Success factors for digital transformation in the insurance industry
A Capgemini research project analysed high turnover companies to understand digital transformation in the 'non-digital' sector. There are key points that make the difference between beginners and digital masters.
Article information and share options
Around half of the firms on the S&P500 from ten years ago are not there today. Technology stocks are rising quickly. It highlights the digital gap between established companies and more recent start-ups. Established insurers need to work hard to reduce this digital divide.
Investment in digital technology is vital, whether it be mobile, social, analytics, embedded device sensors. Ideally, you should invest and improve at both customer experience and operations.
To get business results from your investment in digital requires changes of vision, engagement and governance. In particular, there needs to be a new deal between the technology side of the companies and the business side.
Capgemeni found that companies investing in digital could generate single digit growth through improvements in revenue generation efficiency. However, those who also mastered leadership were growing at rates of up to 26% (cross-industry average). This we attributed to profitability gains thanks to digital.
Insurance industry observations
Since 2014, satisfaction with insurers is down: If you are going to do benchmarking in digital, you need to focus on companies outside your industry, because they shape the customer expectations more than your competitors.
We're seeing an explosion of activity in digital transformation of operations: Automation, simplification of core processes and artificial intelligence are starting to touch traditionally white-collar activities. The MIT machine learning lab found that an investment expert has only about 450 permutations of advice on offer. That is not a complex target for an analytics person to address with an expert system. So, actually, we have not seen anything yet in terms of the potential and the possibilities of the application of this technology.
Transformation on the front-end is easier to sell as it is sexy, whereas internal transformation of operations is actually a better bet. You know your internal operations and costs, so making the business case for automation is less speculative. Moreover, it is less transparent to competitors.
Capgemini see disruption in this area happening 10 to 15 years into the future. Although that is not imminent, you still need to be paranoid – you are being attacked everywhere not by a big shark, it's more like 100 piranhas that take small chunks of your business.
Management and leadership
Digital transformation always depends on a big push from the top. Transformative vision is needed, and engagement is required on a grander scale: Digital provides you with have the tools to engage thousands and thousands of people across multiple regions.
Because digital allows you to cross-fertilize different functions, governance is probably the biggest driver of performance and particularly profitability. A layer of governance needs to cut across functional and geographic silos. You also need a new deal in terms of how the business and IT interact.
The IT department always had a monopoly of technology introduction in a firm. Now everybody is taking the initiative in technology. This new deal forces us to rethink the connection points and even the language spoken between IT and the business. It is very hard to do digital with the same type of IT leadership that developed the legacy system.
Skills & funding
Everybody is chasing the same skills, data scientists, cloud architects, digital marketing people. Insurers may want to think about how to access these people rather than own them. Also consider training, incubating and partnering etc.
We have seen many great digital transformation plans without the funds. You have to find funding mechanism to actually fuel those programmes, which may mean cutting other areas.
Price competitively, connect, engage regularly, deliver perfectly – through back office automation that gives you increased efficiency. Remember, you can measure digital, so there should be an stated target return on investment.
Mastery of digital transformation was seen in areas including front-end customer experience (e.g. Nike, Starbucks), supply-chain end-to-end visibility (e.g. Asian Paints) and robotisation (e.g. Codelco).
About the speaker
Didier Bonnet is the Global Practice Leader at Capgemini Consulting. Co-author of "Leading Digital". This is based on an extensive research on different corporates, different industries to try to understand really best practice in digital transformation. He spoke at the "Insurance Industry Digital Transformation" which took place on 30-31 May 2016 at the Swiss Re Centre for Global Dialogue.
Summary by David M. Taylor. The article is based on the "Insurance Industry Digital Transformation" which took place on 30-31 May 2016 at the Swiss Re Centre for Global Dialogue.