5 insurance digital transformation myths... or not?

Published January 19, 2021 5:21 AM

1 Min Read

Strategy Meets Action, an insurance technology advisory firm, is kicking off the year with a look at five statements about insurance's digital transformation and an evaluation of whether it represents a myth or the reality of the post-pandemic industry. The company has granted Digital Insurance permission to repost portions of the analysis.

SMA also recently announced it had been acquired by ReSource Pro, along with another consulting firm for insurance, The Nolan Company.

Myth or reality: Digital transformation has stalled due to the pandemic

By Deb Smallwood, senior partner

To assess this statement, we really need to think about digital transformation from past investments, the current state in the context of the pandemic, and the strategies planned for 2021.

And then we can ask ourselves: Has digital transformation stalled?

Well, 2020 has been quite a year! I want to make two key points that we've learned during the pandemic. One: The insurance industry is financially strong. It is weathering the pandemic, just like we've weathered other natural and man made disasters over the years. And we should all realize how blessed we are to work in such an amazing industry! The second: The pandemic has brought real clarity to digital engagement and digital enablement across personal and business life. It has highlighted where insurers have made great investments in the past and where our gaps are. The gaps came into sharp focus the minute we went into lockdown and everyone started to work virtually. We saw all the paper: the paper checks, the correspondence, and the forms still coming into the organization – along with a lot of paper and paper checks going out of the organization. We also saw a lot of manual workflows, mainframes requiring people in the data centers, and our lack of providing digital experiences for our policyholders, agents, brokers, claimants, and our employees too.

And so, as we look forward into 2021 and consider the statement “digital transformation has stalled due to the pandemic,” we can see that it is a myth. The reality is that almost all insurers believe that digital transformation is essential. It is critical to all business strategies and plans. And this belief has only been reinforced by the pandemic. In fact, our experience in 2020 has actually accelerated plans and strategies for digital transformation. The difference is that the strategies and plans are being reshaped and reprioritized as a result of the revealed gaps. Most insurers now have a new list of projects: digital payments, improved self-service capabilities, and updating the overall portals for starters. If anything, the list of projects has increased. Another thing that affects our digital strategies is the new clarity around operational efficiency and the customer experience. And so, as we look into 2021, digital transformation strategies are really going to be more about growth in operational excellence, optimizing operations, and improving the customer experience, and less about innovation and transformation. So, it hasn’t stalled. We are going full steam ahead into 2021.

Read the full piece on SMA

Myth or reality? Remote work halts innovation and collaboration in the workplace

By Megan Bock Zarnoch

Is it myth or reality that remote work is going to halt innovation and collaboration in our workplaces? I want to clarify something up front. Usually when we say “innovation,” what immediately jumps to mind is technology. But the definition of innovation is much broader than that. So, apply it to all kinds of products, services, solutions, etc., across a wide range of organizations. Remote work halting innovation and collaboration is a concern we heard voiced by multiple insurers this year, especially since they depend on collaboration to help their organizations build deeper and wider relationships with their agents and brokers to develop more business. And the truth is, deciding whether this is a myth or a reality is tricky, because it's really up to the company and their organization. It is certainly a fact that remote work can make innovation and collaboration more challenging. It removes easy access to that organic, unstructured “white space” where conversations naturally happen: grabbing a cup of coffee, passing in the hallway, or chatting and building ideas after a meeting. However, the pandemic of 2020 has shifted the vast majority of work in the insurance space to remote – virtually overnight. Besides the added challenges, it also makes innovation and collaboration even more important. Numerous studies have shown that companies focused on innovation, both during and after a crisis, financially outperform the companies that do not, both during the crisis period as well as far into the future. So, it really is important that we do what we can to make sure this stays a myth.

It is also true that innovation doesn't happen in isolation. But a wonderful silver lining in 2020 is that the decades-long investments in digital transformation (which, frankly, have happened largely outside of the insurance space) have enabled us to remain connected rather than isolated. During 2020, we have been able to use tools like Microsoft Teams, Zoom, Slack, and online collaboration platforms like Miro to work together while we are apart. And the added benefit is that we can tap into the best resources for the topic, project, or relationship, regardless of location. That said, it's not enough just to have the tools available. We also need to create an environment that encourages innovation. The fastest way to derail innovation efforts is to have a fear or shame-based culture in which teams and employees are too afraid of making mistakes to offer new ideas. A courageous and specifically inclusive approach to ideation and doing business is really crucial – one where risk-taking (including the inevitable failures along the way to success) is rewarded and recognized. That's how we get the best ideas and bring them into action.

Read the rest on SMA's site

Myth or reality? Core systems take a backseat to digital projects

By Karen Furtado, partner

I know many of you have been in insurance for quite some time. And it might really sound like an amazing statement to say: “Core systems will take a back seat to digital projects.” The other blogs in our “Myth or Reality” series have provided a lot of context and information about the many different initiatives and priorities that are critical for insurance companies to truly transform in this day and age. As we saw happen back in early March, there was a real pivot. And there was a pause to reassess what the priorities truly were. How would core systems need to interact? How would we keep pursuing core systems – either as replacements, enhancements, or roles, etc.? In this digital age, we feel tugs and pulls from the many different priorities that we have. Are we trying to cut back some of our costs? Are we really focused on all of the digital engagement initiatives that we have underway? And where does core sit in all of this? Well, I would suggest that core taking a backseat is a myth: Core systems are not necessarily the drivers of digital projects, but they are the enablers. They are the core – the hub of many of the interactions with data from both internal resources and external resources. The facilitation of transactions connected via APIs are now the critical enablers for digital engagement.

When we look to our internal operations, how effective are our resources, our underwriters, our billing staff, or our claim staff? Is the core system enabling them to move forward with their tasks in the most efficient and effective way? How open and interactive is your core system with bot technologies or RPAs? Moving forward, we must enable the balance between the digital workforce and the human workforce to be the most efficient operation that it can be.

As we look at this through the external lens, there is a plethora of different technologies and initiatives out there focused on external digital projects. We now have digital platforms. We have new UI initiatives. We have a whole new way of looking at our interactions with customers and agents. How does your core system help enable the transactions? Is it open? Does it have access to the APIs? Is it efficient? Can it perform? Can it live in the new world? We know empirically from our research this past year that core, because of the type of expense it is and because of its criticality to organizations, continues to push forward as one of the strong and key initiatives. Whether you're sourcing a new system, in initial deployment, or in rollout, remember that core initiatives do not take place in a short time frame. They are significant investments. We are balancing a new world of digitally engaged platforms with the enterprise core system needs that we have today. There is a fit and purpose for every type of solution out there. Some are meant to expedite new product innovation, and others are meant to handle the thrust and bulk of transactions and the volume of significant blocks of business. The important thing is to make sure your core system is working cohesively within your digital structure and enabling you to move forward with the digital projects that you have underway.

Read the full piece on SMA's site

Myth or reality? The pandemic signals the end of agents

By Mark Breading, partner

With each new wave of technology over the past few decades, there have been many predictions that this is the end of agent distribution. You know the drill: “Technology can be so much more efficient and remove all that expense related to those human distributors.” I can remember back to the dawn of the Internet when there was all the discussion about disintermediation. I heard that term in all kinds of insurers’ strategy discussions. I never believed agents and brokers were going to be displaced then. And, they certainly have not been displaced. In fact, in the intervening decades as digital technologies have advanced, they're still dominant.

Now, we are in the midst of the pandemic. It has been a world changing event. And it's also an event that has accelerated the digital transformation of businesses, society, and our industry. The inability to meet in person and the rapid shift to everything online has put pressure on the agent distribution model. So, the real question is: Has the pandemic been the catalyst that finally puts the nail in the coffin of agent distribution (for all those folks out there that that don't like agents or don't think they add value)? And once again, I have to answer a resounding “no.” I think this idea is a myth. For complex lines of insurance, mid-to-large commercial line specialty insurance, high-net-worth on the personal side, and other segments, agents will be necessary. There will always be a need for expert advice on risk management. And there will always be a need for intermediaries who deeply understand customer needs and can create that right combination of coverages linked to the right underwriters. These areas will benefit more and more from technology over time. But the agents and brokers are likely to be around for a very, very long time.

It could be a bit different for more simple lines like personal auto, homeowners, pet, travel (you name it) and some of the new on-demand or gig economy types of insurance. There are strong arguments that those lines will migrate more rapidly to direct digital distribution. But even then, it's not going to happen overnight. It will be a slow evolution. And my prediction is that there will still be agents selling all of those lines in 2030. So, I think that, overall, this is a myth.

Read the full piece on SMA's site

Myth or reality? Customer experience is a discipline unto itself

By Judy DeLarosa, CX contractor

Today, when people talk about the customer experience, there is an idea, or a myth, if you will, that customer experience is a discipline unto itself. Consider this scenario: Let's say you've appointed a head of customer experience, and it’s likely they are part of your senior management team. You have a customer experience practice. This might be a small team of a few people, or it might be a larger division or department within your organization. And you've implemented customer experience driven practices and procedures. You're doing research. You're creating and using personas and journey maps. Maybe you're even doing a service blueprint. And, of course, you have metrics and measurements. And from that, you get analytics and intelligence. You know what your customers need. You know how they feel; you know what they're saying. And you are acting based on what you learn. It's impacting your priorities, your decisions, and your investments. So, you've established the discipline, and you're doing everything right to become a customer experience driven organization.

The question is, are you really? And therein lies the myth. Don't get me wrong. Everything I just said is essential to your organization. But if your customer experience discipline is siloed, if it is simply aligned but not embedded and woven throughout your organization into everything you do, and if it is not a key driver for almost everything you do, the notion that you're truly a customer experience driven organization is more myth than reality.

Creating the reality of being a customer experience driven organization requires education, understanding, and implementation of the discipline throughout your entire organization. It calls for the knowledge of how customer experience differentiates from customer service and the need to share, apply, and nurture practices and assets, not simply develop and document them. This is not about creating personas and journey maps and then putting them on a shelf or implementing them within a siloed discipline. CX assets and practices need to be top of mind and referenced frequently by everyone – in thoughts, conversations, planning, practices, and absolutely when making decisions. And, just as your customers’ journeys continually evolve, so must your CX practices and assets.