Why digitization is important in the insurance industry  

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Digitization refers to creating a digital representation of physical objects like saving a paper document into a digital document in a format like PDF. Computerized systems can then use it in various cases. Digitization is foundational meaning it is the connection between the physical world and software. 

One of the most important features of digitization is cost cutting. Most insurers have recognized the necessary change towards a digital future by digitizing their processes like taking out new policies and managing existing ones, giving out quotations, submitting bills and reporting of car accidents. These are processes that can now be done online. These cut costs because the physical presence of someone is not required and that one person can serve different people at the same time. 

Digitizing the insurance industry makes it easier for customers to access information and enables simple comparisons between providers. It also accelerates closing processes of sales even with the competition in the industry. We have an app in the industry that is very efficient in doing that. Most prospects are transferring their experiences from other areas of life, such as convenient online shopping, and are adapting their expectations of insurance providers accordingly. 

Another area why digitization is important is that it is faster in accomplishing processes with most information to insurers reaching the company in real time. This has enabled more transactions to be done in a short time and more to be achieved.  

There are also challenges with digitization and includes the historical growth of the Information Technology (IT) landscape in many companies. All insurers are affected by this except for the young Insurtech companies. Insurance companies are slow to change and take eons to do so especially in this country with simple IT applications taking inordinately long to be adopted. It took a long time for insurance companies to accept the technology of sharing information in the industry regarding their customers. This was driven by fear that their customers’ base would be poached on and that they would lose their customers. And it is no paradox that this is exactly where the problem lies today. A lot of modernization work is needed, for example, for a broker to be able to visit his customers with an iPad instead of a file folder. 

Insurance sector (Freepik)

The IT systems from the first phase of digitization are still posing problems for most providers today. Firstly, at the digital interface, which is the front-end to their insurance providers, policyholders often have to deal with complex solutions dominated by back-end processes instead of being able to focus exclusively on their own needs. This is exactly the opposite of the user experience which customers otherwise experience online. 

The second issue is that technology projects in large companies generally tend to go on for a very long time, often years, because existing systems need to be maintained and serviced, and changes are a major challenge. Often newly developed solutions are already outdated again before they even go live. As a result, many customers perceive their insurance policies as inflexible and not very customer-oriented. This is despite all the investments put in by insurers. 

Digitization cannot also solve the problem of sales since most of our customers are not so tech savvy and fear technology. Most products also need to be explained which an app or computer cannot do, leaving us with the exercise of having to continue training agents and brokers. 

Also Read: How insurance penetration can be improved in Kenya

Most of our customers also do not want to engage with a faceless entity, especially in a claims process. This is usually caused by bad sales experiences in the past whereby most customers feel intimidated dealing with a gadget you cannot ask direct questions to. 

The problem of fraud still exists and it seems to be on the rise. There was hue and cry recently when an alarm was sounded that insurance customers are still being issued with fake motor insurance certificates. Upon investigation, it was found that customers are getting the same from cyber cafes where information is being altered. This brings to the fore the fact that a lot still needs to be done to curb fraud in the insurance sector. 

Customer focus in digital sales can be achieved by using one of the following measures which is realizing that the customer is the starting point for all developments in the interface solutions and not the internal processes of a company. An optimal customer journey should be the goal for every digital sales channel. 

Another way to achieve customer focus is realising that transformation works better outside-in instead of inside-out. This is achieved by modernizing their corporate culture, internal processes and basic IT infrastructure by beginning the transformation at the interface with the customer. After all, a change from the outside to the inside leads to success much more quickly in complex organizational structures. 

The third is that early feedback prevents undesirable developments. Digital solutions should not be developed “to the end” in silence but should be provided with intermediate goals which are presented and tested, internally or publicly. At the beginning, there can be a “Minimum Viable Product” that only fulfils the minimum requirements, but on the basis of which the project management can check user acceptance for the upcoming product. 

Also Read: Weak regulation: bane of all problems in the insurance industry 

For the insurance intermediaries and looking at digitization from a sales point of view, we are not yet living in the digital age, but in the customer-centric age where the customer’s wishes are the focus, not the technology. The technology should only be a means to an end. Digitalization offers intermediaries a real opportunity to spend more time on their core business which is building trust with their customers. As correspondence still often takes up a lot of time with policies, applications, and changes in the documents having to be checked and mailed, the focus is now shifting towards face-to-face contact. Digitization does not mean people will no longer have a task. Rather, tasks will change with increasing digital transformation. 

As has often been said, intermediaries continue to be an important asset for insurance providers. It is now a matter of moving into the digital future together and not letting any competition with online sales develop. As with the end customers, providers must, therefore, explain the advantages of digitization to their intermediaries. Sales support must be a must by insurers and they must remove unnecessary competition between digital platforms and intermediaries. 

Washington Ndegea 

 Chairman Bima Intermediaries Association of Kenya (BIAK) 

 

 

 

Opinions by contributors are views of respected thought leaders in the respective industries they operate in. The Exchange is a close partner with each of the various opinion contributors.

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