Too many digital transformation projects are failing. Historically, the success rate of these projects is less than 30%, but in 2018, only 16% of digital transformations improved organizational performance and were positioned so businesses could sustain the improvements long-term. The question: After so many years of transformations, why are so many projects still in trouble?
Four reasons come to mind:
- Data still hinders organizations. 2021 research shows that 61% of digital projects were canceled because an app or solution couldn’t access the right data.
- Projects aren’t driven by high-priority business needs. Without a firm business use case that anchors the digital transformation and any new technology to the mission, vision, objectives, and strategy, life insurance carriers are left with a hammer in search of a nail.
- Carriers aren’t getting employee buy-in. Technology might be the method of upscaling operations and front- and back-office processes, but the employees ultimately drive and determine the outcome of a modernization project.
- Vendors and technologies are selected for the wrong reasons. Too many times, transformation project decisions are made based on preferred or existing relationships, price, timeline, or unverified claims. Instead, these decisions need to be made based on culture fit, business need matching, and specific product requirements.
Life insurance carriers need to be smart about how they incorporate technologies into their operations to position themselves for continued growth. To ensure digital transformation efforts are successful and sustainable, now and in the future, life insurance organizations must create a strong data strategy, zero in on their key use cases, acquire support from their employees, and select strong partners for their journey.
See also: A New Era in Life Insurance Underwriting
A strong data strategy sets the foundation for sustainable prosperity.
Life insurance carriers’ systems are treasure troves of data. While carriers see the potential in leveraging that data, many have been unable to because it’s siloed and cannot move freely among multiple channels. If carriers want to unlock their data and extract its full value, they need to plan and execute a holistic data management strategy that includes data aggregation, transformation, and plans for data integration, migration, and storage.
The strongest and most mature life insurance organizations are those with solid data governance principles in place — they collect the necessary data and have comprehensive, integrated standards that encompass all facets of the business and are consistent across projects and departments. By following established standards, they create a common language and format that ensures data can be easily processed and read by other technologies in their ecosystem. Any changes that need to be made are just a matter of making one or two modifications that can be applied to every piece of data — eliminating the need to make custom modifications to millions of data points and effectively reducing future technical headaches and costs.
Penn Mutual has already created a “triangle” model that follows this concept. The organization built a micro-API architecture that allows them to standardize and integrate the data it has on the policy, the policyholder, and the agent. Then, using that standardized unified data, the company can move quicker, create solutions at a rapid pace, and meet users when and where they are.
Mature data organizations also augment the data reaped from the application process with external data to inform decision-making and create an all-inclusive picture of their customer and the policy environment. A common mistake some carriers make is wielding data in a transient way: simply using it to make a decision and then disposing of it so they don’t have to deal with the security and storage issues that come with keeping it. By doing so, they’re missing out on the aggregated picture the data creates, which can then be transformed into actionable and insightful formats.
Data storage is another vital component of a strong data strategy. Many carriers have a data “warehouse” that allows them to store integrated data from various sources across the organization. These central repositories bear a multitude of valuable information that is essential for business direction and customer growth strategy. But if organizations want to introduce new data sources, phase out antiquated systems or simplify future data extraction and reporting, they need to have a data warehouse plan that allows them to do so without duplicating or merging data from disparate systems.
By taking the time to create a follow a comprehensive data strategy, life insurance carriers reduce long-term costs, increase their resilience for continuous changes in the IT landscape, and provide a stronger customer experience.
Identifying core use cases can help set a vision and determine actual needs.
Amid the flurry of new information and technologies becoming available, it can be difficult to discern which would deliver the most value. Evaluating whether to adopt a new technology starts with a review of how it compares with your existing business needs and how they are prioritized. It’s not unusual for companies to fall prey to the excitement of a new technology and rush to implementation, believing it will deliver growth opportunities or create great efficiencies. But all too often the desired benefits aren’t realized. That’s because the exercise didn’t start with a clear and highly important business need that required a specific solution. While it’s important to be aware of new and emerging technologies and what they could possibly do, they should only be adopted when they match a compelling business use case.
By focusing on use cases for technologies under consideration — whether growth related or operational — life insurance carriers ensure they’re not wasting resources on projects that are unlikely to produce great value or solve critical business needs.
Getting employee buy-in can make or break a digital transformation project.
Life insurance companies can’t undergo a digital transformation if their employees aren’t on board. Team members need to be empowered with day-to-day decision making and encouraged to take ownership over the end solution. Otherwise, there’s no amount of technology that will make the transformation successful. To determine if your organization’s personnel is ready and on board with a transformation, consider the following:
- Who in my organization is advocating for change? Executive-level support for a transformation project is necessary, but team leader and manager-level support is critical. They work closely with the employees using the new system daily and can assist with making the transition easier.
- What personnel are critical to implementation, and do they support the project? This could include business analysts, system architects, quality assurance analysts, project managers, and information technology specialists – anyone who can assist in measuring the success of each project stage and providing final approvals.
- Who else needs to provide input? Getting the green light from organizational departments like underwriting, actuarial, new business, policy servicing, claims, accounting and payments is essential. Without their commitment to the project, resource and review bottlenecks may emerge, resulting in delays and additional costs.
- What are employees’ attitudes and concerns regarding this project? Conduct an organization-wide temperature check before pursuing a digital transformation. Gauge employees’ views and see what questions or concerns are present. If there are significant unresolvable objections, that could be a sign your organization isn’t ready. And if the same concerns keep appearing, that could reveal pain points the modernization team may not have considered before.
Often, the success of digital transformation projects hinges on the alignment, commitment, and engagement of a carrier’s workforce. Without it, there’s little hope for success.
A well-rounded governance committee brings varied perspectives and expertise to the table.
Life insurance carriers must look both internally and externally to build a team of advisers that can help make strategic, organizational technology decisions.
While technology and business expertise can be found in-house, carriers should still look to augment their knowledge with the fresh perspective and market overview that life insurance technology analysts can bring. Analysts understand these digital transformation projects, know many of the key vendors, and can speak to what technology solutions are available that solve carriers’ organizational needs.
During the vendor selection process, and after assembling a star advisory team, carriers need to look for vendors with years of experience in helping to solve some of their pain points and similar technology use cases. The vendors must have experience working with legacy policy administration systems similar to the carrier’s, and they need a strong record for implementing more modern systems and advising or facilitating data modernization projects – all of which enable them to anticipate and solve for challenges that may arise during the transformation lifecycle.
At the end of the day, advisory team members are meant to help carriers pick a long-term digital transformation partner, and both will play key roles in facilitating the success of a carrier. Picking the right people is essential.
See also: Digital Self-Service Is Transforming Insurance
A successful digital transformation is centered on future proofing, preparing carriers to meet customer needs and expectations.
Digital transformations offer several benefits — such as reductions in cost, strong decision-making, and the fulfillment of business needs — but at their core, they’re all about future-proofing a life insurance carrier so it's in a strong position to improve customer and agent experience, which will be essential in the coming years.
When Gen Z and millennials enter the life insurance market in full force, being able to make intelligent underwriting decisions with limited information supplied by the customer will become paramount. These consumers expect fast, frictionless, tech-driven service, and life insurers will need to work to maximize the data they have to deliver on expectations. Wearables and Internet of Things devices mean carriers could potentially automate underwriting that occurs throughout the policy lifecycle, instead of the one-and-done method of 40 years ago. But for carriers to fully harness those technologies’ capabilities, they need to consider where their organization is now and where they want to be in the future. What other innovations could be released that help improve customer experience and are they fully prepared to implement them when the time comes?
The same can be said for the life insurance agent workforce. Agent demographics now consist of traditional agents who are used to writing policies on paper and younger agents who have the same seamless digital experience expectations as consumers from their generation. To support this bifurcated agent workforce, carriers need to consider what organizational systems and processes may need to be adapted or updated to cater to and support the needs of agents of all age brackets.
By undergoing a future-proofing-focused digital transformation, life insurance carriers can ready themselves to meet the evolving needs of their consumers, skillfully adapt to rapid technological advancements, and effectively manage risks.
