How a Strong Digital Backbone is Transforming Life Insurance

Like many industries today, the insurance industry is being inundated with changing customer demands and expectations — especially as main demographic segments change. However, the digital transformation necessary to meet these challenges is happening much slower for life insurance companies.

Digital transformation for life insurance companies means improved customer experience, better employee engagement, and dramatic bottom-line benefits. The insurance companies that are making the change in this industry are leaping ahead of the pack — not just because they’re serving their customers and employees better, but because so many of their competitors are simply slow to change.

In one recent example, a well-known American life insurance and annuities (L/A) provider identified the changes in their customers’ expectations and preferences, and took action. They moved from a batch-based approach to an event-driven communication model to improve actuarial data collection and analysis, marketing, customer experience, and more. This set the company apart from competitors in many unique ways.

Read on to learn more about the market shifts driving digital transformation in the insurance industry, and how leaders like our American life insurance client are transforming to keep up — and better yet, to keep ahead.

Why Insurance Customer Experience Matters Now More Than Ever

In their recent report, The Growth Engine: Superior Customer Experience in Insurance, McKinsey notes that customer experience can do far more to drive profitable growth than raising advertising spend or lowering prices.

They point to a joint J.D. Power study to illustrate this: In the last five years, U.S. auto insurance carriers that have consistently provided best-in-class experiences to their customers generated two to four times more new business growth and around 30% higher profitability. This is likely because happy customers are 80% more likely to renew their policies than unhappy customers, and the cost of retaining customers is lower than the cost of generating new customers.

With that in mind, it’s easy to see why better customer experience drives growth and profit for insurance companies. But as is the case across every industry today, customer expectations are changing, and insurance companies are struggling to figure out what this means for them.

While insurtechs are stepping in to satisfy the increasing demand from customers for instant digital transactions across channels, they haven’t yet captured a meaningful share of the market. This leaves room for incumbent life insurance providers to step up to the plate with digital transformation that serves their customers in this way. However, this gap is closing quickly.

Our life insurance customer saw this happening and were concerned that if they didn’t move quickly, they’d fall behind not only their competition, but insurtech startups.

They were moving data in batches, point-to-point through REST-based APIs, so data collection and analysis were periodic at best. Their IT infrastructure and data were not well-integrated across different agencies, states, and lines of business, so leveraging data across these environments to deliver better customer experience was nearly impossible. This also resulted in poorly timed and impersonal marketing, and the inability to give their agencies and support agents a complete, real-time view of the customer’s profile.

To get ahead of the problem, they designed a digital transformation plan that prioritized real-time data movement across different environments so the entire company could serve life insurance customers better and faster.

Digital Transformation Is Creating a More Personal Life Insurance Customer Experience

One common problem across the life insurance industry is a difference in how the customer journey is viewed. Customers view each touchpoint with an insurance provider as a step in a single journey toward a personal goal — while insurers tend to look at each touchpoint as a discrete event. This is likely the result of the fact that insurance providers have historically been very siloed, which makes coordination across silos a huge challenge.

Creating a strong digital backbone and tools that connect all customer events through choreography, eliminates these siloes, while improving customer experience while offering greater personalization and speed.

The reality is that customers and partners want digital tools today. Digital natives (younger generations that have grown up with technology) prefer to purchase for and interact with insurance companies digitally — which poses a problem for carriers that don’t have these capabilities.

McKinsey sums it up this way in their life insurance and annuities state of the industry report:

Financial advisers and captive general agents will expect a digital interface and automated tools in their interactions with insurance home offices and wholesalers — same as their customers. Successful insurers will focus on improving the partner experience to help elevate the customer experience.”

Our life insurance client addressed these challenges with a new core policy administrative system called FAST. This was a more agile and flexible alternative to their traditional application, and exposes events in real-time. To enable the event-driven interactions within the new system, they adopted Solace PubSub+ as the digital backbone.

How Digital Transformation Benefits the Employee Experience

While a recent Aon Global Employee Engagement report found that a 5% increase in employee engagement has been shown to lead to a 3% increase in revenue, the insurance workforce is operating under some unique circumstances.

Baby boomers made up one-fourth of the insurance workforce in 2018 (31% of insurance agents and 24% of underwriters) — but they are rapidly approaching the traditional retirement age. As these seasoned professionals exit the industry en masse, a wealth of institutional knowledge will go with them. And to fill these nearly 400,000 job openings and close this talent gap, the industry needs to shift tactics to appeal to younger generations.

Part of this shift must include an emphasis on the high-tech, flexible work environment an insurance career can offer. And those can’t be empty promises.

A digital backbone with event streaming can help make sure data gets to the right place at the right time. Digital tools also enable remote work and better cross-organizational collaboration. For generations of workers who value flexibility and digital communication, these tools aren’t just perks, they’re critical.

The right technology backbone can also help insurance employees shift the conversation from sales to service. In an industry where most communications are sales-focused, putting the focus on serving the customer and building trust can have far-reaching effects. In fact, proactive communication about insurance-related activities or events (such as a burglary in the customer’s neighborhood, or an impending flood), faster approval/denial of insurance coverage decisions, and quicker claims processing can mean the difference between customer loyalty and attrition.

Our insurance client used their new digital backbone with event-streaming to equip their call center agents with a real time, 360-degree view of the customer profile which includes details on the customer’s interactions with the company. Now agents are empowered to answer questions on the spot when customers call in and they have the information required to be of greater service.

The Bottom-Line Benefits of Digital Transformation for Life Insurance Companies

The life insurance industry may be lagging behind others when it comes to digital transformation, but as more insurance companies reap the bottom-line benefits, the faster the transformation will happen across the industry. The leaders who are leaping ahead already are seeing benefits like:

• AI and data working together to make the business more agile and easier to scale.
• Leveraging the wealth of information they have in mainframes and legacy tech.
• Penetrating large, untapped market segments like younger, digitally native customers.
• Capitalizing on faster-growing emerging markets, such as Asian consumers who are more open to making financial decisions online, on mobile devices or through social media.
• Improving the company risk profile overall, and company risk with individual policyholders, by leveraging data collected through wearable devices.
• More easily leveraging new applications and cloud services.
• Smoother integration of acquired lines of business with different tools and technologies.
• Knowing their customers better to improve cross-selling and upselling across lines of business.

Digital Transformation Is Already Making a Difference in the Life Insurance Industry — What’s Holding You Back?

In their recent Insurance | Digital Transformation Remaking an Industry report, Accenture found that executives believe the biggest obstacles to achieving desired results from technology investments are lack of systems integration or compatibility and lack of collaboration with the IT function.

Finding technology solutions that allow the different parts of the business to work together efficiently is key to solving these challenges — and a digital backbone can help solve this problem.