Harnessing power of data in digital transformation of insurance

Harnessing power of data in digital transformation of insurance

The insurance industry is a major component of the economy. It enables the individuals and companies to take more risk, which further empowers innovation and growth. The fuel of the insurance is data.

Technology revolution of the last decades and falling prices of technology create new opportunities to insurers to harness the data. As presented by WEF (Figure 1), DNA sequencing, for example, costed $2.7bn in 2000, and today for less than $1,000 one can have full DNA sequence. Cost of drones, dropped from $100,000 in 2007 to $700 in 2013, Cost of smartphone falls to as low as $10.

Figure  The cost of technology is falling rapidly


Further, development and convergence of technologies like internet of things (IoT); biometrics; artificial intelligence, big data and cognitive technologies contribute to explosion of data.

 “Competitive advantage in the insurance industry today is defined by an insurer’s ability to leverage all this data – structured, unstructured, owned, bought, rented, accessed on demand – and drive insights at scale to proactively find new customer segments, gain early insights into customer needs, and quickly innovate products that blend traditional risk products with insightful risk advice and preventive services” says  Sandip Patel, Managing Director, Insurance, IBM.

It comes with no surprise that both incumbents and insurtechs join the race in order to harness potential of data.

Recent MMC’s research showed that almost 8 per cent of European start-ups founded last year were AI companies, compared with about 3 per cent in 2015. Yet, two-fifths of Europe’s artificial intelligence start-ups do not use any AI programmes in their products, according to the report.

In the recent conference I attended, one of the panellists discussed how his company (large, global insurer), in spirit of becoming customer centric, invested millions of dollars in data analytics. ‘We have a very good understanding of our customers and know exactly which products to push on them’. The other presented how his company uses big data to move customers to digital channels, which allows his company to significantly reduce cost. These examples are not limited. They demonstrate Insurers approach towards automation and cost reduction, for the benefit of their business.

The true opportunity however lies in leveraging those digital technologies to fundamentally change how the business operates and delivers value to customers. It allows insurers to remove some of the long-lasting pain-points of the industry and shift from product focused to truly customer centric approach, rebuilding trust, removing complexity, offering transparency as well as relevant and flexible solutions. This implies that short term gains should not prevail and that on the contrary the long-term relationship with the customer as this is the driving factor to generate future income and profitability. 

In the recent EBO breakfast meeting held in London, Dr Gege Gatt, CEO stressed that “leveraging data should help Insurers move from product economy to experience economy improve the way we touch people’s lives.” Siloed channel approach should be replaced with frictionless experience. It is not just about automation but creating opportunities to redesign and rethink the customer engagement, challenge status quo and the old-thinking processes. He described that improvement cycle as moving through phases of Descriptive analytics to Diagnostic Analytics to Predictive Analytics.

Could not agree more!

Embarking on digital transformation is not a simple project, however. It usually impacts every part of business and requires change of business models, redesign of processes, products and services, shift of organisation culture. It involves a lot of resources, both human and budgets.

For the last 20 years I have been driving digital transformation in the financial services. I have realised a pattern in which those projects were initiated. Those usually started with: ‘our CEO wants us to leverage AI’ or ‘our competitors claim using cognitive analytics, so we should too’ or ‘we are digital now, so need to move customers to digital channels’. Being unclear about real purpose and objectives of digital transformation, being led by tech hype or Fear of Missing Out, lack of leadership and execution skills in organisation result in many digital transformation projects to fail globally.

To address those challenges and help my customers to approach change in a structured way, supporting efficient and effective execution, I have created a CASTLe framework, which translates into: C – Challenge; A – Analysis; S – Strategy; T – Tactics; LE – Learnings.

Figure 2 CASTLe framework


Technology may be an enabler for a change but it is a business challenge that should be the driver. Doing it because others do that too is not good enough. Satisfying your CEO ambitions is not sufficient either. It is necessary to understand what are the true business pain points and how to address them. The real challenges could include: building engagement with customers, rebuilding products and services to meet customer expectations.

After clarity on business challenge it is important to conduct Analysis and understand what impacts your business challenge? It is not uncommon that such analysis is limited to activities of direct competitors. Such a narrow focus often results in misleading assumptions and missed opportunities. Today’s word is connected, division between industries loses relevance, particularly in customers eyes. Consumers who receive transparent and frictionless experience from Amazon, expect the same from others. Understanding those trends is where competitive advantage can be created. Insurers could take a lead on it.

The company can decide on Strategy of evolution, revolution or disruption.

Only now you are ready to work on Tactics, which is basically detailed plan of how to execute the strategy. It includes building new processes, assigning right talent and also assigning KPIs to measure success of the project.

When project moves to final stage, called Learning, this is where KPIs should be reviewed and conclusion withdrawn and reapplied to the process. 


Figure  Action items in CASTLe frameworks

The insurance concept is so important for everybody that it deserves a much better treatment. Tools and knowledge exist. It is about the time to leverage it to become personalised, simple, fast, contextualised, portable, affordable, inclusive, flexible and social. To become customer centric.