In a world where almost every industry has made its digital transformation, property and casualty insurance policyholders now expect nothing less of a mobile-savvy, hassle-free, and excellent customer service.
P&C insurance digital transformation allows companies to be more attractive than those that haven’t. Therefore, if you want to gain that competitive edge in the market, it is high time you began the digital transformation of your P&C insurance company.
However, to transform your customers’ experience digitally, you will need to keep up with the latest trends and opportunities in the market. Only when you remain updated will you be able to offer a personalized customer experience and meet the high demand of your customers.
In this article, we discuss what P&C insurance digital transformation is, the latest trends and opportunities, as well as factors that hinder the digital transformation. Read on!
Table Of Contents
What is Digital Transformation?
Basically, digital transformation refers to the implementation of modern, digital transformation technologies within the organization.
The benefits of digital transformation are far-reaching when successfully implemented. The transformation starts with a mindset shift (also leveraging inspiring quotes) in the company, then new technologies are adopted to improve the efficiency of the firm and boost employee productivity, such that the company offers more value to clients.
Besides, adopting digital transformation helps P&C insurance firms gain a more competitive edge in the market, giving them added advantage over other similar companies.
The insurance industry is constantly evolving due to changing customer expectations. Nowadays, people are buying their first car or home at an older age. Therefore, they expect a more hassle-free, personalized experience when choosing their insurance company.
To achieve all these customer expectations and provide satisfactory service to their clients, P&C insurance companies need to embrace the digital transformation mindset and technologies. This will allow the business to offer customer-centric services and user-based insurance. All this is possible only via digital transformation.
Digital Transformation Trends and Opportunities in P&C Insurance
Consider these four major digital transformation trends and opportunities in P&C Insurance that you need to incorporate into your company:
1. Using P&C insurance Chatbots to Automate the Service
Chatbots are among the hottest trends for digital transformation in P&C insurance. They are especially common in insurance companies that require customer support on a grand scale. It is no wonder that they have become a trend in P&C insurance where there are many customers who require automated customer service.
Chatbots work by automating customer interactions via different messaging platforms. The most popular messaging platforms that deploy chatbots are WhatsApp, Facebook Messenger, and in-app chats.
The chatbots also extend into other user interfaces, such as Google Home and Alexa. Since they combine artificial intelligence and cloud computing technology with dynamic knowledgebase and chat technology, the chatbots are able to support automated conversations and provide real clients with relevant information and any service that they need.
In addition, the P&C chatbots can help customers get through complicated service interactions, such as walking them via insurance claims processing.
Besides demystifying complex products, chatbots can also help customers choose the best insurance policies for them.
Considering the amount of customer support that chatbots offer, insurance companies do not have to hire many real people to provide customer support. After all, the chatbots do a pretty good job of providing relevant and timely support.
The major downside of chatbots is that some customers do not like speaking to them. As they claim, chatbots only provide limited information and may not be really helpful when a client requires more details or a specific form of assistance.
However, as technology is improving and chatbots become smarter, the resistance against them will recede. And as more and more chatbots are incorporated into the P&C insurance industry, insurers will be able to reduce operational costs, which would’ve otherwise been used by hiring a large team of customer support.
2. Offering Personalization at Scale with Telematics
The good thing about telematics is that it allows customers to transfer important diagnostic data directly from their phones, tablets, or PC to the insurer.
By doing so, it provides insurers with customer insight directly, enabling them to come up with tactical opportunities and strategies that they can use to cut costs, improve the services, build more profitable relationships and drive more revenue.
In most cases, like for the drive safe and save car insurance, telematics is used when insurers require data about a particular vehicle to determine if the car insurance has to be higher or lower.
After receiving the vehicle data, insurers then use predictive analytics to offer the optimum pricing and protection to the car’s owner. At the same time, predictive analytics allow the insurer to maximize their economic bottom line since accessing the customer’s profile is made easier.
It is no secret that telematics has several disadvantages associated with it, such as security and privacy issues. Even so, more and more P&C insurance companies are adopting this trend since the benefits it offers outweigh the negatives.
For example, telematics encourages safe driving habits among drivers, in turn reducing the occurrence of accidents significantly. And when there are lesser accidents on the roads, it means that people feel safer and insurance companies give out lesser payouts to policyholders.
Besides cars, telematics can also be used in home-video cameras where they play a major role in conducting digital inventories of the contents of a home. Also, when combined with utility equipment, telematics can be used to track energy usage in a home. This is undoubtedly a win-win situation for consumers and P&C policyholders who are up to it.
3. Adapting to Consumer Needs with Digital Insurance
Following the advancements made in technology, there have been new emerging trends, such as insurance for ride-sharing passengers, property insurance extensions, self-service apps, and ID theft protection.
These tendencies have led to the introduction of new products and services, as insurance companies try to keep up with these modern trends. Also, insurance companies have begun offering self-service apps that not only reduce the overall workload for customer support personnel but also improve customer experience and reduce cases of inefficiency.
Therefore, if you wish to adapt to consider needs and provide them excellent service, you need to hop into this new trend. However, when you introduce new products, services, or apps in the market, remember that customer demand comes first, then technology second.
Take time to research which products best meet customer needs. Introduce products and services because they meet your customers’ needs, and not just because they would be a cool way to use digital technology.
In addition, take advantage of the immense data available and use it to improve existing products and services.
Remember, you don’t always have to invent a new product or service from scratch. On the contrary, all you may need to do is simply make a more personalized, incremental change, and voila! Your product will meet all considered needs and demands.
So before you rush into a technical transformation, make sure that the business case exists first. Then, you can go ahead to offer your customers a seamless digital experience that will make it easier for them to access your products and services.
4. Offering Insurance Pricing Based on Consumer Usage
Telematics offers more benefits than just allowing customers to transfer important data directly from their devices to the insurers.
In addition to determining the risk profile of the consumer, data analytics via telematics also offers usage-based insurance (UBI) pricing. With this form of pricing, real-time data sent from customer devices are used by insurers to determine how much insurance the policyholders actually require.
Take for instance, when an insurer wants to determine the amount of insurance that a potential policyholder for car insurance should pay. While they could use the broad-rush approach to calculate the amount of time that the customer spends on the road, this would be only approximate and not as accurate. The best option would be to use data analytics through telematics to determine how much driving the customer actually does, after which they can then use the data to calculate the exact charges the policyholder needs to pay.
Usage-based insurance pricing provides benefits to both insurers and policyholders.
For example, in the above case, policyholders who drive little would have minimal insurance costs, saving them a lot of cash in the long run. Besides, the less they drive, the less fuel they will use. And since fuel usage goes hand-in-hand with the amount of carbon footprint released to the environment, less usage of fuel would mean fewer emissions released to the environment, in turn contributing to more sustainable development and improving environmental sustainability.
On the other hand, the usage-based insurance pricing technique would provide a competitive advantage for P&C insurance companies leveraging those digital transformation technologies and looking to attract cost-conscious as well as environmentally conscious customers.
To keep up with the digital transformation trends of the P&C insurance industry, all companies should do more than just provide discounts as their marketing and incentive strategies.
They should also adopt strategies that help them expand their market share without sacrificing on important aspects, such as minimizing the driver’s carbon footprint and improving driver safety.
In addition, insurance companies should strive to increase UBI adoption by using customer testimonials, increasing social media marketing strategies, and launching word of mouth.
5 Improving the insurance company ESG metrics
Another side benefit of P&C insurance digital transformation is the improved ESG metrics (Environmental, Social, and Governace) of the insurance company.
This is because a digitally transformed business will be more efficient and overall will perform better under the ESG standards for institutional investors. In turn, an insurance company with better ESG metrics will have the possibility to attract more investments and put in motion a flywheel of innovation and improved competitiveness that could dramatically grow the business.
Sustainability and ESG have a symbiotic relationship, in fact, ESG was inspired by the triple bottom line framework (the 3 pillars): economic, social, and environmental. In this respect, digital transformation offers a unique opportunity to improve ESG score of insurance companies and many other business sectors.
Factors Holding Back Digital Transformation in the Insurance Industry
Digital transformation in the P&C insurance companies provides massive opportunities to transform the customer experience. However, as research done by Business Insider found, most insurers struggle to successfully implement digital transformation in their companies, and some do not even believe that they have the capability to do so.
Consider the following reasons why most insurance companies struggle to incorporate the digital insurance strategy in their firms:
1. Dependency on Legacy Systems
In most cases, consumer behavior and industry trends do not require insurers to modernize. Considering this, most insurance companies still use outdated core systems in their activities, hindering them from making important digital transformation steps.
However, things are now changing so fast, forcing insurers to adopt modern legacy systems that use digital technology. But before insurers can transform digitally, they are first required to update their backend infrastructure and bring it up to date.
They can achieve this by adopting modern technologies in their activities, such as virtualization and cloud.
Only after updating to these modern systems will the insurers be able to provide complex digital offerings easily without the need for creating expensive IT environments.
2. Poor Change Management
For companies to embrace digital transformation, they need to be ready to make significant changes. For example, in P&C insurance, companies should deploy change management by ensuring that the workforce skills, company culture, and organizational structure are kept right in place.
However, embracing major change is not as easy, especially for companies that do not have to update their business models just so as to remain relevant; and insurance falls in this particular category.
Therefore, since most insurance companies do not improve their change management, it becomes quite difficult for them to implement a digital transformation.
3. Lack of Training and Skills
Let’s face it, most IT professionals and experts looking to work in firms that use cutting-edge technology would not choose insurance as their first choice. It is for this reason that most insurance companies lack people with the ideal skills, knowledge, and experience to work in the firms.
When an insurance firm lacks personnel with the right skills and training, it will be unable to innovate in important areas, such as telematics, Artificial intelligence (AI), and the internet of things (IoT). Also, they will miss out on the opportunities that could drive a successful digital transformation strategy in the company.
Digital transformation has a huge impact on the P&C insurance industry. As more companies adopt digital technologies, there has been a significant improvement in efficiency, agility, and scalability.
However, before you can begin the journey towards digital transformation, remember that creating a digital-friendly firm that focuses on meeting customer needs is more important than investing in the best technology.
Therefore, insurers should focus on meeting customer demands and providing them with the best experience ever.
When they avoid all the factors that hinder digital transformation, P&C insurance companies will be able to make a smooth and comprehensive digital transformation. Not only will digital transformation help insurers respond to changes effectively, but it will also prepare them well for the digital future that is just around the corner!