It’s one of the oldest financial businesses in the world. So, it’s not surprising that insurance has been pegged as a slow-paced industry, bogged down by manual and time-consuming processes. But lately, the insurance landscape has been changing. New competition from surprising sources such as Amazon, AT&T, and new technology are forcing insurers to reexamine their strategy. They need innovative solutions so they can stand out from the competition, retain customer love, and increase customer lifetime value. And, although their digital transformation in insurance has had a slow start, it seems it finally reached a place of honor on the agendas of most CIOs in the industry.
A New Landscape: How Technology Is Disrupting the Insurance Business
Because technology has burst in on pretty much all spheres of life, consumer habits and the way businesses operate are forever changed. In the case of insurance, technology has brought three significant game-changers into play that require executives to integrate digital into their strategies:
- New players: Just like Fintech has changed the finance business, so has Insurtech. Over the past decade, investors have been looking into these new players with particular interest, forcing traditional insurers to find innovative solutions that help them stand out. One thing is for sure: not all Insurtech startups will succeed, but the ones that do will have a considerable impact on the industry. The game has already changed.
- New technology and data: New technology like drones, wearables, and AI are affecting the way customers look at insurers and, consequently, the way companies envision their digital transformation. When used wisely, new technology and data can be instrumental to deliver great customer experience and improve business efficiency.
- Change in customer expectations: In a world powered by technology, most goods and services are just a click away. This has changed customers’ perceptions of what a great experience is. They are more demanding and expect unique experiences to be available anytime and anywhere. In a market known for customer churn, great experiences are the competitive advantage needed to increase the stickiness of customer relationships.
Although these game-changers open new opportunities for insurance, establishing a digital agenda in a traditionally slow industry is not an easy task. As the market landscape changes, a multitude of challenges arise.
Embracing Digital Transformation: The 5 Biggest Challenges for Insurers
Executives expect technology to help them improve their competitiveness and customer loyalty while cutting costs and boosting growth. But to achieve a successful digital agenda, there are several hurdles insurers need to surpass. Here are the top five digital optimization and transformation challenges for insurers in 2019.
1. Grow Business Through Great Experiences
As observed in a survey from Ernst & Young, “40% of consumers decide to continue insurer relationships based on the quality of the experience.” Insurers are expected to deliver omnichannel solutions across mobile, web, chatbot, and call centers, providing customers with seamless experiences wherever they are and whenever they want.
But that’s just part of the challenge. Although agents and brokers play a crucial role in the insurance business, most agent portals have poor experiences. In fact, the 2018 J.D. Power U.S. Independent Insurance Agent Satisfaction Study states,
"Among agents, overall satisfaction with insurers is just 696 (on a 1,000-point scale) for personal lines and 686 for commercial lines, which are among the lowest scores for business-to-business relationships in J.D. Power satisfaction studies."
In a competitive market such as insurance, where the performance of agents and brokers is critical for acquiring new customers and keeping existing ones, executives have a new mandate: optimize the experiences of their teams. Easy-to-use and friendly portals must be at the top of their agendas.
2. Speed Time-to-Market and Beat Insurtech Competitors
Insurtech has shaken up the insurance business. Taking advantage of data analysis and new technology like GPS car tracking or the activity trackers on wearables, Insurtech has transformed the market with new solutions and better experiences. And, even though the startup activity in insurance has slowed, Insurtech continues to play a major role in shaping the future of the industry.
The biggest challenge for traditional insurers is to align their years of experience—something Insurtech companies lack—with new ways of reaching customers, policyholders, agents, and partners. And, of course, do it all with speed, agility, and the right time to market. No pressure, right?
3. Deliver Seamless Experiences Across Countries
As most insurance carriers operate across different states and even countries, companies need to ensure they deliver a seamless experience. But different countries have different regulations, and insurers need to adapt their policies and procedures to be compliant everywhere.
Not to mention that those regulations are getting tighter and tighter. Last year, the European Union updated the Insurance Distribution Directive. And in 2016, the U.S. government expanded the Department of Labor Fiduciary Rule to add stricter governance on how an advisor deals with a client in 2017. Although a Court of Appeals vacated the rule in 2018, insurers had already put measures in place to comply. In addition, the SEC is looking at it closely and might implement parts of it in 2019.
The challenge for insurance companies that operate in a multitude of countries is to be able to customize and adapt their business and user experiences quickly to comply with the different federal or state policies.
4. Ensure a Connected Digital Ecosystem
As competition continues to increase, many larger insurers are growing their business and services offerings by plugging other companies into their ecosystem. For example, Pay-As-You-Go insurance is an auto insurance program that adjusts rates based on the number of miles you drive. As a result, they’re able to broaden their market to new customers, diversifying their product and services portfolio. But it also makes their business a lot more complex. Insurers must connect all these different components of their ecosystem seamlessly, ensuring a smooth experience for customers, brokers, agents, and partners.
5. Maintain Legacy Systems and Address the Increasing Backlog
As we mentioned, innovation is essential for insurers to stay competitive. However, the results can take some time, which can become frustrating. Many companies, especially mature ones, still trust their business to complex, disjointed legacy systems that consume not only financial but also human resources, hampering innovation.
At the same time, their backlog continues to grow. According to the State of Application Development, Insurance Industry Report, 65 percent of IT professionals said they have an app dev backlog, and for 10 percent of these respondents, the backlog was over 10 apps. Only 32 percent said their app dev backlog had improved in the last year.
In addition, according to the same report, development skills are hard to find: 65 percent of organizations have hired web or mobile developers in the past year. Eighty percent of respondents described app dev talent as scarce, with hiring taking longer and costing more.
Overcoming These Challenges With Low-Code
The question is: is digital transformation an opportunity or a threat? It’s all a matter of adaptability, really. Forward-thinking companies will look at these challenges as an opportunity to differentiate themselves from their competition. And that’s where low-code can help you.
Insurance companies like Liberty, AXA, Fidelidade, and Zurich have been using the OutSystems low-code platform to deliver next-generation agent portals and customer experience capabilities. The result is better engagement and communication with their agents and customers across any channel or device.
With OutSystems you can:
- Increase your time to value: Build customer and agent portals up to 10 times faster than your competition.
- Enhance your IT team’s agility: Customize and configure applications based on customer or agent feedback or adhere to new regulation standards within a matter of hours.
- Break down silos: Knock down all the siloed legacy systems and orchestrate all data streams into a single viewpoint and achieve the holy grail of a 360-view of the customer using the OutSystems API layer.
- Improve your flexibility: Build a customer portal or rewrite a core legacy system. OutSystems is a highly flexible platform that grows and flexes with your business.
- Write and reuse: Reduce the need to rebuild and save time and development resources by reusing “objects” across applications that require the same piece of functionality.
Want to learn more about how OutSystems can help you? Visit our Insurance Page.