Digitalization in the Insurance Industry: Opportunities and Challenges

The insurance industry is increasingly confronted with changing market needs, rising customer expectations, and high cost pressure. To master these challenges, insurance companies need to digitalize. Non-physical products, such as insurances, are particularly well suited to digital solutions. As an example, processes can be automated or claims can be processed digitally and therefore faster. However, the heart of the insurance business – the registration, forecasting, and reduction of risks – can also be improved and automated through the use of digital solutions. Find out more about how the digitalization trend in insurance is reflected in figures, what potential lies in the digital transformation, and what digitalization challenges insurance companies are facing. 

The challenges of digitalization 

Data-based analyses or an optimized omnichannel customer journey may sound promising, but the necessary level of digital maturity must be achieved first. Not all insurance companies have fully completed the digital transformation process. They face both industry-specific and company-specific obstacles. 

• Competition and cost pressure
  The financial pressure on insurers is increasing due to comparison portals and unpredictable claims expenses, among other aspects. New platform-based business models and additional competitors are entering the market and customers are becoming more price-sensitive. Insurers face significant cost pressures and competition. To remain competitive, cost and performance transparency on comparison platforms requires continuously adapting services.
• Security risks
  The increased risk situation in areas such as climate, politics and cybercrime requires proactive risk management, especially for insurance companies as a financial security network. Monitoring risks is a prerequisite for minimizing losses or preventing them from occurring in the first place. Cyber attacks in particular pose a major risk to consumer data. To reduce the dangers of cybercrime, insurance companies must strengthen global protection and resilience, early detection and defense against attacks, as well as the operational readiness and quality of countermeasures.  
• Restrained corporate growth
  Added to this is the population’s vulnerability due to current crises and uncertainties, and demographic change. This creates challenges for insurance companiessuch as long-term financing, a shrinking number of potential new customers, and a problem with recruiting new talents due to a cultural change in the working environment. The shortage of skilled workers is also very noticeable in the insurance industry. Insurance companies cannot keep up with the increasing volume of expenses, which is hampering the growth of organizations. 
• Outdated isolated structures
  Insurance companies offer complex products and services, and often still have outdated structures with isolated departments and separate systems. However, a seamless experience is not possible without integration between the different channels. In some cases, there is also a lack of agility and willingness to change. A digital transformation in the insurance industry is therefore associated with considerable investment in technology and infrastructure. 

Process mining for insurance companies

In our LinkedIn Live Event we focus on the insurance industry. Our insurance expert, Sirko Schoeder, will discuss the current challenges and potential of digital initiatives, data analytics and process mining in insurance companies. Join us as our expert reports on best practices and added value through process mining in insurance companies.