Top 16 digital transformation trends in insurance in 2021
2020 has been a year when many digital transformation projects that were previously put on a backburner made their way to the front of the line. Improving agility, delivering better service, and improving customer and employee experience became the number one priority.
We see an expedited adoption of remote signing and customer servicing technologies, tools for digital collaboration, and new innovative digital products.
As digital becomes the new normal, what lies ahead, and what should insurance leaders prepare for?
The global rise of technology
1. The rise of low-code/no-code development in enterprise IT
One of the most pronounced trends within the normalization of low-code/no-code development is enterprise IT. While in the SMB segment, no-code tools became the new norm, enterprises, for the most part, continued to rely on the traditional development projects powered by internal resources or external integrators.
However, this is now changing as vendors start to offer mature, enterprise-grade no-code tools focusing on security and compliance. So enterprises can now offload some security and compliance tasks to vendors while ensuring high-quality security and compliance standards.
Such tools owe their growing popularity to the fact that they solve some burning issues facing IT teams. No-code tools amplify overstretched internal resources, reduce backlogs, and improve productivity.
The most crucial quality that makes no-code tools extremely attractive is accelerated time to market for new digital applications and products compared with traditional development projects. With no-code tools, Insurers can now deliver better apps at a quicker rate, improve customer experience, and enhance overall service quality.
2. The rise of "headless tech"
It might sound somewhat gruesome, but "headless tech" is quite harmless and has been with us for a while.
The most well-known example of headless technology can be found in website development. Traditional websites have a back-end and a front-end as well as a graphical user interface.
In a way, headless tech is a complementary trend that goes hand in hand with no-code tools for developing customer-facing front-ends. Insurers can now separate their front-end presentation layer from their back-end data functionality to create custom digital experiences.
In Insurance, this is particularly important, as back-ends are mired with legacy technology problems that are, for the most part, make them incompatible with the modern front-end experiences customers expect.
By separating customer-facing front-ends and back-end processes while ensuring that the data flows freely between the two is another trend that we will see getting stronger in the near future. Our prediction is that we will see more insurance products and applications that adopt the same principle.
3. Hybrid cloud architecture is on the rise
According to Mordor Intelligence, the hybrid cloud market is expected to reach USD 128.01 billion by 2025, at a CAGR of 18.73% over the forecast period 2020 - 2025.
Organizations increasingly adopt the hybrid cloud as they aim to leverage the advantages of both cloud and public clouds.
Hybrid cloud architectures improve both speed and flexibility by allowing organizations to go back and forth between their own tools and the cloud providers' toolkits.
4. Augmenting legacy IT
The technology trends such as the rise of no-code tools and "headless tech" mean that financial service organizations can keep their legacy architectures intact while improving the digital experience for customers and employees at the same time.
5. Delivering tailored digital products
Personalization capabilities are the new competitive edge. By offering a particular client, a particular product at a particular price point can significantly increase a policy sale probability.
Delivering tailored digital products is going to become a stronger focus of insurers in 2021 and beyond.
The evolution of culture and technology in the workplace
6. Work from home is here to stay
Work from home has been an exception, rather than the rule, for a very long time. However, it seems that even after the COVID-19 pandemic is behind us, the work from home culture will stay with us.
According to a recent survey by Bloomberquint, the number of workers who say they won't go back to the office full time has increased significantly, with over a quarter of those surveyed planning to continue working remotely at least half the time after the pandemic is over.
For insurers, this means that they need to support their employees to complete their tasks remotely. Manual workflows have been outdated even before the pandemic, but (with some minor exceptions) in the post-pandemic world, there is no place for paper-based workflows that require employees' physical presence.
7. Inefficient, manual processes have to go
Inefficient paper-pushing has been the norm in the insurance industry for centuries. However, this is no longer feasible. Insurers cannot continue to treat inefficient paperwork as the necessary evil and need to find solutions to improve customer experience on that front.
As eSignatures and digital forms are being normalized, customers expect to complete nearly all (if not all) actions with their insurer remotely via digital tools - from account opening to policy renewals.
8. Employee empowerment through tech is a necessity
Managing teams of remote and on-site employees require a careful balance of efficiency and empowerment.
Employee-facing apps that encourage teamwork, efficient collaboration, and empower employees are a must in the new normal.
So inward-facing innovation is likely to become a strong focus in the insurance industry.
9. Digital channel as the primary channel
Insurance traditionally has been sold through physical channels, including agents or brokers, resellers, offices, and call centers. But now, the digital channel is gaining the edge.
Now, agents and brokers are increasingly moving to digital tools, while the self-service digital channel is also rising due to skyrocketing customer demand. A late-April 2020 survey of European insurance executives found that some 89 percent of respondents expect a significant acceleration in digitization, and most also anticipate a further shift in channel mix.
Increasingly, offline processes are transitioning into the digital realm. Even products that sometimes require offline execution, such as physical signatures and medical underwriting, are increasingly transitioning to digital with the help of technology such as legally binding eSignatures or face-recognition and telemedicine.
10. IoT increases the need for streaming analytics to innovate
Internet of Things supports insurance technology by providing accurate and real-time data. This improves the accuracy of risk assessment and gives insurance holders the ability to gauge their policy pricing accurately.
However, IoT implementation for risk assessment has many challenges. One of which is analytics. Data provided by IoT is real-time; unfortunately, real-time analytics leave much to be desired. We expect a lot of innovation in this space as the market demand for IoT has driven analytics grows.
11. Increased focus on algorithmic risk assessment
Artificial Intelligence plays a significant role in the insurance industry. The AI-based tools provide solutions for insurance operations and claims settlement teams.
But Machine Learning has value beyond claims processing; it has the power to help insurers automate the entire process. As files are becoming increasingly digitized, they can be easily analyzed using AI algorithms, eliminating manual processing entirely.
This improves processing speed and accuracy, not only in policy administration but also in risk assessment. Machine learning and AI technologies are going to continue growing in popularity as risk assessment tools.
12. The shift in culture from legacy to innovation
Insurance has traditionally been a very conservative industry. But it is now rapidly changing with the influx of new blood in the form of digital-first insurers, tech giants, and innovative startups.
There is a pronounced shift in the mindset among insurance leaders and experts, as the need to innovate is becoming apparent to everyone involved. The industry has shifted from a conservative into an increasingly innovation-focused, digital culture.
As we are closing in on the end of 2020, it is clear that we are headed towards more innovation, better customer and employee experience, increased agility, and innovative applications of existing technologies to age-old insurance problems such as risk-assessment claims processing and policy sales.
The challenges facing changing industries
13. Insurers must evolve to compete
Competition is becoming tougher. Reinsurance News announces that Amazon is gearing up to enter the auto insurance market, and digital-first insurers such as Lemonade are bringing new digital experiences to the market. Incumbent insurers have a difficult time competing with these newcomers to their previously sheltered markets.
To compete in the increasingly digital marketplace, insurers must change their tactics to embrace digital transformation solutions.
14. Maximizing conversions is essential
Just "going digital" is no longer enough. Maximizing conversion and improving sales funnels on digital channels becomes ever more important. Converting online visits into actual policy sales is a combination of art and science.
McKinsey's research shows how digitally smart insurers convert digital customers at six times the rate of their peers. And it seems that the key lies in personalization and continuous improvement of the customer experience.
15. Insurtech joint ventures
Partnerships between InsurTechs and incumbents are a growing trend, and for a good reason - it is often a win-win proposition.
Established insurers are harnessing their customer data and relationships and have the opportunities to create new income streams. While incumbents are tapping into their existing customer relationships and customer data, InsurTechs provide the technology, technical know-how, and support.
16. Proactive risk assessment and future-proofing
IoT technology keeps gaining momentum in the insurance industry, including risk assessment and underwriting. Most crucial of all, IoT theoretically can empower insurers to move from their traditional role in risk protection to risk prevention.