7 minute read 29 Apr 2019
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Seven technologies insurers must master for digital transformation

By EY Global

Ernst & Young Global Ltd.

7 minute read 29 Apr 2019

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  • Digital transformation in insurance (pdf)

If insurers don’t move quickly, new market entrants will do what Amazon has done to retail and robo-advisors are doing to wealth management.

Nearly every insurer on the planet — no matter its size, structure or particular circumstances — should undertake digital transformation immediately. Ever-rising consumer expectations and the insurance sector’s lagging position in digital demands it.

The good news is that many early adopters and fast followers have already demonstrated the potential to generate value by embedding digital capabilities deeply and directly into their business models. Although successful pilot programs have been of limited scope — addressing narrowly defined problems or one specific part of the business — they have delivered some value.

Formidable cultural barriers also remain. Most insurers are simply not accustomed or equipped to move at the speed of digital. Similarly, few, if any, insurers have the talent or workforce they need to thrive in the industry’s next era.

What digital transformation means

Digital transformation is best defined as capitalizing on the power of technology to revisit business models, acquire customers to new channels and create essential user experiences. Digital transformation strategies can be applied broadly across the organization and incorporate a number of related disciplines, including innovation management, enhanced experiences and new business models.

Digital and remote contact channels


More than 80% of customers are willing to use digital and remote contact channels (including web chat, email, mobile apps, video or phone) in place of interacting with insurers via agents or brokers.

Because its value proposition is so high, digital transformation for insurers is essential. Digital transformation delivers tangible and intangible value across the insurance value chain, with specific benefits in six key areas:

  • Cost reduction
  • Customer experience enhancement
  • Speed to market
  • Sales productivity
  • Underwriting efficiency
  • Claims efficiency

The seven technologies and initiatives below each deliver many, if not all, of these benefits.

  • Omni-channel

    Omni-channel is increasingly a baseline capability that insurers must establish to achieve digital maturity. Today’s consumers are naturally omni-channel, researching products online, recommending and talking about them with friends and contacts on social media, and then buying them via mobile apps or at brick-and-mortar retail locations.

    Insurers must look beyond merely supporting multiple channels and find the means to allow customers to move seamlessly between channels, or even within channels (such as when they move from chatting with a bot to chatting with a human agent). It is difficult to overstate how challenging it is to create the capabilities (both technological and organizational) to recognize customers and what they are seeking to do, without forcing them to re-enter their passwords or repeat their questions.

  • Big data analytics

    The application of advanced analytical techniques to large and ever-expanding data sets is also foundational for digital insurers. For instance, predictive analytics can identify suitable products for customers in particular regions and demographic cohorts that go far beyond the rudimentary cross-selling and upselling approaches used by many insurers. Big data analytics also hold the key for creating personalized user experiences.

    Analytics that “listen” to customer inputs and recognize patterns can identify opportunities for new products that can be launched quickly to seize market openings. Deep analysis of the customer base may make clear which distribution channels (including individual agents and brokers) are the best fit for certain types of leads, leading to increased sales productivity.

    The back-office value proposition for big data analytics can also be built on superior recognition of fraudulent claims, which are estimated to be around 10% of all submitted claims, with an impact of approximately US$40 billion in the US alone. Reducing that number is an example of how digital transformation efforts can be self-funding.

  • Internet of Things (IoT)

    The onset of smart homes gives insurers a unique opportunity to adopt more advanced and effective risk mitigation techniques. For instance, intelligent sensors can monitor the flow of water running through pipes to protect against losses caused by a broken water pipe. Similar technology can be used to monitor for fire or flood conditions or break-ins at both private homes and commercial properties.

    The IoT clearly illustrates the new competitive fronts and partnership opportunities for insurers; leading technology and consumer electronics providers have a head start in engaging consumers via smart appliances and thermostats. Consumers, therefore, may not wish to share the same or additional data with their insurers. Insurers may also be confronted by the data capture and management challenges related to IoT and other connected devices.

  • Telematics

    Sometimes grouped with IoT, data from sensors and telematics devices have applications across the full range of insurance lines:

    • Real-time driver behavior data for automotive insurance
    • Smart appliances — including thermostats and security alarms — within homeowners insurance
    • Fitness trackers for life and health insurance
    • Warehouse monitors and fleet management in commercial insurance

    The data streams from these devices are invaluable for more precise underwriting and more responsive claims management, as well as product innovation. Telematics data provides the foundation for usage-based insurance (UBI), which is sometimes called “pay-as-you-drive” or “pay-as-you-live.” Premium pricing could be based on actual usage and driving habits, with discounts linked to miles driven, slow or moderate speeds and safe braking patterns, for instance.

    Such data could also be used to combat claims fraud, with analysis of the links between severity of the medical condition and the impact of the accident. Some insurers are already realizing the benefits of safe driving discounts and more effective fraud prevention. These telematics-driven processes will likely become standard operating procedure for all insurers in the near future.

  • Voice biometrics and analysis

    Audio and voice data may be the most unstructured data of all, but it too offers considerable potential value to those insurers that can learn to harness it. A first step is to use voice biometrics to identify customers when they call into contact centers, saving customers the inconvenience of entering policy numbers and passwords, information that may not be readily at hand.

    Other insurers seeking to better understand their customers may convert analog voice data from call center interactions into digital formats that can be scanned and analyzed to identify customer emotions and adjust service delivery or renewal and cross-selling offers accordingly. The manual quality control process checks for less than 1% of the recordings, which is insufficient. Through automation, the entire recording can be assessed to identify improvement areas.

  • Drones and satellites

    Early-adopting insurers are already using drones and satellites to handle critical tasks in underwriting and claims. In commercial insurance, for instance, drones can conduct site inspections, capturing thermal imagery of facilities or work sites. Their reviews can be as specific as looking for roof cracks, old or damaged boilers, and other physical plan defects that can pose claims risks.

    Within homeowners lines, satellites can capture data to analyze roofs, chimneys and surrounding terrain so that insurers can determine which homeowner they want to add to underwrite, as well as calculate competitive and profitable premiums. When linked to digital communications tools, drone and satellite data can even trigger notifications to customers of new price options or policy adjustments.

    Within claims, drones and satellites can handle many tasks previously handled by human adjustors across all lines of business. Such remote assessments can reduce claims processing time by a considerable degree. This method is particularly effective in situations such as after floods, fires and natural disasters, where direct assessment is not possible.

    While many transformation programs that use drones and satellites remain in the experimental stages due to operational challenges, it is possible that they can improve the efficiency and accuracy of underwriting and claims information gathering by 40%.

  • Blockchain

    Blockchain provides a foundation for entirely new business models and product offerings, such as peer-to-peer insurance, thanks to its ability to provide virtual assistance for quoting, claims handling and other tasks. It also provides a new level of information transparency, accuracy and currency, with easier access for all parties and stakeholders in an insurance contract.

    With higher levels of autonomy and attribution, blockchain’s architectural properties provide a strong digital foundation to drive use of mobile-to-mobile transactions and swifter, secure payment models, improved data transparency and reduced risk of duplication or exposure management.


The inevitable advancement of digital technologies has placed the traditionally slow-moving insurance sector under greater pressure than ever before. Insurers stand to lose if they do not invest more in innovation, learn to experiment more and fail faster. And new thinking, cultural change and different skillsets are just as important as technology upgrades.

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By EY Global

Ernst & Young Global Ltd.