We identified the insurance industry as lagging in our debut HFS Insurance Industry Primer in 2020. However, as we’ve discussed countless times in our research, digital is no longer optional, as the pandemic accelerated every enterprises shift towards transformation. This leaves slow-moving industries like insurance facing significant hurdles they must overcome if they hope to compete in the post-pandemic economy.
Attendees of the HFS Insurance Digital Roundtable
To help us understand the state of the industry and how leading carriers are driving themselves “straight to digital,” we organized a digital roundtable supported by EXL to bring together a selection of industry titans. In our pre-event survey, 94% of attendees agreed with our premise that “digital is data,” which means insurers must embrace data-driven digital transformation to thrive in the post-pandemic economy—but how do they get there? If you’re responsible for driving transformation in your insurance business, we might have the answers you’re looking for.
Exhibit 1: 94% of our roundtable attendees agreed that digital is data
Sample: n = 24+ global insurance executives
Source: HFS Research, 2021
Insurers must first identify value and double-down investments in that area to make data-driven digital transformation a reality.
It’s basic business economics—no business leader will plow investments into an initiative that doesn’t yield returns. Many leading C-suite executives in the insurance space have successfully operated for years without this level of investment in data-led digital transformation, so why the need now? Certain stakeholders, such as the Chief Data Officer or Chief Operating Officer, might understand the value of data-led transformation and how the pandemic accelerated the need for digital transformation. The responsibility falls on them to identify high-value investment areas that yield a quick return to demonstrate value to key decision makers. One of the attendees at our roundtable explained this:
When you’ve identified the value proposition of your data, it’s so much easier to convince the C-suite to invest in your initiative. If you don’t have that value proposition, it’s going to be much harder.
– Chief Claims Officer, a specialty insurance carrier
The insurance sector has data in abundance, meaning it can be a daunting task to unearth which business areas provide the most value. At our roundtable, one delegate told us that they believed claims was the perfect place to start, explaining that in their business, it contributes 50%-60% of their loss ratio and drives great financial value. For instance, data can drive straight-through processing to identify simple claims (e.g., maternity claims in the short-term disability world) versus behavioral health claims that need specialist attention. In contrast, another delegate believed that the first investment must be extracting value from key data and leveraging it to fuel crucial underwriting decisions. The distribution side of the business is emerging as one of the key investment areas for data-led initiatives, including smarter underwriting and improved customer, broker, and agent experiences. In practice, data-led initiatives look like insurers leveraging financial, auto, and demographic data to generate, prioritize, and nurture leads to prime them for closure.
Identifying value is only the beginning, insurers cannot afford to overlook change management to make their data-driven digital transformation a success.
Identifying key areas of value is the right starting point, and the roundtable delegates concluded that executing on the vision requires developing an ecosystem of technology and services partners. However, technology providers alone cannot develop data-driven business for carriers. Designing data-fueled business processes requires a combination of insurance domain expertise; data, analytics, and automation capabilities; and business process re-engineering knowledge. Roundtable participant EXL, for example, brought up its approach of developing comprehensive solutions that bring proprietary and tech solutions to solve targeted problems for insurance carriers.
Whatever the mix of internal and external capabilities, ultimately, deploying the latest and greatest technologies can only go so far. Every delegate at our roundtable agreed that if insurers hope to drive data-led digital transformation throughout their business, they must not underestimate the importance of change management. One delegate explained:
Change management is the key here. We’ve spoken about the pandemic. It was a knee-jerk reaction, and if you didn’t have maturity around change management, it was a much bigger challenge. It’s the same for data-led transformation. If you don’t close the loop with change management, you can’t achieve the entire value.
– Head of Data, an American multinational finance and insurance corporation
It’s not an insurance-specific problem. We could say the same for every large-scale business transformation project: Change management must be at the core of everything enterprises do to drive their initiatives. However, insurance is one of the oldest industry verticals, with significant technical and process debt; meaning progress on modernization has steep change management requirements. It’s easy to see why it’s so important. For example, a company’s most important asset is its people, and if people are unable or unwilling to adapt to new data-fueled ways of working, any initiative is likely to fail before it truly begins.
The Bottom Line: Digital transformation is no longer optional, and for insurers, it must be data driven. However, identifying the value proposition and investing in change management simply must be included in any initiative
Our roundtable discussion revealed that after struggling for several years, insurance carriers finally recognized that digital transformation is no longer optional. Not only that, but they also understand that data-led digital transformation is the key to operating at their full potential. Moving forward, the conversation must shift away from if it needs to happen and instead focus on how. For insurance carriers, this means identifying key areas of value and nurturing an ecosystem of partners for innovative solutions while maintaining a critical focus on change management.