Digital Transformation in the Insurance Industry – 5 Best Practices

To do digital transformation in the insurance industry right, you need to know the industry. Drawing from two decades of experience, we present the key principles for building winning digital solutions in the insurance space.  

When we talk about digital technologies, innovation, and cutting-edge solutions, the insurance sector probably isn’t the first one to come to mind. With all the administration, regulations, and large product complexity, many consider insurance to be a very traditional business. 

In reality, nothing could be further from the truth. 

Digital transformation in the insurance industry is moving faster than a claims agent after a hail storm. Actually, the sector has been one of the first to digitize its systems to improve internal processes, make more accurate risk assessments, and inform product pricing.

However, with rapid advancements in digital technologies and changing consumer expectations, insurers can’t afford to just maintain the status quo. Customers expect more from their digital experiences. They want fast and smooth processes, intuitive interfaces, and complex interactions made simple.  

With over two decades of experience on projects focusing on digital transformation in insurance, we’ve come to learn some important principles for building digital products that customers love and businesses thrive on.

What does digital transformation in the insurance industry even mean?

In general, digital transformation is about using technology to create new or improve existing business models by introducing digital innovation to processes, products, or services. 

An early example of digital transformation in the insurance industry is the use of scanners for digital document filing, as well as complex algorithms backed by historical data for shaping the prices of insurance premiums more accurately. This allowed insurance companies to become more profitable and better at risk management. 

Insurers have a number of digital tools in their toolbelt and with the advancements in AI, big data, and IoT – the possibilities just keep multiplying. 

Then, as the World Wide Web became more and more populated in the 1990s, insurance businesses started selling their products over the internet. This gave them a new source of revenue and also helped them increase customer loyalty and retention.

And today? The insurance industry is hardly imaginable without digital processes. Paperless document signing, online applications, instant quotes, fraud detection, fully digital insurance claim submission and processing, instant insurance, gamification, tracking devices in cars that monitor how a person is driving so that their premium can be adjusted accordingly… 

Best Practices for Digital Transformation in the Insurance Industry

Building a great digital product that will be easily adopted by customers and bring success to a business takes more than tech expertise. Knowing the industry you’re building for allows you to shape that product so that it meets the needs of the market and effortlessly finds its place in it. 

When building for the insurance sector, these are the things to keep in mind.

1. Know your audience

Insurance apps have a very specific target audience. These are not the types of mobile apps users will interact with daily. On the contrary, they will tap that icon only when they need something.

Bearing in mind that many insurance plans, like car insurance, for example, are extended on a yearly basis, the number of daily or monthly active users won’t be very high. 

This can make understanding your audience somewhat challenging as you won’t have ample opportunity to get to know their needs and expectations regarding digital experiences. 

Additionally, and this might come as a hard truth for insurance providers, they also don’t want to engage with your digital product more than that. 

This fact comes into play when you think about upselling your users with additional services. Sending them push notifications about new offers on a daily basis is probably not the best strategy. However, sending them a push notification about travel insurance once their location changes to another country? That could work out great.

2. Apply the KISS principle

We’re not talking about the band that loves heavy makeup, but a well-known principle in marketing, software engineering, and many other fields – keep it simple, stupid.

Insurance forms and contracts are usually very long and complex. Digitizing the process gives you an opportunity to simplify a complicated matter and position yourself as a leading digital service provider with forms that are easily understood by anyone.

When you decide to go down this road, don’t just transfer your paper forms to a digital format.

Think about automation. Is there a piece of information that can be automatically pulled to the user’s screen? Is there a way to connect with your local tax authority or a bank? 

Think about the customer experience and presenting your data in an easily understandable way and only to the extent to which it is absolutely essential for the user. 

3. Leverage loyalty

In the insurance sector, there is an important factor that works in favor of the service providers, and that is customer loyalty. Most users won’t go researching insurance companies each time their contract expires. It’s a hassle and a time-wasting task, especially for an average user who didn’t need to activate their insurance policies in the previous year. 

This definitely doesn’t mean that you can get comfortable and not worry about customer retention. On the contrary, invest in the relationships you have with your loyal customers to strengthen them.

Offer your customers discounts, small gifts, referral bonuses. This is an incomparably smaller investment than the one you need for attracting new ones.

And bear in mind that the loyalty described above only goes so far. After all, you’re operating in a heavily saturated and highly competitive market. Current trends show that the costs of switching insurance providers are going down as the ease of using digital products in insurance is going up.

It is just one of the reasons why insurers should make the UX of their digital tools an absolute priority. If your customer gets a more affordable insurance offer from a competitor with a beautifully designed app that lets them do everything in three clicks… they will be tempted to make a move despite years of loyalty.

Use the power of data

With so many digital channels available to people nowadays, the sheer volume of customer data collected is increasing exponentially. This can be both a challenge and an opportunity for insurers.

Managing and storing this data efficiently and securely is, of course, a prerequisite. And with the data at their disposal, insurance companies can use advanced analytics to gain valuable insights that will help them shape new insurance products and services, form competitive prices, improve the user experience and their underwriting and claims handling processes. 

Leveraging personal instead of pooled data, an insurer can create highly personalized offers that are a perfect match for an individual customer and their needs. 

For example, a person who drives an eco-friendly car, mostly for commuting to work and weekend trips, could get an offer for comprehensive coverage with enhanced protection for commute-related incidents and roadside assistance for those weekend getaways. Throw in a discount for green vehicles and a safe driver bonus, which could be applied towards the premium or future renewals, and you have a perfect fit.

4. Prioritize data privacy and security

Insurance companies operate in a highly regulated environment and deal with sensitive customer data. By providing personal data through digital products, the users put their utmost trust in the insurance providers. That trust may come easily for established companies but know that it’s also painfully easy to lose.

Data breaches can cause immense damage. Obviously, there are financial losses, but the damage to an organization’s reputation is especially hard to recover from.  

Be very careful how you design your product, remember security plays a critical role, and bake it into every stage of the development process. If you don’t have the resources in-house, hire outside experts and test your insurance solutions thoroughly from a cyber security standpoint to make them bulletproof.

5. Focus on the customer experience

Insurance forms are notoriously difficult to read and understand. There’s no problem with this when you’re signing the contract; most users will do the usual next-next-I-agree dance. However, when they find themselves in a situation where they need to collect the insurance money, things can get complicated fast.

Insurance providers need to work twice as hard to help their users rest at ease. Don’t put them in a situation where they’re pulling their hair out because they didn’t read the small print. 

Design your insurance products so that you lead your customers by the hand and give them all the information they need, but not excess information. Format and compile your contracts in a way that a high school student with no experience would understand them. 

Your customers are not insurance experts – they just want to know that what’s precious to them is insured and safe. When there is an unfortunate event, you need to step in and step up. Help them in a way that they understand. 

For example, one of our banking clients, NLB, offers 24/7 video chat support, and we’ve integrated this feature into their mobile app. Imagine you’re traveling abroad, and you need to increase your credit card limit, but it’s 4 AM back home. That video chat will be a lifesaver.

Bonus: Up your insurance game with artificial intelligence

Writing this article without touching upon the magic of artificial intelligence would be impossible in the year 2024, and the insurance business has some great use cases for AI products.

Most insurance providers have collected vast amounts of data in the past two or three decades. With the right tools, this data can be easily utilized for fraud detection, introducing new insurance products and offers to the market, automating routine tasks, providing a personalized experience, and educating their user base. 

But, remember the KISS principle. For starters, you can implement a nice AI-powered chatbot or a flow that would help the user pick out the best offer for their specific case. Maybe a completely personalized offer too?

Ready for digital transformation in the insurance industry?

Though no novice in digital transformation, the insurance industry is well-settled in its ways. Insurance products have carved their niche in the digital landscape, and groundbreaking changes don’t happen on a daily basis. It’s important not to get stuck in the setup that you have. 

Bearing in mind the above best practices, it might be helpful to connect with an external technology partner to support you on your business transformation journey. They can bring a new perspective to your business and introduce you to new ways and digital tools to challenge the status quo.