Digital Disruption: a strategic approach

Recently, the word ‘Digital’ has gained so much outburst that every analyst has been writing about it, every IT solution provider has been tying their products around it  and every Insurer has started embarking on a ‘Digital Strategy’ journey.

Insurance has always been an information based business and it can be argued that its digitization started as early as 1950s when Insurers started reading, storing and retrieving information using magnetic tapes (moving from tabulator and punch card). Since then, Insurers have been adapting to changes in the digital space, although at a slower pace than other industries.  Nowadays, the impact of digital is seen everywhere and it has created this euphoria of everybody jumping onto the digital bandwagon.

The euphoria has also created chaos across the entire insurance industry including customer expectations, operations, product, risk management and distribution. [pullquote position=”right”]Insurers must accept the disruption and transform the chaos into an opportunity by developing and executing structured digital strategies in order to reap the benefits of digital.[/pullquote] There is not one standard definition of ‘digital strategy’.  Views on the components of a digital strategy are also fragmented.  Some present strategy as the technical view of social media, mobility, cloud, big data and analytics.  Others articulate the strategy as the integration and exchange of information, the orchestration of business process such as marketing, distribution, servicing, claims across channels.

Digital disruption

Each view point is so compelling on its own but not complete in itself. For example, an online life insurance quote application without electronic signature capability will deliver less impact on reducing operational costs.  In the P&C context, an electronic insurance ID card by itself will not improve operational efficiency when the customers are going to call the contact centre for all other transactions.  A strategic approach to digital transformation is required in order to deliver comprehensive business results.

A strategic approach to digital encompasses the following five core components:

  1. Customer-centricity: Insurers should identify the customer segments that are aligned with their target market (based on demographics, behaviour and social background) and devise their digital strategy around them.  The ultimate aim of the insurer should be to use digital strategy to deliver the ‘brand promise’ through relevant business capabilities.
  2. Business process optimization: Insurers can increase operational efficiency and effectiveness by integrating and automating business processes across products, channels and operations.  Business process optimization goes hand-in-hand with customer-centricity – they are two sides of the same coin. On one side, customer-centricity improves customer retention, advocacy and wallet share; on the other side business process optimization helps insurers to stay viable and continue to serve their customers.
  3. Actionable insight: Insurers are moving from pure business intelligence and dashboards (that often leave the decision making subjective) to using predictive analytics to drive objective action.  Greater access to data, better economics of storage and improved precision in analysis have created greater automation and shifted the focus from simple underwriting to complex risk management.
  4. Innovation culture: To be successful, a Darwinian approach of ‘survival of those adaptable to change’ is necessary to promote the culture of change and innovation, understanding that a degree of failure is not a bad thing as it teaches us important lessons. A‘Test-and-Learn’ methodology rather than building at once is often more effective as it mitigates the risk of failure but promotes innovation.
  5. Information security: The interchange of data through the ‘Internet of Things’ makes personal data security and privacy much more vulnerable.  This puts pressure on the cost of information management and can slow down the implementation of successful digital strategies. Therefore, it is critical to have a clear Enterprise Risk Management strategy and implementation plan which delivers the highest security standards.


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