Tanguy Catlin, Pradip Patiath and Ido Segev — all with McKinsey & Co. — recently made a bold prediction on the pages of the Harvard Business Review blog: that digitization will mean really big cost savings for the insurance industry.
“A thoughtful digitization program can deliver up to 65 percent in cost reduction, a 90 percent reduction in turnaround time on key insurance processes, and improve conversion rates by more than 20 percent” for insurers, they write.
However, the industry has a long way to go before it realizes the advantages of digital, they add. Many insurers still depend on legacy systems, and most digital efforts are concentrated on customer acquisition, but lag in customer service for existing customers. Many carriers simply don't have a unifying strategy to go digital.
“Some carriers’ budgets are so fragmented they cannot even tally their total digital spending, while others have so many organizational silos that it’s impossible to get any alignment on digital direction and scale,” say Catlin, Patiath and Segev. “In fact, only 50 percent of carriers have budgeted for long-term digital goals, and just 30 percent have a multi-year investment plan to support digital.”
From their recent research, Catlin, Patiath and Segev identified five common characteristics of highly effective digital insurance companies:
- Digital strategy for marketing, sales and service: Leading digital carriers “know their customers so well that 50 percent of their interactions with them are personalized,” the authors point out.
- Digital future: Advanced carriers have “placed bets on specific digital capabilities for the future (such as mobile) and have invested to rapidly build those capabilities.”
- Buy-in across the organization: “As the organization’s digital maturity increases, many digital functions become decentralized and are integrated into broader business unit activities.”
- Digital training and recruiting: Digital leaders have talent experienced or trained in digital business. In addition, Catlin, Patiath and Segev state, more than “60 percent have a rigorous digital training program in place.”
- They're willing to experiment and fail: Top digital insurers “reward risk-taking as part of the learning process. They have robust analytics in place, with 85 percent of their digital spend measurable in terms of return on investment.”
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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