Insurance leaders achieved a full year of digital transformation progress within first 90 days of the COVID-19 pandemic.
NTT DATA today announced its new research findings, L&A Insurers Shift Their Digital Transformation Into High Gear, which surveyed the transformation that the life and annuity industry has undertaken. The research showed that one year of digital transformation progress was made within the first 90 days of the pandemic lockdown; indicating that leaders sped up plans significantly in 2020 with the arrival of COVID-19. Overwhelmingly, life and annuity (L&A) insurance executives believe in the need for transformational digital change (99%), and 72% of carriers are shifting business models toward digital distribution of other firms’ products and services to provide the best customer experience.
Amidst changing consumer expectations, a tumultuous business environment and aggressive M&A activity, the research forecasts how the next decade will be defined by new business models and rapid digital acceleration for the insurance market.
“If the unpredictable last year has taught us anything, it’s that digital transformation is no longer just a competitive advantage – it’s a business necessity,” said Matt Provencher, President, Financial Services and Insurance, NTT DATA Services. “This new research demonstrates just how critical technology’s role is for businesses to overcome unprecedented challenges, and sets the stage for how insurance companies will capitalize on digital opportunities over the next decade to achieve new levels of business agility, customer satisfaction and technology prowess.”
Acceleration of Digital Transformation is Now
With customer needs continuing to evolve, insurance executives are prioritizing transformation and embracing a new wave of innovation through digital business platforms and ecosystems. While prior to 2019, many of these initiatives focused on technology upgrades to streamline operations and increase productivity, in 2021 leaders are now realizing how critical digital technology is to the acceleration of new business growth – with tools such as real-time analytics, artificial intelligence (AI) and machine learning to improve market strength and competitive advantage. Highlights from the study reveal that:
- 42% of insurers have created partial or full Digital Business Platforms
- 56% are in the process of planning and building these capabilities
- 38% are incorporating emerging technologies (Internet of Things, blockchain, AI, robotics)
- 38% are applying big data and analytics to target best customers
Competition & Customer Demands Impacting Business Strategies
The need to drive transformation is no longer a question of if businesses should, but a question of when and, for many – why now? NTT DATA’s research also analyzed key trends impacting leadership’s business strategies in the insurance and financial services industries over the next three years, with top responses including:
- Changing competitive environment (47%)
- More investment in digital technologies such as Digital Business Platforms (46%)
- Growing political and socioeconomic instability (37%)
- Changing customer demand and behavior (35%)
- Increasing regulatory fines (33%)
- Greater focus on sustainability (22%)
Still, Challenges Remain
Despite incredible digital progress made in the first 90 days of COVID-19, many insurance companies are still in the very early stages of digital maturity. Key challenges remain to achieve digital transformation – including technology architecture, developing an attractive business case, and organizational issues.
Results show that:
- 35% of respondents have made investments in digital, but with no comprehensive strategy or roadmap
- Only 12% have a working Digital Business Platform ecosystem that provides business benefits
For insurance companies to get the most out of their digital investments, leaders will need to plan and strategize for how best to capitalize on market opportunities and technology advancements. One thing is made clear by the report – the next decade in insurance will be shaped by landmark disruption and a complete overhaul of business models to keep up with a changing consumer and competitive landscape.
The study paints a clear picture of where digital progress in the insurance industry is being made – and where it’s not. With COVID-19 impacting many companies’ plans for digital projects, market competition and customer demands have evolved, requiring insurance executives to reconsider and re-prioritize many initiatives.
Download a copy of the research here L&A Insurers Shift Their Digital Transformation Into High Gear.