49% of North American Insurers Operating Without a Digital Strategy
A recent survey by Gartner and LOMA revealed that digital maturity among North American life insurers remains low, with 49 percent of the survey's respondents having no digital strategy in place and many without an understanding about how digitalization can help transform their business models.
According to the survey, North American life insurance IT leaders report that their organizations are taking a tactical and slow approach to digitalization. The survey found that that transformation to digital business has been difficult for many life insurance businesses and IT leaders as they try to build the case for innovation and change, but have a traditional culture which has proven resistant to change.
The survey was conducted from in February and March among 51 respondents in North America. Participants were members of LOMA. The study aimed to assess the impact of emerging trends on IT investments, IT decisions and organizational decisions.
According to the study, participants considered heightened security and cybersecurity risks to have the biggest impact on the industry during the next three years. More-unpredictable risks, such as changes in consumer lifestyle, spending and savings, were considered less threatening.
Based on the study's findings, it is critical for North American life insurance CIOs to rethink their approaches to digitalization. Insurers that are unable to transform face higher risk due to market disruption and growing pressures from outside the industry:
New insurance brands offer digital consumers the option of a new buying experience, and aggregators that allow life insurers to reach consumers in a digital marketplace are maturing. Traditional life insurers offering commodity products such as term life will need to learn to better compete with these disruptors, possibly collaborating with them or acquiring them.
Research shows that increasingly, North American consumers want to engage through digital channels and their expectations for life insurance are shifting. To support enhanced content delivery and user experience, North American life insurance CIOs will need to build modern platforms that leverage mobile and other digital technologies. CIOs will also need to support business process changes, integrate current and new sales and service channels, modernize their back-end systems, and enhance customer experience through behavioral analytics and the use of artificial intelligence.
Business and IT executives from innovative North American life insurers should be seeking new partnerships with distribution partners, consortiums (such as for blockchain) or insurtech firms to advance products and services best suited for today's consumers. Currently, most insurers don't have large, effective business ecosystems. CIOs will need to help drive ecosystem innovation and educate their business partners on the IT changes required to support these ecosystems as they develop.
Digitalization will be challenging for most companies because of their reliance on their legacy systems. These systems undermine openness and the ability to develop the next-generation insurance products (such as those leveraging wearables) and build digital front-end platforms. The Gartner-LOMA study found that the top two challenges for the next three years will be aged systems that cannot support new business needs and legacy modernization.