My husband and I just purchased a home. One of the first things my husband wanted to do was install a smart thermostat and light bulbs. We can now control the temperature and lights from our watches or cell phones.
Digital automation and disruptions are all around us. We tend to adopt technology in our personal lives earlier than in the business world, but technology and digital automation are now essential for competing in the marketplace.
Insurance Digital Future
According to McKinsey & Company, insurance companies should expect an annual profit decline of up to 1%, if they fail to use digital technology to improve efficiency and effectiveness. The insurance industry is at a digital tipping point; the time to act is upon us. To stay competitive, insurers need to shift from strictly automating their current processes to focusing on using technology to improve service and processing times; all while continuously looking for new ways to disrupt “business as usual.”
While McKinsey & Company warns that it is time for Insurance companies to face digital reality, there is still room for incumbent insurance businesses in this new world. Organizations that act quickly and decisively are likely to succeed. Those who do not, will not fare as well.
Insurers can focus on these primary value drivers to confront digital disruption head-on, and come out ahead.
- Customer Service: Shifts in consumer behavior has influenced many industries, but insurance has seen some of the most dramatic changes. Accenture advises that carriers need to change their business model from one that is product- and process-driven to one in which the customer is central. Strategically managing organization information and using the right tools, allows insurers to focus on the client and use data and analytics to drive decisions and experiences. Drive profit and improve your core business by responding to emerging customer needs.
- Process Efficiency: McKinsey & Companies research suggests insurers can more than double profits over the course of five years by digitizing existing business without additional process improvements. However, in the longer run, earnings from the traditional business will face headwinds as new ways to mitigate risk arise. Disruptions in the industry will put margins under pressure and force premiums to fall under the weight of price competition. As these challenges continue to appear, insurers will need to leverage technology to make their operations more efficient, lowering costs.
Focusing on the process along with technology not only reduces operating costs but also allows employees to focus on higher-value tasks. To compete with new disruptive business models, incumbent insurers will need to leverage data and analytics to improve their core operations and launch new business models. Newfound productivity will allow insurers to combat decreasing premiums and continue focusing efforts toward longer-term growth opportunities.
- Decision Competence: Insurers need to move quickly to compete with digital disruptors that have the ability to evolve with technology and customer needs. That means letting go of slow decision-making processes and out-dated ways of working. By leveraging data, insurance companies can adopt a new culture and talent base that is more comfortable with experimentation and learning. Leveraging data will help propel the company to greater heights.
Marcus Ryu, the CEO of Guidewire, points to this idea of decision competence as an essential attribute of successful transformation. He defines this as the ability of an organization to make a high volume of complex decisions, often under conditions of uncertainty, at all the appropriate levels of an organization. Ryu feels that this competency allows organizations to drive projects forward without having to continuously appeal to authority or convene a large group of people. He states that the most successful business transformations he has seen have been with organizations that have focused on decision making as cultural competency.
Traversing an ever-changing landscape may seem daunting, but advances in technology and access to data can give insurers the edge they need to disrupt “business as usual.”
Are you ready to pivot toward success? We can help you create a strategic roadmap that allows you to confront digital disruption head-on, and win!