The Digital Business: What Does It Mean for Insurers?

Digital technologies have profoundly changed how we do business. Because these technologies impact virtually all business functions and customer interactions, today’s companies recognize the importance of becoming a “digital business.” This notion is certainly supported by insurance industry articles, discussions, and conference references. But what does it really mean to be a digital business?

The “digital business” for most people means sales and service — the importance of enabling omnichannel self-service to improve customer engagement, for example. Designing a compelling customer experience is indeed an important part of a successful digital business strategy. But Guidewire’s discussions with insurers have also revealed that core operational systems play a big part in enabling digital transformation. This digital transformation goes well beyond updating internal automation projects to reduce paper-based processing, to include core system capabilities, which are required to fulfill digital sales and service aspirations.

But if your core system isn’t up to the challenge of meeting modern digital demands, what is an insurer to do? George Grieve, CEO at CastleBay Consulting, explored this in his article “Getting There from Here.” He wrote that cool technologies like mobile and portal solutions are “dependent technologies” and, “if the core systems are data- and function-poor, rigid or hard to integrate with, implementing innovative technologies will be hard, costly, and unsatisfactory.”

Some insurers with inflexible legacy core systems attempt a quick fix by building websites that don’t really offer full self-service. In these instances, form-based customer input is forwarded to the insurer, where someone manually rekeys the information into the core system. Other insurers must recode complex operational logic and duplicate data for each channel solution.

While these patchwork remedies can satisfy the demand in the short term, they have long-term TCO implications that can drastically restrict an insurer’s speed-to-market when changes must be made in several places. Thankfully, modern core systems can enable key digital sales and services capabilities in a more optimized fashion. Following are a few examples:

• Straight-through processing and customer self-service: To avoid disconnected, form-based quote processes and offer true self-service, core systems need to support straight-through processing, including automated underwriting, rating, and document generation. If customers cannot complete their transaction or get all the answers they need in one session, they will go elsewhere.

• Workflow Flexibility: The processing workflow used by internal users on desktops is not the same as the one that should be exposed to consumers and policyholders. The workflow should be more stream-lined and tailorable to the user, device or channel. Many older-generation core systems are rigid in the way they expect to interact with a user and are not capable of supporting different workflows.

• Omnichannel capability: Customers want to have a choice in which channel or device they can use to access various insurance services. They expect to move seamlessly from one device to another with a consistent but appropriate experience for each channel, without having to rekey data or provide the same information twice. This is a key element of being “multi” channel and “omni” channel. To enable this, core systems must expose a consolidated customer view and a single source of truth across systems and channels. Each channel should provide a complete view of the policyholder and, regardless of the channel used, each transaction should be executed in real-time against a common database and with all customer data. Many legacy core systems are still batch-oriented with policy-centric — as opposed to customer-centric — data models, so they cannot support the omnichannel model.

• Personalized customer journey: Once insurers have established self-service capability across devices, they typically want to start tailoring and personalizing the customer journey. For example, branding differently based on how the consumer enters the site - from a sponsored link on Facebook, to a Porsche dealer site, to searching for “antique auto insurance.” But this tailored journey should really go beyond aesthetics like background images and banners. For example, dynamic cross-sell/up-sell messages can be based on information about customers and their transactions and interactions to date, while differentiated product offerings, service levels and pricing can be based on customer segmentation rules or campaigns. This deeper level of personalization must be driven by core systems to avoid the cost of duplicating customer information, product definitions and processing rules.

To create a truly sustainable digital business, insurers must leverage the capabilities of modern core systems and integrate those systems with their sales and service channels. By doing this, they will remain viable and competitive in today’s dynamic digital world.

A version of this blog post previously appeared on Insurance Innovation Reporter.