The digitalization of insurance: Opportunities and trends

The insurance sector is traditionally known for personalized advice and lengthy paper-based processes. However, it has not been left untouched by digital transformation. Buy policies online, use an app to report damage, and access insurance information around the clock and from anywhere – online services are the future of insurance. Yet one constant remains at the center of this tech revolution – people.

In this article, we explore how digitalization can work in insurance and the way unused potential can benefit insurance companies.

Banking, shopping, doctor's appointments, or registration at the local municipal office – today we do all these activities and more online. Digitalization is becoming more and more widespread in daily life, and this trend has reached the insurance sector.

Every generation has its own needs

The younger generation of digital natives, in particular, is used to doing everything online. Younger customers want to buy insurance online without speaking to an advisor, submit paperless applications, and report damage with just a few clicks.

Meanwhile, older customers continue to prefer going to a physical branch. They want to get advice in person or over the phone, or they’d like to speak to an employee in the event of damage. A hybrid variant is ideal for middle-aged policyholders. You can simply submit applications and buy policies online, and in an emergency you can also contact an advisor to sort out matters in person.

Accordingly, insurance companies have to re-imagine the way they provide information and take new approaches, for example, via an app.

Online channels are gaining ground

A study by Ernst & Young shows that interest in online channels when buying insurance is increasing on the whole. Only in the initial awareness stage are customers mainly offline. During the information and decision stages, online channels such as comparison and rating portals, as well as social media channels, are become increasingly appealing. For the transaction and post-purchase stages, customers count on digital insurance products, such as an insurer's website or app. During the Covid-19 pandemic, demand for digital services rose sharply and this trend is continuing – across all age groups.

Identifying demand in advance

The study also shows that the need for insurance often arises in traditional ways, for example, through recommendations from friends or due to the customer’s changed life circumstances. For insurers, this means there is unused potential in identifying demands in advance.

With the help of digital technologies such as artificial intelligence, insurance companies can identify this potential even before the customer does so themselves. Data analytics can help in this process to identify changed life situations early on. Using automated technologies, insurers can be at their customers’ side from the awareness stage onward, using personalized offers to selectively generate interest. Digitalization in insurance also helps to identify risks in good time. Even dynamic insurance rates can be offered based on pattern recognition.

What are the goals of digitalization in insurance?

Pressure on the insurance industry to go digital is increasing. While changes can already be seen in the private sector, progress is slower in the area of industrial insurance. One challenge is the complexity of commercial insurance. Digitalization is an opportunity to reduce this complexity and provide user-friendly products. When insurers understand the digitalization of insurance as a force for generating added value, they can start to optimize their processes, improve their customer experience, and create new business opportunities.

So what are the specific objectives of digitalization in insurance?

Focusing on customer service

The long-term goal of the insurance sector has to be for customers to purchase insurance as easily as they purchase other consumer goods. The digital customer journey should not be an obstacle, but should instead use state-of-the-art technology to ensure that buying insurance is as appealing as possible. When customers can, for example, conveniently upload a photo of an item they would like to have insured to an app and receive a personalized quote based on it, this reduces the barrier to use. A trip to the nearest insurance office, on the other hand, involves considerable effort by the customer.

Reducing costs

Without digitalization, insurance companies will continue to fight a tough price war. The economic crisis triggered by the Covid-19 pandemic is forcing insurers to reduce their costs. More competitors and poor supply chains are further exacerbating the crisis. Digitalization provides a way out, through more efficient processes, automated tasks, and faster data processing. This creates optimized customer experiences and a shorter time-to-market. Cost savings in the value creation process allow insurance companies to give financial resources back to customers in the form of lower premiums.

These examples show how digital offerings can effectively reduce costs:

• Online platforms and mobile apps simplify customer interaction and reduce administrative effort.
• Electronic document management reduces storage and archiving costs.
•  Improved risk assessment reduces claims and costs.

Improving internal workflows

In addition to external communication, the digitalization of insurance also improves internal processes at insurance companies. Everything from data storage to employee communication is centralized and digitized. This network enables employees to work together seamlessly and reduces administrative workloads significantly. By using AI-supported systems, you can perform your processing activities more efficiently, allowing you to support customers faster and more accurately.

Leaving the competition behind

In the digital insurance world, pioneers prevail over competitors. They work more efficiently and quickly, which promotes customer satisfaction. Thanks to their agile processes, they react to customer needs at lightning speed. This strengthens loyalty and confidence. They set trends and define standards, securing their place atop the digital insurance landscape.

A fast flow of information closes experience gaps

If it takes a long time to process a claim, this can become a source of dissatisfaction for a customer and a reason to leave. Fragmented information flows make it difficult to buy insurance conveniently, communicate changes, or submit claims. Reason enough for customers to switch to the competition. Seamless communication creates shorter processing times.

Avoiding media disruptions

Media disruptions make it difficult for customers to take out insurance quickly and easily. For example, if a customer enters their data online but is then forced to print out the document and sign it by hand, the process might not always seem reasonable from the customer's perspective. These experience gaps result in unreasonable processes and dissatisfied customers. For this reason, it is important to minimize media disruptions. Insurers can do this by connecting channels (online and offline).

Creating a seamless customer experience

The information submitted by customers has to be processed quickly and efficiently. To avoid delays or information loss, systems are required that collect, structure, and route insurance data seamlessly. It is essential for all the different communication channels to be tightly integrated. This creates the opportunity to provide customers with a consistent, user-friendly and personalized experience.

Leveraging unused data

The amount of data about their customers that insurance companies have is increasing by the hour. The problem is not a lack of data sources, but rather the ability to correctly use and analyze the data. The increasing networking of devices is driving the growth in data volumes. Laptops, smartphones, fitness watches, and VR glasses are a part of customers’ everyday lives, and these devices track important data about behavior. The Internet of Things is creating promising prospects for digitalization in insurance, but with this trend comes the challenge of storing and processing this data.

Personalized insurance products

One example: An insurance customer starts his day with a jog while his smartwatch records data such as heart rate, calories burned, and distance. He has also connected his smartwatch to the app from his digital health insurance provider. In return, he receives attractive premiums while the insurance company collects valuable health data. It enables the customer to track his activity data and progress in a fun way, and it encourages him to identify with the health insurance company.

This customer also likes to take bike rides. His GPS data show that he occasionally leaves his bike in public places overnight. However, the bicycle is not covered by his household contents insurance. Through digital content understanding the existing information is linked, enabling personalized offers, better decision-making, and tailored customer service for insurance companies.

Discovering hidden data potential

Insurance companies possess an enormous amount of data about their customers that often goes unused. These “dark data” contain important information about contact details, living conditions, interests, claims, and usage behavior.

However, the data have to be structured in order for them to be used in a product-related manner. For example, by analyzing health data from thousands of patients, risk assessments can be created to provide early warning of health problems, such as diabetes, and to provide nutritional advice. Data can also be used to calculate car insurance prices more accurately. Data analytics can also help to identify popular product packages, which enables insurance companies to adapt their offerings accordingly.

Centralizing data to create added value

By investing in centralized data management, insurers gain new insights and enable customer-focused products and services. The use of different data sources and AI-based methods creates a 360-degree view of the customer and it adds value to customers and insurers by providing personalized offers and automating business processes.

Digital legal security for greater customer confidence

Insurance companies manage a wealth of sensitive personal data. Although data represents great potential for improved services for insurers, transparency is essential for customers to willingly share this data. Standardized, digital workflows help to meet legal requirements – even across different national borders.

Robust and secure IT architectures

Personal data has to be collected, stored, and managed in accordance with the General Data Protection Regulation (GDPR). In addition, the supervisory requirements for IT in insurance (VAIT) imposed by the German banking regulator BaFin apply to the insurance sector. VAIT's goal is to create robust IT systems in the insurance sector. A secure IT architecture minimizes risks, ensures data integrity, and protects the confidentiality of customer data. Through VAIT, insurance companies comply with regulatory standards and create a high level of security and stability in their IT systems.

Mainframe vs. cloud: Where is the security gap?

Both mainframe systems and cloud solutions have benefits, but they also have different security features. Mainframe systems are considered secure because they typically operate in closed environments and allow for strict access controls. However, they often require high investments in hardware and maintenance. Cloud platforms, on the other hand, provide a flexible and scalable solution. By using cloud services, insurance companies can respond quickly to changing requirements and easily deploy resources as needed.

How does Intelligent Content Automation help with digitalization?

Intelligent Content Automation (ICA) is playing a central role in transforming the insurance industry. When you bring all the information needed to purchase insurance into one system you create context, which increases efficiency and improves the customer experience. Our ICA solution Doxis offers consistent workflows, rapid data collection, and seamless connection to a range of third-party systems such as mobile apps.

The heart of the IT landscape

Doxis is a digital document management solution and archive all in one. As the central enterprise content management solution, it is at the heart of the IT landscape. It’s where all the information flows together to support data-driven decision-making. The expansion of Doxis to include various solutions such as Business Process Management, Contract Management or Invoice Processing creates a central point of contact for insurers to store all insurance data in a compliant manner.

Automated damage reports

An insurance customer causes a car accident. Instead of having to laboriously submit documents in paper form, Doxis allows you to report damage quickly using an online form. Thanks to intelligent content automation, all of the customer's existing information is already pre-filled. So all they have to do is provide information about the accident itself and upload the accident pictures.

Intelligent workflows and AI-based data collection save employees from subsequent questions. All damage reports on the Doxis platform are summarized in an individual dashboard for the insurer and can be processed efficiently – providing real added value for customers and a major step towards getting closer to the customer digitally.

Less manual work, more customer proximity

Automation through ICA is revolutionizing the way insurance companies work. Less manual work means more time and resources to focus on what matters most: customer needs. Through Intelligent Content Automation, insurers can optimize their processes and provide personal customer service. In the end, the digitalization of insurance is not only about technology, it is, more importantly, about people.