Global insurers need to recognise that by not embracing digitisation, they may limit the market in which they compete, and they must further understand that they can create strategic advantages by digitising along the entire insurance value chain.
That is the view of Chris Newman, managing director–global, ACORD, who told Monte Carlo Today that the opportunity has never been greater, nor the stakes higher than right now.
“Now that the London Market has proved it can operate remotely, the moment for accelerated modernisation is clearly upon us. With a rapidly evolving ecosystem paired with financial uncertainty amid a global pandemic, the need for insurers to modernise is more urgent than ever,” Newman said.
“As an industry, we must embrace the moment and take action. Clearly, global data standards and their interoperability within this global ecosystem continue to play a significant role.”
He said that six months into the global COVID-19 pandemic, it was reassuring to see Lloyd’s of London reopen its doors, and equally reassuring that the London Market had adapted so well to the demands of these new and unprecedented times.
“The market, long hampered by modernisation challenges, was forced into more digital ways of working as a result of quarantines and office closures, to great effect.
“Many challenges remain before the market finds itself truly embracing digitisation, but the need has never been greater to address them,” Newman said.
He argues that, from a global perspective, even before COVID-19 arrived, the insurance industry had found itself at an uncertain inflection point. Insurers who failed to meaningfully differentiate their offerings had already begun to suffer from a lack of consumer-buyer engagement, and slow-to-adapt incumbents who insisted on viewing their products as commodities were losing market share to those able to adopt a buyer-driven approach.
“Customers were demanding digitisation—and rightly so,” he said.
“Fortunately, there is no other industry better equipped to quickly identify, understand, and mitigate risk. As the industry increasingly understands that failing to digitise is a known risk, and that the benefits of digital maturity are material, it is inevitable that insurers will place increasing value on its importance.
“The immediate need to begin conducting business remotely that the market—and in fact, the whole world—experienced beginning in March 2020 swiftly accelerated that shift.”
“We must embrace the moment and take action.”
Since 2015, Newman said, the percentage of global consumer-buyers interacting with their insurers through digitised mechanisms has doubled. As the global standards-setting body for the insurance industry, he said ACORD has a clear window into this digitisation increase, and the recently released fourth edition of the annual ACORD “Insurance Digital Maturity Study” provides a well-timed look at some continued deficiencies and key targeted improvements.
The study found that companies embracing digitisation to develop new, technology-enabled operating models throughout the enterprise significantly outperformed the industry, and saw a direct correlation between digital maturity and total shareholder return.
Among the top 130 worldwide insurers, however, fewer than 30 percent have truly digitised the value chain, and 13 percent are not leveraging digital technologies within their current business processes.
More than half of the insurers in the study are still exploring how digitisation can be applied against their business model. Clearly, there are still many obstacles to overcome.
Moving forward, perfecting the internal exchange of information will not be enough. Insurers must be able to integrate effectively across the greater insurance ecosystem, as the importance of partnerships, alliances, third parties, and vendor relationships grows.
Standardised digital data exchange increases efficiency and effectiveness, both internally within the enterprise, and externally among trading partners.
“Digitising the entire insurance value chain creates the flexibility and adaptability necessary to leverage data for competitive advantage, not in hindsight, but at the moment of value—for instance, when a customer is trying to bind, or when a claim is being filed.
“Incorporating digitisation as a fundamental component of operations helps to ensure that the right processes, capabilities, and organisation all come together in an effective strategic operating model,” Newman said.
“Current economic realities impose significant constraints.
“For the foreseeable future, insurers will have the difficult task of simultaneously managing for near-term results, positioning for long-term growth, and strategically turning the pressure of digitisation forces into a value creation opportunity—all while operating in an arduous and volatile economic environment,” he concluded.
Main image: shutterstock.com / Andrii Yalanskyi