The P&C insurance industry is at a crossroads. A fast-changing risk landscape has created a number of opportunities for insurers, but technological adoption has been lagging overall. Digital transformation refers to applying technology to meet changing customer expectations, and respond to fluctuating market forces.
Digital transformation can benefit P&C insurance businesses in a number of ways: improving innovation and agility, increasing employee productivity, and impacting revenues. Companies that commit to technological adoption can realize cost controls, improved customer experiences, and manage sustainable growth.
A recent study by Accenture found that 96% of insurance executives report the pace of innovation is accelerating due to emerging technologies: meaning that those companies that hesitate to adopt new technologies may lose out on competitive advantage and instead, be left behind.
Considering the number and variety of benefits that are available to companies that embrace digital transformation, why have P&C insurers been slow to adopt? This may be a result of the many challenges to digital transformation that are specific to the industry.
Key challenges to digital transformation for P&C insurance companies include:
- Multiple Legacy Systems
- Investment of Resources
- Lack of IT Expertise
- Change Management
- Data Management
1. Multiple legacy systems.
Unless your company is a startup, you already have at least one software program – and process – in place to manage policy administration. When these systems are both outdated and critical to core business functions, they are considered ‘legacy’ systems. Legacy systems present a challenge to digital transformation: it is difficult to integrate new technologies to older systems, and building custom APIs can be complicated and expensive.
Even though legacy systems are expensive to maintain, they can also be expensive to change, putting insurance companies in a difficult position when it comes to digital transformation.
2. Investment of resources.
Digital transformation requires that a company commit to a number of investments: in money, as well as time invested in strategy, implementation, and user training. Moreover, as recently noted in the Harvard Business Review, digital transformation is about more than just technology: it is about building skills and bridging a talent gap – another expensive proposition.
3. Lack of IT expertise.
Adopting new technologies requires IT expertise that may be difficult for an insurance company to acquire. In fact, a recent survey found that 81% of insurance executives are concerned about the availability of talent with key skills.
It’s not all about a candidate’s technology skills either- fit requires an employee to have a number of characteristics to contribute fully to the job. Finding a candidate with the right combination of technical skills, soft skills, and experience can be incredibly challenging – and competition for ideal candidates is high.
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4. Change management.
Digital transformation isn’t just about buying a technology solution and implementing it: it’s about managing the change to processes, procedures, and the daily activities of employees that will be impacted by that solution.
Optimizing user adoption, and making sure that employees are not only trained but applying technology, is the only way to maximize ROI of a technological investment.
5. Data management.
The exponential growth of data has created a number of opportunities for P&C insurance companies: providing valuable insights into customers, markets and trends. However, managing high volumes of data – and using analytics tools to garner insights – is expensive and complicated.
There are a number of challenges to digital transformation in P&C insurance, but the advantages it provides will make the adoption and implementation of new technologies critical to the success of businesses.
One way that P&C insurance companies are beginning their digital transformation journey is by adopting a microservices architecture: breaking down large, monolithic processes into smaller, agile parts that can be managed independently of one another. A microservices partner can not only help supplement a lack of internal IT expertise, they can also provide the framework to support innovative, customer-centric products with a faster time-to-market.
If you are interested in learning more about microservices, and how to jump-start your company’s digital transformation, contact Solartis today.