{"id":74144,"date":"2024-08-05T22:21:30","date_gmt":"2024-08-05T22:21:30","guid":{"rendered":"https:\/\/whatfix.com\/blog\/?p=74144"},"modified":"2025-10-08T10:29:58","modified_gmt":"2025-10-08T10:29:58","slug":"digital-transformation-insurance","status":"publish","type":"post","link":"https:\/\/whatfix.com\/blog\/digital-transformation-insurance\/","title":{"rendered":"Digital Transformation in Insurance (Challenges, Examples)"},"content":{"rendered":"

As one of the most digitally mature sectors<\/a>, insurance companies invest strongly in digital transformation, particularly artificial intelligence (AI). According to Zipdo<\/a>, 67% of insurance executives believe AI will significantly impact the industry in the next three years, and over 80% of insurance companies are already planning to increase their investments in AI technology.<\/p>\n

The modern insurance policyholder wants a hassle-free, self-service experience, is mobile-savvy, and is happy to buy policies from new players in the insurance industry \u2013 also known as\u00a0InsurTech<\/a> companies \u2013 if they can provide these experiences. In other words, consumers prefer insurance companies that have already made their digital transformation<\/a>.<\/p>\n

If your insurance business hasn’t already, it needs to begin digital transformation. In this guide, we\u2019ll cover everything there is to know about digital transformation in the insurance industry.<\/p>\n

\n

What Is Digital Transformation in Insurance?<\/h2>\n

Digital transformation in insurance refers to the process of implementing cutting-edge technologies to improve every aspect of insurance companies. Examples include using online claims portals, automated fraud detection, claims management software, and more.<\/p>\n<\/div>\n

9 Examples of Digital Transformation in Insurance<\/h2>\n

Emerging technology and cloud software have disrupted the insurance sector, transforming internal operations, employee experience, policyholder experience, and core insurance workflows.<\/p>\n

Here are nine examples of digital transformation in the insurance sector:<\/p>\n

    \n
  1. Automated underwriting using algorithms to generate contextual policyholder quotes<\/li>\n
  2. AI & automation reducing claims processing time & cost<\/li>\n
  3. Omnichannel customer experience tools improving policyholder communication<\/li>\n
  4. Telematics technology enables personalization at scale<\/li>\n
  5. Digitalization of legacy insurance applications and processes<\/li>\n
  6. Blockchain and smart contracts add transparency to P&C insurance industry<\/li>\n
  7. Digital adoption platforms improving agent productivity & performance<\/li>\n
  8. Predictive insurance analytics<\/li>\n
  9. Policyholder portals<\/li>\n<\/ol>\n

    1. Automated underwriting using algorithms to generate contextual policyholder quotes<\/h3>\n

    Automated underwriting is a computerized process where robotic process automation (RPA) software and artificial intelligence use algorithms to generate insurance quotes and underwrite the potential risk of clients, taking out the need for real people. This helps insurers with a more streamlined, less biased, and overall better underwriting process to assess, estimate, and price risk using aggregate or personalized data.<\/p>\n

    Once an algorithm completes its calculation, an industry professional reviews the quote or decision, investigates the logic behind why the automated underwriting system recommended the result it did, and adjusts if necessary.<\/p>\n


    \n\"Deloitte <\/a><\/p>\n

    Take Fannie Mae, for example. Its Desktop Underwriter<\/a> system recommends decisions for mortgage lenders like \u201crefer,\u201d \u201crefer with caution,\u201d or \u201capprove.\u201d Mortgage lenders want to issue more loans but must do so cautiously to minimize financial risk. When a lender gets a \u201crefer\u201d or \u201crefer with caution\u201d recommendation from the automated system, they\u2019ll either underwrite the loan manually or reject the application depending on specific risks identified by the algorithm.<\/p>\n

    P&C insurers use a similar process to assess risk and price policies, such as homeowners\u2019, car\u2019s, and renter\u2019s insurance. Approved customers can digitally sign up for a policy without speaking to a human underwriter through self-service experiences. If appropriate, a P&C professional can manually amend a policy once the customer is insured.<\/p>\n

    With automated underwriting systems or\u00a0loan software<\/a>, those applying for insurance can complete the process without speaking to a real insurance agent. The number of consumers willing to do that has skyrocketed over the past few years \u2013 from 17% in 2016 to 36% in 2020, an increase of over 110%.<\/p>\n

    2. AI & automation reducing claims processing time & cost<\/h3>\n

    Manual claims processing typically takes around 30 days or more. And because many people are involved in the process, it\u2019s susceptible to human error.\u00a0Artificial intelligence<\/a>\u00a0(AI) and machine learning tools, on the other hand, reduce claims processing\u00a0error rates<\/a>\u00a0to 0% and\u00a0speed up\u00a0the process by one to 15 days. AI has also\u00a0decreased processing costs<\/a>\u00a0by 30%.<\/p>\n

    AI and machine learning tools continue to improve their effectiveness at identifying potentially fraudulent claims and estimating damages and losses because they continually analyze relevant data. These tools can also be programmed to handle repetitive tasks, like filing the first notice of loss (FNOL), freeing up time for your agents to do more thought-intensive activities.<\/p>\n


    \n\"AI-powered <\/a><\/p>\n

    One AI and machine learning tool changing the insurance landscape is Lemonade<\/a>, an InsurTech startup with an automated chatbot that has achieved the unimaginable: it processed a\u00a0digital insurance claim<\/a>\u00a0in three seconds, from filing to payout. It has also identified a large number of insurance fraud attempts, saving insurance providers millions.<\/p>\n


    \n\"\" <\/a><\/p>\n

    3. Omnichannel customer experience tools improving policyholder communication<\/h3>\n

    Providing an\u00a0omnichannel customer experience (CX)\u00a0means meeting your customers where they are and communicating relevant information to them regularly. Your customers need to be able to buy policies, process claims, and more on both web and mobile devices. Insurance providers that meet those demands will find that their customers are\u00a0more loyal and less likely to churn<\/a>.<\/p>\n

    Omnichannel CX in insurance<\/a> also means providing customers with easy access to information, accurate and predictive customer service, and fast processing times across all platforms. According to\u00a0Salesforce<\/a>, 58% of customers say\u00a0their expectations have changed\u00a0because of<\/em> <\/span>technological advancements, including omnichannel CX tools such as insurance chatbots. They want a more\u00a0retail-like experience<\/a>\u2014easy access to your product offerings and quick responses from your customer service team.<\/p>\n

    Insurance chatbots help your firm educate customers, collect customer feedback, and run simple processes.\u00a0Artificial Solutions\u2019 AI-powered chatbot<\/a>\u00a0is a great example of a conversational chatbot that communicates with customers using natural language. Customers can ask the bot questions, buy policies, file claims, and more using a faster and more streamlined process. Customers have a great experience, and you save time and money in manpower and support.<\/p>\n

    4. Telematics technology enables personalization at scale<\/h3>\n

    Telematics technology<\/a>\u00a0is data tracking software and hardware (think your cell phone, website cookies, global positioning systems [GPSs], and computers) that track users\u2019 behavior with their consent. Before telematics, there was no way for insurers to track and influence policyholders\u2019 behaviors. Insurers couldn\u2019t assess risk on an individual level at scale, so they had to create policies based on general data instead of personal data.<\/p>\n

    \"Types<\/p>\n

    Auto insurers have already started using telematics tools like GPS trackers and beacons to track data directly from customers\u2019 cars and devices. With that data, insurers can anticipate changes in individual behavior to measure and reduce risks.<\/p>\n

    Insurers who use telematics and get the consent of their policyholders to track individual data can personalize policies and offer discounts that would not be possible otherwise. For example, instead of basing driving behavior on the general population, insurers can track an individual\u2019s average driving speed, most-used route, rate of car usage, and more to give their customers policies that perfectly suit their needs.<\/p>\n

    Besides tracking behavior, telematics has also enabled providers to influence behavior to reduce accidents. Fewer accidents mean fewer payouts. Insights from telematics help insurers make better decisions around underwriting and claims, in addition to personalized policies.<\/p>\n

    Insurers have also started looking at smart home devices\u00a0outside of the auto insurance industry to further drive P&C insurance digital transformation. Smart home devices track home data, such as humidity and temperature, that can cause damage to a home over time.<\/p>\n

    5. Digitalization of legacy insurance applications and processes<\/h3>\n

    While legacy systems may have supported your insurance company in the past, these outdated applications and manual processes will eventually start to hold your company back. As legacy systems become outdated, they slow teams down, are difficult to maintain, cause frequent outages, and make it difficult to achieve your digital insurance strategy.<\/p>\n

    Legacy application modernization<\/a> refers to insurance companies replacing outdated systems with modern, cloud applications. This may involve adding new SaaS solutions, migrating to new ways of doing things, and retiring legacy apps.<\/p>\n

    Common examples of enterprise insurance companies modernizing their legacy applications include:<\/strong><\/p>\n

      \n
    • Implementing a new claims management system to automate claims.<\/li>\n
    • Launching new policyholder portals to provide self-service experiences for customers.<\/li>\n
    • Modernizing internal operations, like implementing a new HCM system.<\/li>\n<\/ul>\n

      6. Blockchain and smart contracts add transparency to the insurance industry<\/h3>\n

      Blockchain\u00a0is a digital ledger that records data in the form of \u201cblocks\u201d that become a permanent record once they are accepted \u201con-chain.\u201d Blockchains are easily accessible by permitted parties through\u00a0blockchain-based platforms<\/a>.\u00a0Smart contracts<\/a>\u00a0are lines of code stored on the blockchain that automate insurance claims processing to improve user experience and back-end efficiency. The smart contract is ultimately what would approve (or not approve) the conditions of a claim and send it off to be included in a block.<\/p>\n

      Without blockchain, when a customer decides to purchase a policy, there are four parties involved: the customer, the broker, the insurer, and the bank. But conversations only happen between two parties at a time\u2014for example, the customer only talks to the broker, the broker only talks to the insurer, and so on. Information is passed from one party to another and gets held up or lost during the tedious back-and-forth.<\/p>\n

      It\u2019s a long, convoluted process that lacks transparency and efficiency and usually provides a poor customer experience. It takes time for information from the bank to get back to the customer because that information has to go through two other parties.<\/p>\n

      Blockchain solves that problem because it is a decentralized system that removes the middleman and makes information more accessible. When a smart contract is created, it gets added to the blockchain for everyone to see. The blockchain-based smart contract then automates the tracking, management, and cloud storage of policies, records of physical assets, and claims-triggering events to increase back-end efficiency and front-end transparency. Instead of inefficient paperwork and slow communication, blockchain enables all information to be accessed by any party at any given moment.<\/p>\n

      To illustrate the process, the smart contract auto-initiates<\/a>\u00a0claims processing when certain conditions are met (e.g., policy expiration). Each piece of new information that gets executed through a smart contract gets entered into another block on-chain that would be accessible for all relevant parties to access.<\/p>\n

      7. Digital adoption platforms improving agent productivity & performance<\/h3>\n

      Insurance digital transformation requires an upgraded tech stack and updated processes that theoretically save you time and money. But if your agents don\u2019t know how to use your tech stack or complete your processes, then the time and money you would have saved are wasted.<\/p>\n

      Unfortunately, you can\u2019t use\u00a0traditional classroom training methods\u00a0to train your newly digital workforce because they are outdated, time-consuming, and not collaborative enough for digital learning. You need to digitize and update your agent training methods to\u00a0increase agent efficiency<\/a>\u00a0and reduce redundancy.<\/p>\n

      A\u00a0digital adoption platform (DAP)<\/a>\u00a0like\u00a0Whatfix DAP<\/a>\u00a0provides an \u201cin-app\u201d training technology that integrates with your applications and walks your customers and employees through important processes and new technologies, as well as provides an easily searchable Self Help content database.<\/p>\n

      \"Whatfix-DAP-Self-Help-Gif\"<\/p>\n

      With\u00a0in-app guidance<\/a> features like guided Flows, in-app Task Lists, contextual Self Help, guided Tours, Smart Tips, and Pop-Ups, employee and customer end-users are enabled to realize value and adopt new processes quickly. It also supports your employees by providing contextual, automated guidance technology to reduce errors and increase performance. Use all of DAP\u2019s features to increase agent efficiency and improve the customer experience.<\/p>\n

      \"duckcreek-task-list\"<\/p>\n

      One example of how DAPs can drive efficiencies in the insurance industry is\u00a0Sentry Insurance<\/a>, which created end-user training 40% faster with Whatfix. They used Whatfix features to develop and deploy training modules across six different applications for over 77,000 people.<\/p>\n