Insurance CEOs are getting serious about digital transformation. But as they start to step up their efforts, many are struggling to catalyze the level of change that will be required to achieve their transformation objectives. What will it take to reach the next level of digital transformation in the insurance sector?
Let’s be honest: the insurance industry hasn’t been the fastest to adapt to the shift towards the digital economy. But now there are clear signs that many of the leading insurers are starting to take the need for transformation much more seriously.
Consider this; in a recent survey of US Insurance CEOs conducted by KPMG International earlier this year, 95 percent of the respondents said they now see disruption as more of an opportunity than a threat. And almost a quarter said they expect to start to see significant returns on their investments into digital transformation within the next year.
This is great news. The reality is that recent advances in technology, automation and analytics have unlocked massive new opportunities for insurers to improve performance, manage risk and drive growth.
The road to growth
Most insurance CEOs seem to recognize they are in danger of falling behind. The vast majority of CEOs that I talk to tell me that – while they are confident in their organization’s ability to grow over the next three years – they also recognize that their traditional routes to growth are no longer delivering the returns their shareholders require, nor the services and experiences their customers now expect.
What insurance CEOs are increasingly realizing is that future growth will largely come through technological enablement: automation will deliver greater efficiencies; cognitive technologies will lead to better decision-making; new platforms will unlock unexpected service offerings and revenue potential. Technology will not be the panacea to growth, but it will certainly underpin it.
Turning tone into reality
The right ‘tone from the top’ only goes so far; it also needs to be supported by meaningful end-to-end transformation across the organization. Let me just unpack that statement a bit. The key words to focus on are ‘meaningful’, ‘end-to-end’ and ‘across the organization’.
Achieving ‘meaningful’ change will require insurers to move beyond small pilot projects and proof-of-concepts to instead focus on achieving real scale and, therefore, meaningful change. Driving end-to-end transformation will require insurers to think much more holistically about how they organize their business today and in the future. And ‘across the organization’ will require them to find ways to break down existing siloes and overcome resistance to unlock collaboration across the enterprise.
Resetting the balance
As Laura Hay, KPMG’s Global Head of Insurance and a partner with KPMG in the US noted in a recent article on the topic, the real challenge facing today’s insurance CEOs is how to properly balance the new demands of growth against the ongoing need to manage risk and cost.
My concern is that – when it comes to disruption – too many US Insurance CEOs are leaning towards the risk management side and too few are embracing the change side. Given the changes now underway across the US market (driven largely by technology-enabled consumers), my advice to insurers is to rethink the balance.
Yes, there is considerable risk and uncertainty involved in a transformation of this size and scope. But the risk of moving too slowly is much larger. Insurance CEOs will need to think seriously about how they reach the next level of digital transformation.
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