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Enablers of Digital Strategy: Present & Future

Digital strategy is critical for insurers struggling to remain competitive in a connected world, but how do those tactics morph from idea to reality?

Three elements differentiate today’s digital strategies from those of the past, explains Donald Light, director of Celent’s P&C insurance practice for the Americas, in the analyst firm’s recent webinar “Insurance Digital Strategies: Cheaper, Smarter, Faster, Better.” In his discussion, Light emphasizes the importance of digital strategy and the necessity for insurers to adjust theirs in the wake of new technologies.

The first of these elements is data, “especially data that’s in machine-readable and machine-storable form,” says Light. The second is information in any format, including text, video, and sound. The third element is experience. “[This] involves continuing interaction, first with other people or intelligent agent systems.”

In terms of goals, insurers should first focus on cutting cost through reducing expenses and increasing productivity. For example, Light explains, an insurer may aim to experience zero growth in expenses year-over-year.

Businesses should also strive to be smarter in their pricing, underwriting, and claims decisions, says Light, which may involve a key goal of pricing risks more accurately than their key competitors. “We’re operating in a pretty complex world with a lot of factors,” he cautions, emphasizing the importance of consistency in making exact decisions.

[Novarica: 40% of Insurers Planning Policy Revamp in 2015

The third and fourth critical goals, he continues, involve boosting efficiency by cutting down on cycle times and improving the customer experience by making processes more engaging and satisfying.  

Carriers should note that while none of the aforementioned goals is entirely digital in nature, all involve a balance between the digital and physical worlds. The achievement of each requires “digital enablers,” the technical and economic trends that make digital strategies possible. Insurers will find that the tactics behind digital success today are largely different from those of the future.

The enablers of today’s digital achievements include the digitization of data and information, growth of analytics and rules, and development of mobility-driven user experiences. As user interfaces change and become more engaging, customers find older ones increasingly unacceptable. Companies that neglect to update their interfaces will find themselves at a disadvantage in the marketplace, Light cautions.

Moving forward, the Internet of Things will emerge as a primary digital enabler of the future. Accompanying IoT will be the “natural best friend,” a product of technology that uses machine learning, and access to large data stores, to provide companionship. Light references the movie Her, the story of a man who develops a relationship with the voice on his smartphone, as a relevant example.

Although it may seem that society is already connected 24/7, it has yet to achieve the ubiquitous connectivity that will enable future digital transformation. Devices such as sleep monitors will ensure users are connected every minute of the day. “People will accept this as a natural part of how they live their life,” says Light. These monitoring devices will provide instant access to data for companies formulating digital strategies.

With the digital enablers of the future, insurers will be better able to achieve smarter and less expensive goals such as more accurate pricing, better underwriting for small business and worker compensation carriers, and improved claims strategies. These digital means will help them fulfill goals that straddle the physical and virtual worlds. 

Kelly Sheridan is Associate Editor at Dark Reading. She started her career in business tech journalism at Insurance & Technology and most recently reported for InformationWeek, where she covered Microsoft and business IT. Sheridan earned her BA at Villanova University. View Full Bio

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KBurger
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KBurger,
User Rank: Author
10/8/2014 | 3:24:05 PM
Re: IoT
Let's hope that's how it plays out. Often, though, some of these high-profile positions are more window-dressing and they don't pan out, either because of lack of funding, lack of top management support, or lack of a coherent, thought-out strategy. That's not unique to insurance, of course, this can happen in any industry.
Kelly22
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Kelly22,
User Rank: Author
10/8/2014 | 3:02:12 PM
Re: IoT
Good point, Kathy. It does seem like a few insurers are being proactive by creating executive positions dedicated to innovation and big data. Forward thinkers like those are less likely to be caught off guard as trends like IoT grow. 
KBurger
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KBurger,
User Rank: Author
10/7/2014 | 1:29:34 PM
Re: IoT
The good news is that at least some insurance execs (hopefully on behalf of their companies) are at least thinking about the potential & if not actively pursuing applications at least are trying to envision how IoT might play out in the industry. So one could hope that the industry will not be caught totally flat-footed here, there are likely to be some forward-looking/acting companies that are going to set the agenda as opposed to being in complete reaction mode. This will not be industry-wide of course but there is still an opportunity for insurance to take the lead. It's starting with auto/telematics but there is recognition of much broader opportunity.
Kelly22
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Kelly22,
User Rank: Author
10/6/2014 | 4:22:12 PM
Re: IoT
Too true, Nate. Businesses struggling to adapt to the rise of smartphones and tablets will be overwhelmed as more devices become connected and start providing data. 
Nathan Golia
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Nathan Golia,
User Rank: Author
10/6/2014 | 3:39:38 PM
IoT
The impact of the IoT on digital strategy can't be understated. Each newly connected device represents a potential new connection point between insurer and insured. Companies who think "omnichannel" is a challenge now can expect even more proliferation.
KBurger
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KBurger,
User Rank: Author
10/1/2014 | 9:20:48 PM
Re: Who loves you, baby?
Ha, I didn't even think about straight-forward customer service (sort of next-gen contact center). Now that I think about it, it also could play a role in distribution, potentially a stand-in or complement to an agent.
Kelly22
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Kelly22,
User Rank: Author
10/1/2014 | 5:18:54 PM
Re: Who loves you, baby?
Your idea of using the "natural best friend" to provide health services is a good one, and something that I don't believe Donald mentioned in his discussion. He did note that it could lead to increased customer engagement and a new way of attracting business for insurance brands. It could also serve as a huge source of customer data, which would lead to better pricing. 
KBurger
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KBurger,
User Rank: Author
10/1/2014 | 4:24:58 PM
Who loves you, baby?
The concept of "natural best friend" is interesting -- did Donald discuss what he thinks the implications for insurers would be? I could think of some potential applications in health insurance, to help with wellness and with helping customers who have chronic conditions. I'm not sure where the application in other lines of business would be. Or I guess it could simply be a service insurers offer (sell) to enhance more traditional products?
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