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Editor's Note: Digital transformation challenges enterprises across a range of industries and opens the potential for consulting and implementation work for IT service firms. This article is the latest addition to TechTarget's coverage of digital transformation for insurance companies.
Digital transformation is all the rage nowadays.
By working with emerging technologies, startups are disrupting established industries and dramatically altering products, practices and distribution channels.
Established insurers are struggling to address these changes because they created corporate cultures that are antithetical to the traits required for digital transformation: speed, agility and boldness. Consequently, many insurance firms need help making the change, opening up new opportunities for IT service firms.
Indeed, digital transformation for insurance companies is creating work for partners in a number of areas. That's because enterprises need to take many steps to use digital technology successfully. First, they must identify new opportunities. Next, they need to look at the organization and determine and implement necessary changes. Finally, they have to put plans in place to train employees and deploy new solutions.
"Insurance is our largest vertical right now, and we expect it to remain so as these companies embrace digital transformation," said Richard Dresden, senior vice president at Ensono, a company based in Chicago that delivers and supports a variety of hybrid cloud services to organizations.
Digital transformation for insurance: Now a must
"Insurance customers now consider digital transformation as table stakes," stated Michael Costonis, the global insurance practice lead at Accenture, which delivers consulting services and products to enterprises and generated $34.9 billion in fiscal 2017.
Additional evidence of digital transformation's importance to insurers comes from Cognizant, a consulting and IT services provider based in Teaneck, N.J. Nearly two-thirds of the insurance industry respondents to a 2017 Cognizant survey "believe that digitally-driven transformation is the key to their organization's commercial future," according to the company.
Michael Costonisglobal insurance practice lead, Accenture
Technologies such as mobility, artificial intelligence, cloud and big data have the potential to alter many facets of the insurance industry, starting with client engagement. Via mobility, for example, customers have gained convenience and control over the buying and service processes. They expect to have information immediately sent to their phones and be offered high degrees of self-service.
Traditionally, many insurance companies relied on independent agents to market and support their products, so they also need to revamp their sales and distribution channels.
Improving an information-centric industry
Digital transformation for insurance companies also targets paper. Insurance is a forms-intensive business. Traditionally, these firms have had large groups of employees who spend their time inputting and routing documents. Insurers have been searching for ways to automate that process and recently became interested in robotic process automation (RPA).
Here, software automates routine tasks so enterprises replace mundane, repetitive -- but important -- human actions with intelligent bot software. This area has quickly gained traction: Transparency Market Research estimates RPA revenue will expand at a compound annual growth rate of 47.1% from 2016 to 2024 and reach $16.9 billion.
"Many insurers are incorporating RPA into areas like claims processing," Dresden said.
Such changes improve data accuracy by eliminating human error; streamline data capture; and reduce personnel costs, sometimes quite dramatically.
In addition, insurance companies now collect lots of information, and rely on analytics to differentiate their products and services. "Insurers want to get out in front of client demand and use analytics to forecast what customers will need next," Dresden explained. Insurance suppliers want to work with demographic information, such as a couple becoming engaged, and proactively market services such as homeowner's insurance.
Watch out for bumps
But established insurance suppliers face challenges in making this transition. Their corporate culture is a problem: Insurers tend to be risk-averse. Consequently, they are quite comfortable with the tried-and-true processes that made them successful yesterday and hesitant to give a thumbs up to the new ways of doing business in order to be profitable in the coming years.
Also, insurance suppliers often rely on legacy systems, which through the years have been highly custom-designed. Consequently, these solutions are not able to easily support digital transformational technologies such as public cloud. When the legacy solutions are connected to the new services, the links can be cumbersome and inefficient.
"Sometimes, insurers find that deploying new digital applications has a significant impact on their existing infrastructure," Dresden said. "In certain cases, the workload requirements increase tenfold."
For more information on digital transformation for insurance firms, take a look at this SearchCIO case study on Idaho Farm Bureau Insurance. You can also learn about how gamification can support an insurer's digital business strategy from these SearchITChannel tips on gamification techniques. And you can also find out how IT service firms are partnering with RPA vendors.