Digital Transformation in the Insurance Industry [Podcast]Last updated: June 20, 2023 | 10 min read
GhostDraft’s CEO, Wayne Toms, recently joined forces with COVER Magazine’s Tony Van Niekerk for a podcast that focused on the surge of digital transformation in the insurance industry. As a publication that has grown to encompass 26,000 professionals in financial service fields such as insurance, investments, financial planning, and risk management, COVER Magazine is at the forefront of current news regarding digital developments. With Tony’s extensive 28-year history in developing products and understanding distribution strategies within the industry, this collaboration was set to share insight relating to how insurers are keeping up with innovative technology today.
Digital Transformation in the Insurance Industry
Digital Transformation session with Wayne Toms, CEO of GhostDraft, focusing on the ‘Digital Transformation in the Insurance Industry’ and host Tony Van Eikerk, COVER Magazine.
Tony Vanke Niekerk: Hi, this is Tony at COVER Magazine. I’m speaking to Wayne Toms, the CEO of Ghost Draft. Wayne, thank you very much, first of all for chatting to me. It’s great to see you again and we. It’s a continuation of our previous conversation. I think this time we want to sort of take a step or two back and just unpack a little bit what digital transformation is. Everybody talks about it and there’s a lot of thoughts about how you do it. But, just as a starting point, why is it so topical in the insurance industry?
What is Digital Transformation?
Wayne Toms: Well, what do we mean by digital? Put simply it’s using technologies to automate processes and create digital customer experiences, particularly in the world where there are changing business and market needs. For example, an insurance customer who wants to buy a policy may want to have the following experience with the insurer.
Firstly, they want online access to a form to submit certain information. They would like quick or maybe even real-time assessment and underwriting of their application. They want a quick turnaround then of the policy documents with personalized product offerings. That’s an expectation these days. They want those documents to be e- delivered to them, and the content of those documents should be dynamic, including multimedia, inter interactivity options, and so on. And finally, they would then like the ability to manage that policy online.
So, why has digital become topical for insurers? Well, the way customers buy insurance today is changing. Everyone has smartphones, they’ve got apps, and these have indeed become the default way for people to shop for grocery shopping and many other types of shopping as well.
And this has led customers to expect more from their interactions with insurers. Customers hate friction, and they want to be able to dictate their needs and the correspondence that they receive from insurers like contracts, policies, claims, et cetera, needs to be brief and easy to read. And a lot of the new market disruptors in the insurance industry have tied into these changing needs.
They have less dependence on legacy systems. And in fact, they’re specifically setting out to disrupt business models with their pricing and the way in which they enable customers to select exactly what they want. So as we see these rising customer expectations and this increasing intensity of competition, and indeed the economic volatility that we face today, we see insurers shifting their focus to three core areas.
Three Focus Points for Insurers’
Firstly, building. Exceptional customer experiences that drive growth and customer retention. Secondly, driving process efficiencies and cost reduction. And thirdly, accelerating digital transformation through innovation.
This digital transformation means changing our business systems to enable the things I’ve been talking about and making commensurate changes to people’s structures and business processes as well.
Tony Van Niekerk: I’ve heard many times from people talking about it, especially when it comes to the more sort of complicated products that they say no, it applies more to the smaller products and etc. But as you say, people’s interaction with buying those smaller products is actually what shapes their expectations. And therefore then they want that same sort of experience even with more. Complicated stuff, and I think that sort of brings me to my next question. Why have insurers been so slow to respond? We know this. We know that’s what people want, but yet we don’t respond quickly enough.
Adapting to Customer Requirements
Wayne Toms: Well, let’s face it. The aim of insurers like banks and other financial institutions is to reduce risk, and the inevitable impact. Of that focus has been to slow down innovation, and we often see this in the core insurance IT systems, which are infamously slow to change or extend. Research in the states suggests that it takes insurers an average of 8 months to bring even simple new insurance products to market. And four months just to make simple product modifications. While half of that time is spent on the implementation and testing of the appropriate changes where the product is coded or configured in the insurer systems. So, with this digital opportunity presenting itself, insurers need to find a way to adapt to these new customer requirements while continuing to meet their fiduciary responsibility.
And the problem is that the way many core insurance systems have been architected means they cannot easily enable these to support digital requirements. In fact, new systems are often required, or at least that’s the perception, but replacing core systems, as you know, is hugely complex and costly, and it’s made even more complex by the need to change. Or to support the complex insurance product structures in the new system, and also to migrate the policies in force across to these new systems.
Tony Van Niekerk: So now, given this legacy investment that they have, what options do insurers have to offer digital enablement to customers in their businesses? How do they overcome that challenge?
Wayne Toms: Well, As I was saying, digital transformation can be a hugely disruptive journey for insurers because of the difficulty of changing existing systems, structures, and processes. But we would argue that digital transformation be seen not as a single, huge investment, but rather as a series of small incremental steps.
The key is to find a way to enable digital customer engagement without having to change the core systems themselves. Luckily modern, it has provided us with a way to do this with the development of what are called open APIs, which are standard methods that allow computer systems to talk to each other. They’re widely supported in software applications, and they’re relatively easy to work into existing IT ecosystems. This interaction layer, the open API layer, can then enable us to separate the digital functionality into a separate set of systems and to layer these systems on top of the existing core systems without the need for extensive systems surgery.
Tony Van Niekerk: For someone like me to understand what types of digital-enabled solutions. Can you then use it to achieve those?
Wayne Toms: Well, for a process to be digitally transformed, if we can use those words, we believe there are four types of application or system functionality that we should consider.
Applications or System Functionalities to Consider
Customer Facing Solutions
The first is a customer-facing solution. This would provide us with a customer-facing and usually personalized interface to the customer. Usually through a browser or an app, it’ll guide the customer on a simplified interaction journey, either for a specific known customer who can log onto their account, or in fact, to an anonymous person may be a prospector, a new customer who wants to sign up for business. This interface will present certain information to that customer, and in fact, will gather information from that customer. And these solutions should support the e-delivery of documents and perhaps also live interaction so that customers can have a conversation.
Employee Facing Solutions
The second type of application would be an employee-facing solution. Business users also need a simple interface, which can help them navigate through this digital process. These interfaces usually hook into systems which will reduce the touches. In other words, try to enable straight-through processing, as they call it, to increase collaboration amongst staff and team members, and speed up the business activities.
This is also an opportunity to embed process automation in support of the digital process. For example, at Ghost Draft, when business users use our tools to design a new insurance document, we also have the ability to automate the process of converting these into templates and then deploying them for immediate use.
The third type of solution is what we call a content solution. These solutions would package the content which is delivered to customers in a way that’s personalized for their specific needs. It’s generally content that is online enabled. It often includes multimedia with live links to other useful content and may even include interactivity options. For example, interactive graphs allow users to change parameters and see the impact on premiums and coverage, that kind of thing. And this content is invariably data-rich, which means both using data that we must personalize the customer experience and or conversely accumulating the data from the customer interaction to enhance future decision making. For example, underwriting and claims assessment.
And the final solution, not to be forgotten, the other three application types need to work with some kind of a platform solution. Some kind of core system that has a simplified integration layer and can integrate into these other three solutions I’ve spoken about.
It’s generally API Open, which means it’s easy to enable communication with the other solutions like the ones I’ve just been mentioning. It’s cloud-enabled, which means it’s very quick to deploy and maintain. And these solutions are actually designed to allow changes and innovation with little or no actual code being written.
In order to meet those requirements going forward. We’ve actually seen the emergence of new-generation policy administration systems in the work we’ve been doing, which are functionally very light compared to what we’ve seen in the past. But they’ve got these flexible integration capabilities and in fact, they’ll often even use marketplaces of third-party solutions, which can easily be brought into the core. I think we’ll be seeing much more of that going forward.
So, for example, if we think of these four types of solutions I’ve just been talking about, at GhostDraft, we focus specifically on the automation of insurance documents and correspondence. And this is obviously a key point of customer interaction as you know. So, our solutions are able to provide a front-end application for customer interaction, as well as a simplified browser-based solution for insurance business use. And both of these can easily integrate into the insurance backend systems. In fact, we’ve already done this for most of the leading policy administration systems in the world and we’re able to deliver all the document content as personalized and multimedia enabled.
Tony Van Niekerk: That’s probably become one of the most important aspects of insurance nowadays, is how you actually get that sort of almost multi-layered client interaction and communications to connect with each other and to easily adapted across all your platforms. Now you’ve given me a lot of things to think about and anybody who’s listening or reading this also should probably have the next question, where would you recommend the starting point is?
Taking the First Step
Wayne Toms: Yeah, it’s a good question. The first step is to start. The way to do that, we would suggest to our clients that you identify a customer interaction process or point, whether value is easy to articulate. For example, engaging with new customers to produce a quote and then rather re-engineering or radically altering the core systems, which as we said can be very complex and expensive. Look rather to leverage an existing third-party solution, which can handle the full digital journey with the customer, and they do in, in fact, exist. These systems are also designed from the ground up to work with and integrate into other systems. That’s how they built that then leaves a much smaller requirement in the hands of the IT department, which is simply to provide this integration layer on top of the existing core system.
In fact, in our interactions with insurers, we see many of them building out the functionality of their core systems specifically to allow systems like these to be easily integrated into their environments. And so that’s a great starting point, and, and it doesn’t have to be a forever solution. In fact, the beauty of separating digital into its own layer is that these systems can be replaceable with limited impact on the core going forward.
Tony Van Niekerk: So, if somebody comes up with something completely different, that’s really much better. You can unplug and plug in again. So how about brokers and intermediaries? We’ve spoken about insurance. Does this apply to them as well? And how do they get to play?
Wayne Toms: Brokers customers have the same needs as those who interact or interface directly with the insurance carriers. In our experience with some careful planning, it’s often quite possible for brokers to own the digital front end and to integrate this into the carriers’ policy and claims system.
One of the benefits of digital solutions is that they often require less upfront investment and they’re extremely versatile. So, these systems are actually within the reach of mid-size intermediaries. They can then give them the ability to flex those solutions to a variety of current and future customer requirements.
Tony Van Niekerk: So here comes the crux of the matter. I’m always trying to leave the listener or the reader with sort of some sort of quick overview or perspective. How would you summarize what you’ve just said?
Wayne Toms: It’s just that there’s a general impression that digital transformation can be hugely complex and expensive. Yet, it doesn’t get any easier by doing nothing. The problem just cascades into the future. But suppose we can disaggregate the journey of digital transformation into a series of more manageable initiatives and investments. In that case, we can deliver customer benefits more expediently, while also building out a flexible set of systems. We can then use it in the future to adapt to the growing customer and business requirements.
Tony Van Niekerk: Wayne, thank you very much. That was very interesting. Your summary is probably what everybody should look at as unpacking their business into smaller pieces. Then, look at how you can transform each of those. But the basis of it is to have a good platform to start on and take it from there.
Wayne Toms: One must start.
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