The insurance industry runs on trust. When a customer makes premium payments, they expect an effortless, stress-free, and quick payout when they file a claim. Unfortunately, owing to lengthy assessment processes in traditional insurance practices, this can often take over 30 days.
On the other hand, insurance companies that adopted new technology and automated their processes sooner have managed to decrease turnaround times significantly and increase the quality of customer engagement. It is no wonder that digitized insurers are witnessing a spurt in growth, sometimes seeing over a 100% rise in revenue compared to traditional insurers.
While modernization of the insurance industry through tech adoption is key for companies to grow, transforming an industry that provides one of the oldest financial products in history, has its own set of challenges.
The Pros and Cons of Digitization
Every strategic change comes with its own upsides and downsides. Technology is a necessary change if insurers want to remain relevant in the current digital era. However, before diving in head-first, here are some pros and cons to be aware of:
Digital infrastructure will change your customer strategy forever, for the better
Insurers sit on a mound of useful data. Insurers can leverage digitization to quickly access information, perform analysis with agility, and implement useful strategies. For instance, predictive data analysis can tell you how many claims are likely to be filed under specific circumstances. Technology can help insurance aggregators formulate effective acquisition plans, improve underwriting, speed up policy purchase and renewal, as well as improve the claims process.
Technology can be a massive cost saver
While digital transformation involves a substantial financial and time commitment, in the long run, it will boost your bottom line. A McKinsey report shows that automation can reduce claims cost by over 30%. Technology can also enable the personalization of insurance products, thereby allowing insurers to price and underwrite policies more accurately for individual customers. This will open up a world of longer-term growth opportunities while cutting costs.
Digitization will earn you customer loyalty
Digitization enables more meaningful customer engagement through multiple channels, provides personalized experiences, and above all, enables online claims processing within minutes. In insurance, it can cost five times more to acquire a new customer versus converting an existing one. Satisfied customers are 80% more likely to renew their policies than unsatisfied ones, for obvious reasons. Digital policy application and renewal can be quick, hassle-free and available 24/7, making the process seamless for insurance buyers. Support services can also be answered more quickly and efficiently online.
The transformation is time-consuming
For an industry rooted in traditional practices, the switch to technology cannot happen overnight. Creating a digital infrastructure involves complex back-end processes, familiarizing employees with these changes, as well as educating customers on how to deal with new interfaces. It is also essential to find technologies that work for your company. All of this takes time.
Digitization will require increased security
Data and payment security are major concerns when it comes to digitizing insurance. Identity thefts and hacking can increase with greater digital interventions. An insurance company that is adopting the technology will have to ensure that background checks are thorough, claims are genuine, and that their online infrastructure has the best protection against needless attacks.
Implementation may be challenging
Transitioning from an existing physical system, especially in the insurance industry that handles heavy and sensitive paperwork, to a digital platform can be challenging. Apart from ensuring accurate data and client transfers, an insurance company going digital will also have to train existing staff on navigating a new interface as well as guide customers on how to access services online. Digitization is also a dynamic landscape where new technology crops up often, making it a continuous evolution as opposed to a one-time transition.
Today, avoiding digitization is impossible. Traditional insurers will have to embrace technology to remain relevant or relinquish the market to new entrants. Instead of venturing into the dark with no support, onboarding a partner or outsourcing digitization to a third party can be a wise decision.
Allsec Technologies provides a complete digitization solution for the insurance industry, encompassing IT and infrastructure support, personalized application consulting, development and testing, customer acquisition, retention, and service support. Reach out to us for more information.