How Insurance CIOs can Leverage Digital Opportunities

Insurance CIOs need to embrace and enable digital innovation, as well as communicate new ideas about digital ways to work.

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The digital disruption that has transformed sector after sector, from publishing to travel, has come to insurance as well. Consumers are expecting a differentiated digital experience. The mandate to transform from ‘doing digital’ to ‘being digital’ has emerged as a top organizational imperative.

While CIOs are valued for their technological acumen and vision, what’s needed is a new organizational paradigm built for innovation and agility that spans technology platforms, people and processes and is carried out under a unified vision. This means shifting away from the traditional ROI-based model that favours large initiatives that are sponsored by the CEO and approved by the board, and replacing it with an organizational model capable of supporting smaller digital initiatives that can either quickly succeed or fail. The CIO can and must play a central role in enabling this.

Insurance CIOs need to embrace and enable digital innovation, as well as communicate new ideas about digital ways to work. To overcome the challenges and make good on the opportunities, insurance CIOs must transition from being coordinators who focus on consolidating and integrating innovative solutions, to being digital change agents who provoke change and drive business digitization. To get there, insurance CIOs must:

  • Take a hands-on approach to addressing digital opportunities and challenges.
  • Invest more time in their internal leadership network and manage their relationships more actively.
  • Ensure the understanding of technology drivers and make sure their impact is distributed across the leadership team.
  • Establish IT as a talent engine, renewing skills and enticing digitally-savvy, high-potential individuals into the organization.

From ‘Doing’ to ‘Being’ Digital

Insurance CIOs are prioritizing the right digital technology and delivery capabilities to enable digital transformation. However, “being digital” goes beyond developing a few mobile apps, launching a Web portal or moving a system or application to the cloud. It requires making digital a core element of how the company operates and seamlessly blending physical and digital components to deliver new value to key stakeholders, whether they are policyholders or business partners. Today, top digital opportunities are geared toward not just driving efficiency, but also reimagining customer experiences, reshaping how work gets done and even rewiring business models.

The following digital initiatives that provide high ROI are eliciting a lot of interest:

Usage-Based Insurance: UBI is one of the top areas for digital ROI, and no wonder: Insurers have discovered that when policy pricing is tied to human behavior, they can improve their loss ratios. The most prevalent example is the auto insurance industry’s “pay how you drive” offerings, which align driving behavior (captured through in-vehicle telematics devices and smartphone apps) with premium rates. These technologies can also deliver real-time feedback in order to promote safe driving practices and prevent losses. Closely related is the use of emerging technologies such as telematics, wearables, connected devices and the IoT to build a smart ecosystem that monitors events and behavior in real-time. By correlating this data with internal and external data sources, insurers can establish an automated closed-loop feedback mechanism to prevent, mitigate and predict future losses. They could also suggest loss control measures that customers could adopt to gain premium advantage, or create a tailored risk profile for each customer and better match the premium offered with the risk characteristics presented. Insurers are applying this approach to home insurance, using IoT, WiFi and high-definition video technologies to alert customers to possible break-ins and offering premium savings and deductible refunds to participating customers.

Omnichannel Experience: With insurance CIOs recognizing that the customer experience is largely shaped by digital technology, it’s also not surprising that omnichannel customer experience is another top area for digital return on investment. Forward-thinkers are implementing interactive capabilities via customer portals and mobile apps, enabling customers to interact with providers, compare offerings and take greater control of their policies and claims.

Robo-Advisors: A third area of high ROI is robo-advisors. Using technologies such as natural language processing (NLP), speech recognition and virtual assistants, insurers can embrace innovative ways of transforming the customer experience. USAA, for example, partnered with Nuance Communications to add the company’s virtual assistant (Nina) to its mobile customer service apps to deliver engaging self-service platforms for customers to transact, navigate, ask questions and customize their experience.

Insurers are also using artificial intelligence-based technologies such as robotic process automation to reduce repetitive tasks and free agents to undertake more complex work that requires human elements, such as creativity, empathy and complex decision-making.

While the transformation to digital might seem daunting for many insurance CIOs, accustomed to a conservative, cautious environment, the change will be worth it. In the words of an insurance CIO, “The future of insurance can be seen in the efforts of a few forward-thinking players that have experimented with different business models for niche markets, as well as insurance market leaders that have used digital to “spread their wings” and grow more quickly than they otherwise would.”

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