Current estimates suggest investment in digital transformation across all sectors will almost double from $1.25 trillion in 2019 to $2.3 trillion in 2023, (Statista, 2022). A significant proportion of this will be spent in the insurance sector, but as we have seen in the past, high expenditure is no guarantee of desired outcomes. Digital is not a stand-alone topic and needs to be carefully woven into the strategy, operating model and wider DNA of any enterprise, including having a digitally driven workforce. In recent years, progressive organisations have spent time putting the customer at the heart of their businesses, but this narrows thinking to the ‘what’ and omits the ‘how.’ We believe these both should be equal priority.
Digital transformation is underway. However, the mindset is largely one of digitizing legacy operating models over a fundamental reassessment of the opportunities presented by new technology. Effective digital strategies need to recognize that investments must balance addressing the demands of today, whilst also building the foundations of a radically different digital business for tomorrow.
In the short term, your digital strategy needs to look externally and internally. As the existing markets collectively develop their capabilities, companies need to ensure they are digitally open for business. Internally, tactical gains from developing technologies can continue to be applied to legacy processes and IT infrastructure. At the heart of digital is data – a coherent data strategy will begin to unlock value if it can be embedded into decision making processes.
In the medium term, companies should look to be ‘digitally-led’ across the value chain, starting with product design and distribution. This will inform your architecture (both business and technology) to ensure it is nimble and flexible enough to be able to change at pace; that your current operating model, governance and decision-making processes can keep up with the changing digital and technological landscape.
Longer-term, leading organisations will challenge the status quo – asking themselves ‘how would a digital business be built to sell insurance?’ rather than ‘how do we digitize our analogue business?’ We have seen the profound effect digital can have in the tangible world of retail, music and media – to think insurance will not change as radically is a risky position to take. As with other sectors, incumbent players may face challenges from new entrants with deep pockets.
The digital challenge for insurance is complex, with the nature and timing of the future uncertain. However, the best prepared companies will develop a robust strategic framework to exploit the opportunities presented and defend against the inevitable change ahead.
Alpha’s key takeaways:
- Invest the time to align on your short, medium and longer term Digital thinking – they will serve as foundations of your digital strategy. They should not be used to force decision making, but to hold the owners of the digital strategy to account. In the event something is in conflict with a principle – either the principle/ strategy will change, or a decision will be made to remove the point of conflict.
- Your digital architecture and supporting roadmap are critical – they will enable you to set out the revenue flow between old vs. new, helping business stakeholders understand the impact the evolving technology estate is having on the organization’s bottom line.
- Bear in mind that the “middle” will digitize itself – it’s already happening – one of the most important things you need to bear in mind is ensuring your business and technology architectures are nimble and flexible enough to adapt at pace.
How Alpha can Help:
Alpha is helping a number of our clients approach and structure their digital transformation journey. If you are facing these challenges, we are more than happy to speak to you and provide our expert insights – please contact us here.