The insurance industry is traditionally slow to innovate, and that’s a problem today. Today, more than half of all consumers research insurance brands online, especially using social media, before determining which one to contact for a quote. Yet 57% of all insurance companies have operating models that do not facilitate digital connectivity, and the majority of companies want to meet the needs of digital consumers but are not doing so right now. The key is in innovation of the insurance value chain.
How is digitization impacting every component of the insurance value chain?
Every aspect of the insurance value chain is impacted by digitization, from interactions with customers to underwriting and claims management. Those insurance companies already embracing digitization are finding outstanding success in many areas. They are seeing a more consistent and customized omnichannel experience delivered to customers. They are using social networks as tools for sourcing information and are able to offer real-time solutions including micro-insurance offers to meet specialized needs.
A key way to reduce costs is to automate the claims management sector of any insurance business. Moving toward a no-touch claim method minimizes costs while also offering better predictive and preventative tools. It also aids in reducing fraud and allows risk managers to better engage with customers instead of spending time behind paperwork.
Another impact is on underwriting. Insurers that successfully use digitization are seeing more speed, better accuracy, improved risk evaluation, and more refined risk segmentation. In short, it gets the job done faster and more effectively. Designing products is more efficient as well. In fact, companies can make better use of connected objects, new services, and fraud management tools. Then they can embed and test them with users. This allows for a streamlined approach to developing new products.
Real-time access is powerful: It allows companies to create a “fail early, fail often” strategy, lets them better find and access competitors, provides the ability to scale, and outlines threats.
Every sector of the insurance industry can benefit. More insurance companies are realizing the impact it can offer. But how?
Re-imagining business models and processes enables digitization
Your customers want to submit claims online. They want to compare policies online. Marketing, claims management, agency management, and much more can all be managed more efficiently using digital methods. How can your business move from its current state into the digital economy?
It takes a focused effort on changing existing business models and processes to achieve this goal. A key concern for many insurance companies is the changing digital economy. Customer demand is changing. New technologies are influencing the way businesses operate. New entrants in the market already making an impression digitally are playing a role. How can your business compete?
New, enhanced business models also play a role. Here are several examples: A digital lifestyle insurer is one that offers a customer-centric business model, putting the customer first. It offers customer profiling for better marketing. It enables omnichannel connectivity to link the business to its customers. And it allows for micro-segmentation, allowing the business to offer customized products based on individual needs.
Becoming a connected insurer will enable you to build a business that provides for your company’s needs across all devices. In today’s networked economy, offering this type of connectivity of services across all customer and corporate platforms is essential. A data-driven insurer is also a powerful business model as your organization collects and interprets data to better leverage risk. It transforms your business, shifting it from risk protection to risk prevention.
Selecting the right business model (or models) is essential. However, as your business incorporates these new business models, it becomes necessary to manage business processes. In short, you need to evolve many of the older, less efficient processes that are now being used. Engaging in new solutions spreads the benefits and value across the business.
Changing business processes
The potential changes are many. From digital customer management to risk management insurance, it’s easy to see the impact. Now, consider how to modernize processes.
With digitization, changes happen right away, including research and development. Insurers can adjust how they research and develop insurance products. For example, they have access to data on driverless cars. They can incorporate fitness-based health insurance programs. Insurers can offer products designed to meet individual needs. “Pay-as-you-behave” products are possible.
Customer engagement is another essential process change, perhaps because of the “Amazon Factor.” (In short, companies like Amazon set the bar high by creating outstanding engagement opportunities.) Other organizations like Uber and Netflix understand and implement this, but insurers consistently do not. However, customers expect similar access. They want personalized interactions. And they need easy-to-use tools. Digitization enables you to offer these things.
Part of effective customer engagement is offering a consistent user experience across all connection points. Customer interaction online and over the phone should be equal. Consumers want support on their smartphones. Another business process change lies in automation. Claims management is an excellent solution. It reduces costs and improves accuracy. Automation in underwriting can also meet customer needs for faster service. By automating services, insurers embrace the technology already at their fingertips.
What else can digitization do?
Digitization improves every component of the insurance industry: It improves customer retention. It aids in improving employee satisfaction. It reduces costs. It provides better insight. Across all aspects of the value chain, digitization becomes a powerful and highly effective tool. In a digital economy, insurance companies have access to powerful digitization tools.
Download our insurance white paper How Insurers Can Prepare for the Digital Revolution today to see what SAP has to offer. We will work with you to develop an insurance business that’s ready to meet the needs of the digital world.