Insurance isn’t going anywhere as long as people have assets to protect – but you can’t say the same about insurers. In a world driven by digital convenience, insurance companies are turning to new technologies to meet growing customer expectations for fast and easy online service. Insurers who do well at implementing digital insurance can expect to grow their business and improve their customer experience, while those who drag their feet about going digital may soon find themselves unable to compete with more advanced companies.
Of course, just because implementing digital insurance is needed doesn’t mean that it’s easy. To be successful, insurers must undergo a complete digital transformation of their company, culture and technology – a daunting task in a historically traditional industry. Such an undertaking comes with inevitable challenges, and many insurers have been slow to take the digital leap. If you’ve been thinking about taking your insurance company on a digital transformation, here are some of the challenges you may face when implementing digital insurance.
COMMON CHALLENGES TO IMPLEMENTING DIGITAL INSURANCE
1. Knowing Where To Begin
Digitalization is top-of-mind in the insurance industry, and there’s a wealth of information on the topic. But implementing digital insurance isn’t as simple as adopting an online interface and moving to paperless billing; insurers must carefully transform their entire organization to fully meet evolving customer expectations in the digital space. Becoming a digital insurance company is a journey rather than a destination, and knowing how – and where – to take the first step is often the first struggle insurers will face.
It’s key to begin implementing digital insurance with a careful strategy rather than jumping in with both feet. Unfortunately, there is no one-size-fits-all approach, and insurers may find themselves overwhelmed with a barrage of products, tools and technologies that promise to help them disrupt the digital space. If you aren’t sure how to choose the right ones for your needs and ecosystem, partnering with a strong technology partner can be a great start to digital transformation.
2. State of IT infrastructure
Legacy systems are a hallmark of traditional insurance companies – one that, according to industry experts, presents the biggest hurdle to digital transformation. For many insurance companies, the systems that are essential to core business functions like policy administration are built on outdated architecture that can’t support new technologies, making innovation difficult (if not impossible). IT infrastructures are often built around these antiquated legacy systems, creating a complex network of interconnected hardwares and programs that are not easily updated.
Despite the obvious need, removing or replacing legacy systems remains a challenge. It’s often expensive and comes with inherent risks to customer data, daily operations and business credibility. Still, insurers must devise a careful strategy for updating legacy systems if they want to stay competitive in a digital market.
3. Lack of Internal Expertise
Digital insurance requires both talent and technology to implement – and expand – successfully. Not only do you need a talented IT team to handle the technical aspects of digitalization, but you also need internal business teams that are equipped with the skills to work in evolving digital systems while enhancing user experience.
Unfortunately, many companies aren’t already staffed with highly tech-minded professionals. Although existing teams may be adept at managing core legacy systems, they often struggle to innovate and are not equipped to spearhead new technologies. Insurers must examine their internal teams carefully to ensure they are digitally literate and, if necessary, hire new talent or partner with strong insurtech companies to bridge the talent gap.
Because insurers aren’t known for being on the cutting edge of technical innovation, even large companies may struggle to attract top talent to the industry. But if you begin your digital transformation without the right internal teams, you’ll find it difficult to navigate the inevitable technical challenges that come your way, much less stay ahead of the market curve.
4. Internal Resistance to Change
Many insurers are surprised to find that one of their biggest challenges for digital insurance comes from their own employees. But people are generally resistant to change, and some of your most seasoned employees are likely set in their ways. They may feel uncomfortable when asked to upset their routine or take on new tasks, falling back to the old adage of it’s not broken, so why fix it?
Many employees also see technical innovation as a threat to job security. In the realm of digital insurance, automating policy renewals or implementing chatbots for online customer service could be seen as replacing administrative staff rather than improving efficiency. You can combat this fear by keeping everyone involved in your digital pursuits and being transparent about future roles. Building a company culture that prizes digital progress is key to success, and you’ll need every member of your team on-board.
5. Budget Constraints
Many insurers are unprepared for the investment of implementing digital insurance. The price of digitalization is multifaceted, spanning everything from the cost of buying and installing physical technology to the time spent training your staff and testing new rollouts. These investments can also be hard to predict as customer expectations and industry regulations are known to change rapidly. For example, emerging cyber-threats may result in swift legal rules that require digital insurers to increase spending on cybersecurity.
With many budgets already stretched in a downturned economy, aligning your budget to meet new digital needs can be a definite challenge. It’s important to allocate your resources carefully and remember that, in the long-term, digital insurance can reduce business costs and increase overall revenue, making it a worthwhile investment.
There are many challenges to implementing digital insurance, but future-minded companies can anticipate these obstacles and achieve a successful digital transformation. With the right digital mindset and a strong technology partner, insurance companies can create a competitive advantage – and an exceptional customer experience – to position you as a leading industry provider now and in the future.