Digital transformation trends in insurance

Insurers tend to innovate slowly in an attempt to get things “right” in a heavily regulated industry. But that is changing. COVID and climate change have accelerated the digitalisation of the insurance industry, and there is no going back. The time to act fast is now.

However, the traditional challenges remain: insurance is compliance-heavy, and the financial and reputational risk of getting something wrong can be huge. Established insurers have complex systems that can be difficult and costly to modernise, and the insurance industry rightfully resists ill-considered changes that can bring about unforeseen risks.

But the competition is realising that digital transformation can generate a competitive advantage, and newcomers are starting as digital-only services. Legacy technology and cumbersome processes simply cannot allow insurers to innovate and manage risk effectively. Systems designed decades ago will become risks themselves, as they struggle to cope with the demands of today’s insurance industry.

This is all the more reason to embrace digital transformation. It is easier today to assess risk, profitability, and customer needs through the use of emerging technologies.

Digital transformation trends in insurance

The goals of increasing revenues, reducing costs, encouraging customer loyalty and promoting brand recognition remain, but today’s strategies require digital insurance technologies.

Customers embrace digital distribution and readily take advantage of automated processes, including chatbots, driven by artificial intelligence and machine learning. And while customers expect their data to be collected, they want it to remain secure. That security depends on sophisticated digital safeguards.

Insurers need accurate data for real-time analysis and algorithmic underwriting. In addition, they need flexible policy management systems that allow them to create new products quickly in response to new needs, such as the need for protection from climate change disasters, and incorporate ever-changing risk factors into product pricing.

Speed to market is the single most crucial advantage an insurer can have with new products, and that process is accelerating as digital capabilities multiply.