Challenges of Digital Transformation in Insurance Industry have multiplied nowadays. As businesses continue to become more digitally-oriented, leaders face (and will continue to face) many challenges around their digital transformation process.
According to a recent survey, 97% of global IT professionals were involved in some sort of digital transformation in 2020. Is your company considering the following action? If so, you may be feeling confused.
While there are more technological capabilities at our fingertips than ever before, the way forward isn’t always easy. From securing funding to transitioning from legacy systems, many obstacles can deter even the most ambitious initiatives.
Today, we’re sharing some of the most common digital transformation challenges. But before these, let’s dig into the definition of Digital Transformation, its advantages, and why it is so important for the insurance industry.
What is Digital Transformation?
According to Salesforce, Digital Transformation is “the process of using digital technologies to create new — or modify existing — business processes, culture, and customer experiences to meet changing business and market requirements. This reimagining of business in the digital age is digital transformation.”
Digital Transformation is fundamentally the combination of digital technology into all areas of a company, changing how it works and delivers value to customers. It’s also a cultural change that needs organizations to continually challenge the status quo, experiment, and get comfortable with failure.
Nowadays it is crucial for all businesses, from the small to the enterprise. That message comes through loud and clear from apparently every keynote, panel discussion, article, or study related to how businesses can remain competitive and relevant as the world becomes increasingly digital.
Understanding Its Advantages
Digital transformation is changing the way an organization operates. Systems, processes, workflow, and culture are all evaluated. This transformation affects each level of an organization and brings together data across areas to work together more effectively.
By taking advantage of workflow automation and advanced processing, such as artificial intelligence (AI) and machine learning (ML), companies can connect the dots on the customer journey in a way that wasn’t possible before.
Some of the leading advantages of digital transformation are as follows:
Better customer experience: According to reports by Gartner, customer experience (CX) is one of the key drivers for sustainable growth in business. More than two-thirds of the companies majorly compete on it to thrive in the competition. Digital transformation can be vital in enhancing the customer experience and give you a clear edge over your competitors.
Data-driven customer insights: Companies will have better data-driven customer insights through digital transformation. With the help of structured data, businesses can make better customer-centric strategies, use social media metrics to increase their growth.
Greater resource management: Digital transformation brings all the tools to one place rather than having a dispersed database. Moreover, it can also integrate apps and software at a single junction for better Business Intelligence (BI). Businesses should not consider digital transformation as a functional unit or a separate department. Instead, it focuses on leading efficiency and innovation across units.
Increased productivity and profits: Companies that adapt to digital transformation see an increase in profits. According to Oxford Economics and SAP Centre for Business Insights, 85% of the companies see an increase in market share through digital transformation. In addition, 80% of the businesses that have completed the cycle of digital transformation report better profits.
Increased agility: Digital transformation makes organizations more agile. Borrowing from the world of software development, businesses can increase their agility with digital transformation to improve speed-to-market and adopt Continuous Improvement (CI) strategies. This allows for faster innovation and adaptation while providing a pathway to improvement.
After understanding the positive impacts of digital, it is time to see digital transformation challenges and opportunities.
Challenges In The Digitalized World
In 2020, many organizations made process improvements and adopted new technology. However, many of these companies didn’t have lofty goals in mind – they were simply forced into making these changes to continue operations amid a pandemic.
Moving into 2021, these organizations are struggling to define how their new digital strategy fits into their longer-term goals. In addition, they are facing issues such as:
- Employee Pushback
According to a 2016 Digital McKinsey survey, the most significant obstacle to achieving digital goals is cultural and behavioral challenges.
By our real nature, individuals like routines — they make us feel comfortable. It is called the comfort zone for a reason. Things can easily start to seem harsh when our habits are changed and uncertainty enters our lives. Experiencing a digital transformation is the essence of discomfort — so it may make employees feel threatened.
It is important to note, however, that sometimes change is a must to keep up with the times because not changing is far riskier. Digital transformation is indispensable to your company.
You may be unable to completely eradicate doubt and uncertainty from employees’ minds, but you can certainly mitigate them. Being consistent and transparent is key. Keep your employees involved throughout the whole process. Empower them and paint them a future they can all work towards. By helping your employees understand what’s at stake, you can light a fire in them.
That, of course, requires a compelling strategy, which brings us the right to it.
- Lack of a Defined Strategy:
Digital transformation is considerably more than a buzzword. Yet, it often gets thrown around without any precise definition. This leads companies to forge ahead in murky waters, confident that they need to be moving but not sure where they’re going.
Without a strategy in place, your transformation could fail to get off the ground. So, ask yourself: What are my company’s goals and priorities? Are they consistent across the organization, or are some stakeholders on completely different pages?
- Lack of Expertise to Lead Digitization Initiatives
It takes a combination of expertise and technology to go through your digital transformation. One without the other will not cut it. If your current systems are holding you back, it’s time to reevaluate your technology partnerships and what they have to offer.
The digital transformation will bring along its myriad of technological challenges and you need the right people on board. Tutor your workforce to be digitally educated and help them build the abilities needed for innovation. By making early investments in your people, you can stay ahead of the game.
You may not have the expertise internally at this moment to take on a digital transformation. This may provide you a chance to look outside and find business partners or new hires that will support you on your digital journey.
- Limited Budget
Wouldn’t it be nice to have an endless pool of financial resources? Unfortunately, that is not the reality. Your company will likely face budgetary limitations that may limit any part of your digital transformation journey. Be aware and prepared for it.
While the digital transformation may require new, and sometimes abundant, investments in your company, people, and customers remember this is not a race. When you build your digital transformation strategy, use your resources as a reality check to see how much your company can manage. Develop a plan that involves several phases over several years, if that’s what is required. Don’t put your company at risk over budgetary issues.
Although these are the biggest obstacles to digital transformation. Overall, remember to build a solid foundation first — one that drives a wide set of outcomes for your company, customers, and employees.
With a mindset of continuous improvement and innovation, all of the benefits of a digital transformation are within range. Just be sure to tackle the challenges as they come and do your best to prepare in advance.
Why Digital Transformation Is Vital For The Insurance Industry
Digital transformation has transformed countless commercial industries – from manufacturing and retail to hospitality and healthcare. The insurance industry has traditionally been reluctant to modernize, but it is now clearer than ever that the time is now for insurers to adopt digital transformation.
Insurers today have had to digitize various aspects of their operations to keep up with the needs of insureds. Any business that wants to stay competitive in today’s marketplace must meet customers where and when they need something. The digital transformation of insurance – powered by artificial intelligence, machine learning, predictive analytics, mobile service, live chat, etc. – is allowing insurers to do just that, and will keep shaping the industry for years to come.
Here are few reasons why digital transformation is crucial for the insurance industry.
- A changing insurance marketplace:
To compete in today’s market, where large disruptive players, as well as smaller niche players, are exploring opportunities, insurance products need to be simplified and personalized. Instead of agents pushing products based on commission, the focus needs to be one of the trusted advisors providing product information and customer education.
Insurers now also need to be able to launch innovative products more commonly, based on the various demands of the marketplace. Most important, insurers want to know their customers and answer to their expectations.
- Understanding the digital customer:
Today’s customers or prospects have come to expect the digital experience they enjoy with the fast-moving consumer goods industry. They require to get a policy serviced or a claim managed efficiently and effectively.
For example, Millennials and Generation Z consumers want a different experience in their transactions. They expect feedback from social media about what they are buying, they want offerings to be easy to understand and buy yet personalized to their demands. They suppose to have an omnichannel experience, meaning that they might start looking at a product on their desktop, continue the journey of signing up while on the move using a smartphone and maybe pay from their tablet. Therefore, the user interface requires to be standardized and mobility enabled.
Customers expect to be able to leverage newer technologies such as chatbots to ask questions and get answers. And because they are used to a service-oriented experience, they aren’t willing to wait 2 weeks to get a policy mailed to them. They want an email sent immediately with well-encrypted information.
Nowadays, product personalization and life cycle-generated cross-sells depend on having a completely automated environment that tracks the customer’s experience over a lifetime and relevant products.
- A digital imperative for insurance:
Given the demands of customers and an increasingly fractured and competitive landscape, insurance companies need to be able to leverage data and data quickly and effectively to stay ahead. The fact is that most insurers are sitting on terabytes of decades-old data.
While companies have led basic metrics and reporting, they have largely been doubtful of how to leverage this knowledge. Now, they are looking to develop predictive analytics capacities to determine customer behavior and expectations.
The journey from idea to market needs to be speedy and relevant. The capacity to perform comprehensive analytics for better business decision-making depends on having a digital platform that can obtain enterprise-wide data and take advantage of cloud-first capabilities such as machine learning and artificial intelligence.
Cost is another driver for digital transformation in the insurance industry. It has battled with legacy systems, ending in higher costs linked to maintenance and system upgrades. And since IT is one of the first areas to face cuts during downturns, it’s often a struggle to get the budget needed to keep mainframes and other technologies running smoothly.
Cloud-based digital platforms, nevertheless, drive companies away from a capital expenditure (or CAPEX) model and toward operational expenditure (OPEX) or consumption-based model, which means IT is less dependent on C-level and board approvals for infrastructure. Instead, an insurance-as-a-service platform lets the company pay only for what it needs, adding capacity as required.
Ensuring a Successful Digital Transformation With Nearshore Outsourcing
The digital transformation challenges listed above might seem overwhelming, but they don’t have to mean the end of the road for your project. Learning how to prepare for, identify, and work around these issues is key.
For companies based in the US, outsourcing to Mexico is a unique way because it includes more benefits than any other option available. So choosing the right digital transformation partner is key. Technology and expertise are essential to successful projects.
At Ascend we would love to help your insurance company with your digital transformation through Nearshore outsourcing to achieve your business objectives.
Our competitive advantage is based on 20+ years of experience in the insurance industry, a reliable talent pool of skilled IT professionals, cost-effective solutions according to your needs, and multiple facets of services like Legacy Systems Modernization and Maintenance, Quality Assurance, and Software Testing, etc.