The Role of Data in Digital Transformation in Insurance

Digital Transformation in InsuranceDigital Transformation has become a major agenda item for many Insurance institutions. In a recent blog, I looked at Digital Transformation for Retail Banking (link here).

In this blog, I wanted to explore what I see happening in the world of Insurance and the role that data plays in this industry. My view has been that Digital Transformation is similar, but not the same, in Retail Banking and in Insurance. Here I want to share what I see happening in Insurance.

Insurers are changing

Like the Retail Banking sector, Insurance institutions are considering what their value proposition needs to be and how to respond to market changes. Apart from mandatory Insurance products, such as vehicle insurance, the younger generations are increasingly asking whether they need many other insurance products and are willing to shop around to get the right deal. There are other, broader reasons for these changes that include:

  • The need to understand who the customer is and what they’re expectations and needs are. With more objects that need insuring plus a larger, older generation needing tailored products; the need to know the customer is getting more important.
  • The Millennial generation have higher expectations of providers including omni-channel access, real-time processing and mobile everything; whereas Insurance very often works at a much different pace and in a different way.
  • With so many commoditised Insurance needs, players from other industries are entering traditional Insurance institution markets and bring a different experience.
  • The need to compete better, drive operational efficiencies and connect more with the objects they Insure means Insurers are looking at ways of reducing costs and improving service by using new technologies including Blockchain, artificial intelligence, machine learning and the Internet of Things.
  • Regulation and compliance is still a major issue so how do Insurance institutions deliver these requirements both effectively and efficiently. Some obvious candidates could include SOLVENCY II and the new EU General Data Privacy Regulation (GDPR).
  • Insurance can often be considered quite transparent, especially for low touchpoint products. So how do Insurers create more product and brand visibility to a generation of customers who are used to being marketed to?

Like Retail Banks in my previous blog, I think the question many Insurance institutions are asking is ‘How do we build a value-add relationship with Customers, to secure their business today and tomorrow?’ and move from just being a ‘service provider’ to more of a ‘relationship partner’. Given the notion of what Insurance fundamentally is, the move to being a ‘relationship partner’ can therefore be quite challenging.

So I think Insurance institutions are seeing Digital Transformation as driving change in their business and engagement models; sometimes at a very fundamental level. These changes could include:

  • Putting the ‘Customer’ at the heart of the business i.e. really being Customer Centric.
  • Moving added value interactions to digital channels.
  • Digitalisation of the Value Chain.
  • Getting closer and connected to the object(s) they insure.

So why are Insurers investing so much in Digital Transformation?

I think this is because many Insurers can’t innovate fast enough to keep themselves relevant and nimbler players are eroding market share and margins. Also, I think another challenge is that often there isn’t a single, consistent definition of what Digital Transformation is for an Insurance institution. Here’s my definition, based upon the many Insurance institutions I’ve been to visit:

Digital Transformation is the application of digital technologies and solutions, to drive the adoption of disruption and innovation as the basis of change.

The last part of this definition, about disruption and innovation, is something most Insurance institutions are very aware of. The challenge is how to respond to it.

So why is Digital Transformation so challenging?

I think the world of Insurance still has many data challenges, which makes Digital Transformation difficult. Some common data challenges I’ve observed include:
 

·      Data in Silo’s

·      Cloud / On-premise data stores

·      Inconsistent data definitions

·      Unclear data ownership

·      Regulation

·      Complex change management

·      Complex organisational structures

·      Incomplete Data Governance

·      Data latency challenges (e.g. IoT)

·      Legacy systems

·      Lack of data standards

·      Data complexity

·      Data Culture issues

·      Complex business models

·      Data security requirements

·      Lack of data sharing

·      New technology introduction

·      Lack of data value understanding

·      Business / IT integration

·      Mixed quality data

 

I could go on. But the point is that even with these challenges, Insurance institutions needs to transform their business models otherwise they risk being unable to compete.

Digital Transformation capabilities for insurance

To help demonstrate this I’ve mapped out some of the capabilities I think an Insurance institution might need as part of a Digital Transformation programme, to try and explain the importance of the role of data to that programme. A sample of the capabilities are:

 

Some Insurance Digital Transformation capabilities
Some Insurance Digital Transformation capabilities

 

I’ve highlighted 5 capabilities as good examples of some Insurance specific capabilities where data plays a very important role.

  • IoT data services: data can have very different latencies and can also include semi and unstructured content; which means some Insurers are struggling to gain value from this capability as they’re not equipped for it.
  • Broker services: intermediaries often hold the customer relationship and history but, with more connected objects sending data directly to an Insurer, the needs of data sharing are changing.
  • Claims automation: incorporating digital data into the claims process, and automating as much as possible, means Insurers can’t afford for data to be any form of process bottleneck.
  • New data acquisition: for many low touchpoint products, alternative sources of data are required to help build out a more detailed picture of the customer journey yet finding and incorporating these sources can be challenging.
  • Customer Centricity: many Insurers are still on the product-to-customer centricity journey so aligning processes, centred around the customer, can still be challenging.

My conclusion was that to deliver these Digital Transformation capabilities, there is a high dependence upon the data each capability generates and/or consumes. I also concluded that a single Digital Transformation capability may be dependent upon many other Digital Transformation capabilities to deliver their expected benefits. This suggests to me there is a significant impact upon the success of any Digital Transformation capability from all the data they require, to operate correctly.

Below is a picture of what data capabilities might be needed to deliver the Digital Transformation capabilities outlined above. It’s a generic set of data management capabilities but hopefully you’ll get the idea of what’s needed:

 

Some data capabilities for Digital Transformation in Insurance
Some data capabilities for Digital Transformation in Insurance

 

Where this start to get interesting is when you map out what data capabilities are required for each Digital Transformation capability. What you start to see is how many of the data capabilities are required for each of the Digital Transformation capabilities. You can also see that there is plenty of overlap, and scope for reuse, of the same data capabilities as you look at the bigger picture of what’s required for Digital Transformation. Below is a picture to show this:

 

Digital Transformation capability to data capability map for Insurance example
Digital Transformation capability to data capability map for Insurance example

 

From the picture, you can see many of the same data capabilities are required across all three Digital Transformation capabilities used in the example. This picture gets even more compelling when you map out all the data capabilities required for the rest of the Digital Transformation capabilities.

So, what does this all mean?

The overlap in data capability requirements leads me to conclude that delivering all these Digital Transformation capabilities, with the right data at the right time, requires a platform approach to managing data.

Informatica developed the Intelligent Data Platform (IDP) to provide the data platform capability that could support many different types of Digital Transformation programme.

Have a look at this review of IDP and see if this is something that might help your organisation deliver your Digital Transformation programme.

For those of you that read the Retail Banking version of this blog, you’ll notice some similarities and some differences. That’s to help highlight the similarities and differences in what Digital Transformation means between Retail Banking and Insurance. The point is that Digital Transformation isn’t the same across every industry and that, even between two similar industries, the differences can be quite significant.

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