By Henna Karna (as appeared in Insurance & Technology magazine, April 7, 2014)
Answers to common questions about what it means for carriers to embrace digital, and how doing so will enhance service to policyholders and drive operational effectiveness.
Insurers have been working hard modernizing legacy systems, collecting and analyzing data, providing multichannel access, and adopting cyber and social media strategies, not to mention mobile devices and the cloud. So now that they’re “all dressed up” technologically, where do they go?
The answer is they go digital. From creating a community of customers to helping achieve the highest levels of product and service offerings to streamlining internal operations for efficiency and productivity, digital presents carriers with both challenges and opportunities. Here are answers to some common questions about what it means for carriers to embrace digital, and how doing so will enhance service to policyholders and drive operational effectiveness.
Going digital, in simple terms, means transitioning from an “inside out” to an “outside in” approach to business. With the exception of a handful of super-enterprises, most companies are focused on “What can I offer to customers?” and “What can I deliver to customers?” That focus is important but traditional “inside out” thinking. On the other hand, companies with an “outside-in” orientation ask questions such as: “What do customers consciously — and subconsciously — want? How can I affirm, if not expand, my control over the value chain with new ideas and products? How do I redefine business processes with an operating model that informs key answers to the aforementioned questions?”
But keep in mind, a more holistic view of digital encompasses both external expansion that is customer-centric and internal optimization that improves efficiency within the organization. Linking the two is important for a seamless, effective operating model.
With the exception of a select few, insurers have been slow in their evolution toward digital, even as the broader digital phenomenon continues to permeate the retail sector, banking, and many others. In some cases, organizational legacy can impede technological innovation. Even so, the tipping point toward digital is certainly imminent because the insurance industry stands to gain significantly from advances in big data analytics. As systemic capabilities emerge that enable the collection and mining of large, disparate, and often unstructured data elements, the insights gained in an environment enriched by big data can have a profound impact on risk models, pricing, underwriting, and other core elements of the insurance value chain.
At the highest level, a carrier would have to engage its audiences more frequently, more personally, and across multiple channels. Digital engagement should mimic the personalization of face-to-face interactions, offering a collaborative environment in which customers can participate in idea generation and product development, and the organization is better able to understand and predict customers’ wants and needs.
On a more practical level, executing a digital engagement strategy should be gradual but still involve all key facets of the company’s infrastructure. Although a digital platform is heavily supported by technology and is rooted in IT, it should be a priority for the entire business. Paramount for digital success is a broad top-down mandate that spans marketing, sales, service, operations, finance, and IT.
Because a digital approach enables a clearer view of the quickly evolving, unpredictable marketplace and illuminates the path forward in the evolving, data-driven world. Also, technological advances have created the digital customer — one who is empowered by technology, distracted with technology, and social through technology. Going forward, communication with customers will be continual and bidirectional, capturing customers’ sentiments and built upon self-service as well as co-creation of products and services. Supported by an efficient operating model, digitally enhanced technology effectively enables value creation for the business.
One challenge is to recognize and attract modern, digital consumers — those empowered and demanding data; distracted and receiving information from a variety of competing organizations; social and sharing information with other consumers. In this environment, insurers must identify even more with consumers to steer engagement strategy appropriately for each customer segment.
Insurance companies are also struggling to gain actionable insights from the large swaths of data available today. The more data carriers have, the more disorderly it becomes, which heightens the risk of missing key or valuable insights — in turn, making the transformation to a digital engagement model all the more critical.
The challenges of the present, however, don't change the fact that digital engagement is the blueprint for future corporate operating models. To that end, organizations that embrace, implement, and refine their thinking around this imminent paradigm will be the likely standouts among insurers in the years ahead.
Dr. Henna Karna is president of Verisk Digital Services, the digital business unit of Verisk Analytics.