like insurance) to ignore. The interest in advanced data-supported digital payments comes from customers’ increased comfort with online banking and shopping during COVID. 

Knowing how and why this concerns insurers is of vital importance.

  1. Customers are quickly developing their own foundation for how they pay for services and move money — choosing those methods that are easiest and that gain them the most points or benefits.
  2. If speed, ease and familiarity trump research, product strength or even pricing, then open banking and open platforms in general will allow any market-savvy company to generate insurance business. Companies with massive customer bases, like Walmart, Tesla, PetCo, Ikea and Amazon stand to win simply because of their placement within customer lifestyles.
  3. The end result is that not integrating a technology (such as IoT devices or Telematics) may harm an insurer’s ability to embed their products, offer their own new products through new partnerships, or capture a new line of business quickly.

Not surprisingly, companies in the New Products line of business segment lead all others in 11 of the 16 technologies covered by the survey, including the key platform technologies of Cloud/SaaS, APIs, AI/Machine Learning and Microservices.­­ These same companies are in lock step with the Multiline Products segment for two other platform technologies, Digital Experience Platform and Low Code/No Code Platform.

Most importantly, those companies making the strategic decision to adopt these key platform technologies that outpace others are innovating with new products and services and adopting the viewpoint that they are “technology companies providing insurance” as opposed to “insurance companies using technology.”

Digital Capabilities

Insurers’ digital transformation is underpinned by increasing customer expectations for new experiences. In their response, insurers are heavily focused on customer self-service applications and portals, with 41% to 61% of companies saying they are implementing or have already implemented these.

Self-service tools and portals have been around for some time, but they do not meet the shift in the desire for personalized, holistic experiences because “out of the box” portals are functionally focused … i.e. a claims app or quote app. In contrast, digital insurance platforms transform these older approaches from siloed, separate transactions into more satisfying, holistic experiences for customers, channel partners and employees as we noted in our life and auto customer research.

Encouragingly, about a third of insurers are implementing or have implemented digital capabilities for intelligent claims intake, intelligent underwriting, intelligent digital marketing and market segmentation, and for reporting, modeling or compliance, with over 40% planning or piloting these, highlighting the acceleration of their digital capabilities.

While the overall high interest in these digital capabilities is encouraging, some very significant differences between business and IT must be resolved to maintain and accelerate momentum.

Business’ ratings were higher than IT for:

  • +95%: Innovative, personalized products (3.7 vs 1.9) — This disconnect reflects the increased decision making by business leaders to use new SaaS core and digital platforms to launch new products rapidly, rather than on the existing systems or traditional process. In some cases, IT is not even needed.
  • +42%: Digital employee benefits onboarding and engagement (3.4 vs 2.4) — The expansion of voluntary benefits and the complexity of signing up employees as well as keeping them informed is increasingly critical in winning the customer. 
  • +32%: Agent onboarding, servicing, management platform (3.3 vs 2.5) — Agents felt the impact the most during COVID with the lack of digital capabilities beyond the traditional quote portal or upload/download for AMS systems. Increased M&A with agencies puts pressure on the business to respond to keep and attract agents. 
  • +18%: Customer self-service portal (3.9 vs 3.3) — This has been a constant area of focus, but is shifting to expand beyond the traditional portal on websites to a much more personalized and sophisticated experience. 

See also: Culture Side of Digital Transformation

Finally, multiline carriers are very active in establishing digital capabilities. Driven by the complexity of multiple products, they want to digitalize, simplify processes, and provide self-service capabilities for customers, employees and agents (see Figure 4).

Figure 4: Insurers’ levels of activity in adding digital capabilities by lines of business

So the question for each insurer is: What are you doing with your idle time during COVID? We can tell you the competition is taking advantage of this idle time!

The Digital Journey in Personal Lines

Most personal lines insurers were already pursuing digital transformation before the pandemic, but the tumultuous events of last year caused many to reprioritize digital projects and change the shape of their journeys.

Generally, the industry fared well despite the lockdowns, economic volatility and work-from-home imperative. As activity and behavior patterns shifted dramatically in many ways, the industry benefitted – so much so that large rebates were offered by many personal lines carriers. However, insurers also had to deal with the increasing severities in personal auto, an uncertain financial market and reduced demand in some areas due to layoffs and an economic downturn.

From a digital journey standpoint, it was not so much about pausing the effort to become a digital enterprise as it was about reprioritizing projects to address urgent needs revealed as a result of the pandemic.

A new SMA research report, Digital Transformation in Personal Lines: Project Priorities for 2021, identifies specific plans for carriers related to a variety of digital projects. A big theme is the focus on self-service capabilities for policyholders, especially for policy service and claims. While some insurers already had robust solutions in these areas for digital capture and workflows, most found that their capabilities needed upgrades to support remote, virtual operations.

At the same time, the evolution of core systems continued unabated. Modern core systems for policy, billing and claims are the foundation for digital transformation.

The move to simply digitize more assets and automate workflows also accelerated. Although the core, digitization and workflow projects may not, by themselves, drive transformation, they are enablers for a whole range of digital projects. More information must be in digital formats, and the systems of record that manage key transaction flows and data must be built on modern architectures that provide the flexibility and adaptability needed in the digital age.

See also: The Digital Journey in Commercial Lines

Although one would think that all the focus would be on customers, the reality is more complicated. There are certainly digital projects that focus on addressing the digital gaps related to customers, such as self-service portal projects. However, there is just as much or more activity focused on operationally driven transformation. In some ways, this is the typical response to a crisis – focus on operational efficiencies and position the company to weather difficult times. But, in other ways, this focus just reflects the opportunities to reduce complexities, decrease paper and manual handoffs and increase digital data to feed digital workflows and analytics.

SMA predicts that there will be an acceleration of the digital journey as 2021 progresses, continuing into 2022. As we move toward the post-pandemic world, there is an even greater appreciation for the power of digital transformation.

Myth or Reality? Digitization Is Stalled

To assess whether digital transformation is stalled because of the pandemic, we really need to think about transformation from past investments, the current state in the context of the pandemic and the strategies planned for 2021.   

Well, 2020 was quite a year! I want to make two key points that we’ve learned during the pandemic. One: The insurance industry is financially strong. It is weathering the pandemic, just like we’ve weathered other natural and manmade disasters over the years. And we should all realize how blessed we are to work in such an amazing industry! The second: The pandemic has brought real clarity to digital engagement and digital enablement across personal and business life. It has highlighted where insurers have made great investments in the past and where our gaps are. The gaps came into sharp focus the minute we went into lockdown and everyone started to work virtually. We saw all the paper: the paper checks, the correspondence and the forms still coming into the organization – along with a lot of paper and paper checks going out of the organization. We also saw a lot of manual workflows, mainframes requiring people in the data centers and our lack of providing digital experiences for our policyholders, agents, brokers, claimants and employees.  

And so, as we look forward into 2021 and consider the statement “digital transformation has stalled due to the pandemic,” we can see that it is a myth. The reality is that almost all insurers believe that digital transformation is essential. It is critical to all business strategies and plans. And this belief has only been reinforced by the pandemic. In fact, our experience in 2020 has actually accelerated plans and strategies for digital transformation. The difference is that the strategies and plans are being reshaped and reprioritized as a result of the revealed gaps. Most insurers now have a new list of projects: digital payments, improved self-service capabilities and updating the overall portals for starters. If anything, the list of projects has increased. Another thing that affects our digital strategies is the new clarity around operational efficiency and the customer experience. And so, as we look into 2021, digital transformation strategies are really going to be more about growth in operational excellence, optimizing operations and improving the customer experience, and less about innovation and transformation. So, it hasn’t stalled. We are going full steam ahead into 2021.  

See also: The Rules of Digital Transformation

Call to Action: 

The call to action for digital transformation is to ensure that your digital strategies are reshaped in response to your gaps and needs, and that they are all-encompassing in terms of optimizing operations and customer experience. Digital transformation needs to be part of your overall business strategy and should be integrated with culture change, customer experience and operational excellence. And priorities should be set using multi-pronged approaches, with both outside-in and inside-out perspectives. 

For more information, watch our 30-minute on-demand webinar, Myth or Reality: Strategies for Insurers in 2021

A Burning Platform for Transformation

While the industry had digital as a “priority” in nearly every survey the last few years, the events of 2020 have accelerated its importance – creating a tipping point for insurance. Malcolm Gladwell’s bestseller, The Tipping Point, described this phenomenon as a “magic moment when an idea, trend or social behavior crosses a threshold, tips and spreads like wildfire.” We now have a “digital wildfire” expanding rapidly every day, reshaping every aspect of our customers’ lives and businesses.  

The COVID-19 crisis exposed less than desirable customer experiences due to manual, paper-bound processes, non-digital post-service transactions like claims, payments, printing, mail, a rise in online insurance purchases and the need for extra caution due to fraud. Projects are getting reprioritized for this and next year to adapt to this new reality. But companies need to consider prioritizing investments in the digital platforms that will meet their needs today and in the future.  

Digital Insurance Platforms – Digital Wildfire Creates A Burning Platform

We have been writing and talking about digital platforms for a few years, including in our thought leadership report, Insurance Platforms – A Burning Platform for Market Leadership in the Digital Era of Insurance. Through our research over the last five years, we have found a top motivator for digital transformation is the need to meet customer and distribution channel expectations of a much-improved experience. We identified a strong intersection of business and consumer technology trends that are relevant to the insurance industry that require a new insurance platform. The insurance platform lays the groundwork of a new digital insurance business model defined by a focus on customer experience, business innovation and technological leadership, with rich and robust capabilities that will enable speed to value as a digital insurer. 

In the insurance platform report, we define a platform as an architected, networked system that provides access to a broad set of services, data and other capabilities; is continuously and seamlessly upgraded with newer technology, content and functionality; is accessed via APIs that are part of a robust, extensive API catalog; enables personalized customer engagement; is cloud-based, with a designed-to-scale, pay-per-use pricing model; leverages AI and machine learning through embedded capabilities; is flexible to aggregate heterogeneous services from multiple providers (technology, data, insurtech); and enables rapid “test and learn” for new business models and products while supporting current operational business models.

Fundamentally, the insurance platform model replaces the old paradigm of the integrated suite of core insurance systems focused on transactional processing with “one-size fits all” portals over the core. While that approach enhanced the traditional business of insurance of the last few decades, it does not meet the demands and expectations of a new era of insurance because it leaves unchanged the nature of the business model and the products that insurers sell.

Today’s next-generation insurance platform uses cloud-based technology architecture to unite core insurance processing systems — policy, billing, claims — with advanced digital and data/analytics capabilities and third-party services delivered via application programming interfaces (APIs) that will enable the customer-led digital transformation. Furthermore, platforms enable innovative companies to create speed to value, unique customer engagement, a “test and learn” platform for minimal viable products and value-aligned, optimized costs.

See also: Digital Future of Insurance Emerges

Digital Platforms Must Digitize, Optimize and Innovate

On June 24, SMA held a virtual event (now available on video) focused on digital platforms. Manish Shah, Majesco’s president and chief product officer, described the digital transformation journey with three main parts:

  • Digitize — This first step enables organizations to create digital portals for interaction with traditional product and channels, to digitize and automate the existing processes.
  • Optimize — The second step enables organizations to move beyond digital portals to create richer digital experiences beyond core transactions.
  • Innovate — The final step, and goal, enables organizations to launch innovative products and services to transform the business and operating models for sustainable, competitive advantage.

Customer expectations and changing market dynamics are shifting business and operating models and driving digital transformation. We believe that all three steps of digital maturity – Digitize, Optimize, and Innovate – are needed to build sustainable, competitive advantage in the digital age. Many of our customers are at the different steps from building next-generation customer and agent portals, optimizing the business with electronic bill payment, creating a powerful single quote and buy experience for different products across multiple policy systems and leveraging new dynamic sources of data to creating an innovative on-demand product for the market. These are just the tip of opportunities and innovation well underway.

Digital Leaders – From Owner to Orchestrator to Provider

Emerging digital leaders, many of whom align to our Knowing – Doing leader focus from our Strategic Priorities report, are aggressively investing in new business models, products, and processes – including customer engagement and distribution models aligned to a more digital economy and growing demographic.

Customers are looking for ways to make their lives simpler and have a great experience. The next generation of customer experience is bigger and broader, and it requires a digital platform and robust ecosystem that work together under one common platform across different core systems.

Given the nature of ecosystems, insurers can assume multiple roles, from owner of the unifying platform, to orchestrator of the products and services to provider of products and services. What insurers achieve will depend on their ability to create a cohesive digital experience … requiring a digital platform that creates rich customer experiences; innovates business models, products and services; leverages a vast ecosystem of third-party capabilities; capture market opportunities; competes in the digital age; and reinvents the insurance industry. Future success and growth are tied to your answers and your digital transformation. 

See also: New Digital Communications

What is your digital strategy and journey? What role will you play with your customers? Are you investing in a digital platform that will take you across the entire journey or stop at the first step of portals? Do you have a burning platform for today’s digital wildfire?

Strategic Priorities and the New Reality

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning, to sales and customer service, to critical cloud infrastructure and security—we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything.” — Satya Nadella, CEO Microsoft

This statement was on April 30 – just two months into COVID – and reflects the pace of change and acceleration of digital transformation across all industries, including insurance. The pace of change in insurance continues to gather speed and dominate C-level discussions and planning. 

Today’s changes require insurers to gain clarity on how to succeed in the future of insurance. Future market leadership will be defined by a new digital foundation and business model that embraces customer, technology and market boundary changes with vision and energy. This year’s Strategic Priorities report found that forward-thinking leaders are digitally transforming their current business, while also disrupting it by building their business model for the future. The gap between Leaders, Followers and Laggards over the last year and the next three years is staggering:

  • In the past year, Laggards had a 41% gap to Leaders; and Followers, had a 15% gap to Leaders. 
  • Over the next three years, the gap widens, with Laggards falling 62% behind Leaders and Followers trailing Leaders by 21%. 

The era of succeeding as a “fast-follower” is long gone. Today’s Leaders are reallocating their investments into digital transformation that gives them a compelling, engaging, customer-centric approach that differentiates them. 

How do your strategies align to what Leaders are doing? What specific plans can you take to improve your odds of success? How can you accelerate your digital transformation? These questions and more are what the just-announced strategic alliance between Majesco and KPMG are focused on: to provide a sustainable, risk-optimized route from strategy through execution.

Digital Maturity

Gartner’s Emerging Risks Monitor Report from earlier this year noted that “organizations are concerned about their ability to keep up with a rapidly changing business landscape, driven in part by concerns about their own organizations’ lagging and misconceived digitalization strategies.” This is a profound statement. Insurance still embraces decades of legacy business assumptions and technologies that are roadblocks on the path to digital maturity. 

Why is this important? Because KPMG’s research, compiled from various studies, found that digitally mature organizations outperform less mature organizations. How? Digitally mature organizations had 25% higher revenue growth and 31% higher EBIDTA over the last three years, 11% higher Net Promoter Score and higher speed to market by 17 months! Digitally mature organizations not only operate more effectively, they are obsessed with their customers and with defining, unlocking and preserving value for both the customer and their business.  

For too many insurers who lack digital maturity, this difference and the growing gap between Leaders and Followers and Laggards should be a strong motivator to move forward on the journey and get ahead of the curve … now. 

See also: The Rules of Digital Transformation

The Path to Digital Maturity

Visionary leaders see the market, customer and technological trends as a many-fold opportunity for insurance — and are preparing to use new sources of data, reach new market segments, offer innovative products needed by customers, create exceptional customer experiences, leverage new channels and more. KPMG’s recent report, 2020 CEO Outlook, found that the top priorities were focused on: digitization of operations (74%); new digital business models (70%); the creation of a seamless experience (73%); and a new workforce model augmenting people with AI (66%). 

Majesco’s research echoed a similar sentiment and indicated that leaders are moving forward with a cloud-based no-code/low-code platform using microservices and open APIs (64%); are envisioning and experimenting with new digital experiences (68%); and are focused on digital ecosystems and partnerships (45%) that will allow them to stay out ahead of the trend and the marketplace.  

This is why Leaders are accelerating their digital journey across three key areas as depicted in Majesco’s Digital Maturity Model (below):

  • Digitize – Create Portals for Traditional Products & Channels for Digitization & Automation of Existing Processes
  • Optimize – Expand Customer Engagement Beyond Transactional Interactions to Broader Customer Experiences
  • Innovate – Launch Innovative Products & Services to Transform to Digital Operating and Business Models

Insurers can start at any point on this maturity curve – from focusing on today’s business or by creating the business for the future. Regardless, having a single digital no-code/low-code platform with rich insurance content and a robust digital ecosystem of partners to enable this journey across a wide array of business scenarios is crucial for success. 

But acceleration means traditional methods have to be adapted to meet the time pressures.

Digital Maturity — From Good to Great

The book by Jim Collins, “Good to Great,” published nearly 20 years ago, is still so relevant in today’s digital age. While many different concepts were discussed in the book, the key to success was leadership. A key to that leadership is having the right people in the right positions to create an environment for success. They have a vision and goals for success and constantly review and act on data or results to “make it better.” 

In today’s digital world that is about creating an environment that enables “test and learn” and innovation. And the theme is speed to market.

See also: Optimizing Insurance’s Role in the Pandemic

Companies that procrastinate are risking irrelevance, because, as the pace of change accelerates, their ability to adapt diminishes. This is why taking action now is crucial.