The Making of a Digital Insurer – McKinsey Report
Article Synopsis :
Insurers worldwide are increasingly creating value by using digital tools and technology in a number of innovative ways. However, much of the potential for digital competitive advantage remains untapped.
In “The Making of a Digital Insurer. The Path to Enhanced Profitability, Lower Costs and Stronger Customer Loyalty”, the Financial Services team from McKinsey highlights the importance of employing an enterprise-wide approach to digital transformation and emphasises that digital is more than the sum of individual initiatives. To succeed in a digital era, the report asserts, insurers should rethink their approach in six areas:
- Strategy: A digital strategy adapts to rapid industry change while supporting overall business objectives.
- Customer-centricity: Digital tools improve the customer experience at every step in the decision journey, and beyond.
- Digitising business processes: Processes are re-imagined from a zero-base, reducing costs and errors, and boosting customer satisfaction.
- Organization: The corporate culture, approach to talent, and organizational model all support digital excellence.
- Technology: Two-speed IT allows for rapid digital development and ensures that transactional systems are safely maintained.
- Analytics and decision making: Data from both internal and external sources is gathered in real-time and mined for actionable insights.
The report suggests the optimal approach to digital transformation combines short-term steps with more measured, long-term projects. For insurers interested in jump-starting their digital capabilities, McKinsey articulates five specific steps, with a thorough discussion of each:
- Assess digital maturity
- Map the digital opportunity
- Build a “fast-paced” core digital team
- Run pilots
- Celebrate and build on success
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Digital Insurer's CommentsThe successful digital insurer possesses more than technical expertise. They have a corporate culture, an approach to talent and an organizational model that create the conditions for digital excellence. And according to McKinsey, these ‘digital champions’ generate revenues 10% higher than the industry average and are 20 to 30% more profitable.
It’s ironic the main barrier to becoming a digital champion is often existing technology. Per McKinsey, nine of ten carriers acknowledge that they’re struggling to develop the technology infrastructure needed to support digitization. Also the size, complexity, and rigidity of legacy platforms are a barrier to the rapid development that characterizes digital.
We agree with McKinsey’s assertion that being digital isn’t a magic pill or fad diet, but a lifestyle change. Insurers embracing the hard realities of our increasingly digital world will enjoy a healthier existence and better quality of life, with happier shareholders, over the long term.
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