Meet the Industry Challenges Driving Digital Transformation

Learning Objectives

After completing this unit, you’ll be able to:

Describe the limitations of legacy systems and processes.
Explain how innovative insurtech companies create new markets.
Define how the industry meets challenges using a modern digital-transformation solution.
List the requirements of a modern digital-transformation solution.

Why Digital Transformation Now?

Insurance carriers today face more change, more competition, and more opportunity than ever before. Digital transformation has become an imperative. A carrier's failure to deliver digital experiences profoundly impacts their ability to compete today and in the future.

These trends are increasing the pressure on carriers to transform their business for the modern age.

Everything is available online	Customers have choices	Business as usual is not an option	Companies compete for talent
Policyholders expect to buy insurance like they can buy any other product.	About 75% of customers switch providers for a better experience, leaving $400 billion in premiums up for grabs in the US.	Legacy systems don't centrally manage data or give customers what they want, when they want it.	Companies need to offer fun, elegant, innovative technology to get young people interested in working in the insurance industry.

Meet Justus Pardo, an independent consultant hired by Cumulus to lead the digital-transformation project.

Justus, consultant at Cumulus Insurance

In subsequent modules, you follow Justus as he brings digital transformation to Cumulus, improving many company processes and increasing customer and employee satisfaction.

Limitations of Legacy Systems

Despite the excitement for innovation, many carriers struggle to deliver on the basic expectations of digital natives. Why? The common barrier is the carrier’s rigid legacy systems, which are insufficient to meet the challenges of digital transformation for these reasons.

Manual processes: Time-consuming, error-prone, paper-based, and mail-dependent processes are still the norm at many companies.
Siloed software: Software often consists of multiple disconnected systems or even spreadsheets. Application processing, rating, underwriting, and policy issuance are typically separate functions. So are claim processing, settlement, and payment to third parties.
Lack of connectivity: Transferring data between systems is time consuming and error prone. Legacy systems lack modern APIs, forcing carriers down a manual path.
Long, text-heavy forms: Processes such as purchasing a policy and filing a claim begin with forms that customers dread, which they must fill in manually.
No online access: Legacy systems lack online interfaces, which means customers and brokers can't do business online or on their own.
Rigid business rules: Product rules in legacy systems are usually antiquated, written many years before. This makes the rules difficult to understand and creates a barrier for growth. Rules are also often hard-coded, requiring IT help for even basic changes.

Insurtech Innovations

Insurtech is the use of technology to make insurance more flexible, efficient, customized, data-driven, and cost-effective. Insurtech companies believe that the insurance industry is overdue for innovation and disruption. Insurtech companies offer many capabilities.

Feature	Description
Instant issue and claims adjudication	You can purchase standard policies and handle simple claims online within minutes.
Straight-through processing with no manual steps	After your purchase, application processing, rating, underwriting, and policy issuance occur in a single automated process. So do claim processing, settlement, and payment to third parties. If your case is complex, it’s automatically routed to a human expert.
Mobile and digital experiences with no human interaction	You can easily access automated processes from any online device.
On-demand coverage	You can turn coverage on or off as needed. For example, you can activate travel-related insurance for the duration of a vacation.
New insurance types	You can get pay-as-you-go car insurance based on IoT (Internet of things) monitoring of mileage and driving habits, or micro-insurance and item insurance for individual valuables like cameras or bicycles.

Digital Transformation Requirements

A modern digital-transformation solution needs to meet many requirements. All parts of the solution must have:

Low-code portal construction: Insurance companies can create, customize, maintain, and upgrade their online customer portals easily, with minimal coding.
Straight-through processing: Every business process begins by asking the client only for information not already in the system, and then handles the remaining process automatically, with no human intervention in most cases.
A single system of engagement: Everything a customer needs to do, whether it’s buying insurance, updating information, amending a policy, or filing a claim, is available from a single portal.
Simple options with minimal typing: Online forms use autofill, present options, and request information from third-party systems to minimize the data the customer needs to enter.
Real-time updates and self-service: Because data is centralized, updates in the self-service portal apply throughout the system.
Omnichannel service: The automated processes are easily accessible from any online device.
Collaboration features: All parties interact online, including customers, internal teams, and external partners.
An open architecture: The system seamlessly integrates with external systems such as comparative raters, legacy underwriting systems, vehicle valuation services, and credit card companies.

Sales Requirements

In addition to the general requirements, sales processes must have:

Quick launch of new products: When the need for a new insurance product arises, an insurance company can design and deploy it quickly.
Rules to determine product eligibility: Each customer is offered the right products at the right times.
Ratings tools: The system applies automated rules for pricing calculations based on risk.
Instant approval or referral to underwriting: Rule-based underwriting logic automates approval for standard policies and forwards more complex cases to underwriters.
Digital contract generation and policy issue: Preapproved legal language is assembled based on the selected policy options.

Claims Requirements

In addition to the general requirements, service processes must have:

Peril-based first notice of loss: After the customer selects the type of peril, they should be prompted only for peril-specific information.
Instant settlement for simple claims: Settlement is automated and only forwarded to claims adjusters in complex cases.
Transparent tracking for more complex claims: Customers can check the status of their claims by logging into the self-service portal.
Rules to determine settlement amounts: Policy details can be applied to claims adjudication automatically.
Collaborative tools: Any needed discussions with third-party providers such as auto repair shops can be conducted online in the context of the claim.
Automated payments to claimants and providers: Compensation can be deposited into the customer’s account or sent to a third-party provider.
Reserve tracking for claims departments: Reserves can be aggregated and displayed in a dashboard.

Knowledge Check

Ready to review what you’ve learned? The following knowledge check isn’t scored—it’s just an easy way to quiz yourself. To get started, drag the description in the left column next to the matching term on the right. When you finish matching all the items, click Submit to check your work. If you’d like to start over, click Reset.

Summing Up

Now you know how insurance companies sell policies and make money, the kinds of things they insure, the departments they include, and the processes they use. You also know about the challenges insurance companies face in the modern world and the ways in which digital transformation addresses these challenges. You know the basics, so in the next modules you can dive into the details.

Want to Learn More?

If you’re a Salesforce customer, check out the following learning journeys to find out how to skill up on our amazing suite of digital transformation tools and industry applications.

If you’re a Salesforce partner, you can find the same great learning plus additional partner resources on Partner Learning Camp (Sign-in required). #AlwaysBeLearning