Carriers prioritize customer experience in digital transformation

Improving customer experience has emerged as a pivotal focus for carriers and brokers in their digital transformation journey, according to data from Digital Insurance’s “State of Insurance Digital Transformation 2023” report. 

Other primary tech-oriented goals for carriers and agents include driving underwriting efficiency and overcoming tech talent shortages.  

Customer Experience

According to Digital Insurance research, 85% of carriers and brokers named customer experience as one of their top three goals for digital transformation, and 47% identified it as their first priority. 

“Insurance companies say improving customer experiences is a top priority – making it simpler and taking out the hurdles,” said Ellen Carney, principal analyst at Forrester. “From a digitization and technology standpoint, that includes straight-through processing. If you have a parking lot accident, we wouldn’t need to send out an adjuster and we could just pay the limits. Ask the customer how they want the payment, like Venmo or PayPal, and make it super simple.” 

Forrester’s research echoes insurers’ sentiments surrounding customer satisfaction, with 77% of insurers saying that improving the customer experience is their top priority overall.  Straight-through processing enables automated underwriting processes or claims handling, with the goal of minimizing manual intervention and reducing processing time. 

“The numbers that we’ve heard about straight-through processing are really ambitious, with 70% to 75% [of carriers saying they plan to use] straight-through processing in underwriting in the case of life insurance and claims in P&C,” said Carney.

Insurtech is expected to have the biggest impact in customer experience, as well, according to 36% of respondents. Though this dropped from 41% last year, customer experience is still top of mind for industry expectations of insurtechs when compared to underwriting, claims, distribution and product development. Among insurtechs and vendors, 54% responded they are targeting customer experience with their products or services, which is second only to the 67% focusing on underwriting. 

Among carriers and brokers, the technologies they have implemented or plan to invest in over the following 18 months include digital payments (70%), chatbots and customer interaction technologies (58%), robotics and intelligent automation (45%) and telematics, IoT, or sensors (29%). 

Underwriting

Digital Insurance’s research shows that underwriting has become a lower priority for carriers’ and brokers’ digital transformations: underwriting dropped from 27% last year to just 14% this year. On the insurtech side, however, underwriting takes the number-one spot with 67% targeting underwriting processes with their products or services, up from 28% in 2022. 

The research suggests that insurtechs responded to insurers’ needs for underwriting technologies and services last year, enabling the carriers and brokers to focus on other areas for digital transformation. 

For example, Nationwide recently announced a partnership with Hourly, a workers compensation and payroll service provider, to collect updated data from payroll and time tracking information to underwrite workers compensation policies. Our research does show, however, that most carriers are engaging with digital innovation on an ad hoc or siloed basis; 58% pursue this approach compared to the 34% that implement an innovation program with a formalized lab or ideation process, and the 8% with no particular innovation strategy. 

Carney also suggests that underwriting technologies may help close discrepancies in underwriting surrounding climate-related risks. Technologies such as AI and satellite imagery, coupled with more traditional catastrophe models can help insurers address the complexities of assessing climate-related risks. The Digital Insurance report shows that 69% of insurtechs provide advanced analytics for big data sources and 10% provide drones and geospatial data. 

“When you think about underwriting, you think about emerging risks around climate and for property risk, like how we could do a better job underwriting where we have more intelligence and make better decisions about what markets we’re choosing to stay in, and what markets we’re choosing to exit,” Carney said. “Likewise for the consumer. And, of course, one of the things that better underwriting is going to do is ensure profitability on an individual basis and on a company-wide basis, and I think that’s going to be one of the key factors moving forward.”

Talent Challenges

The report shows that only 56% of carriers think they are adequately staffed to meet the needs of their digital transformation goals, and just less than one in three brokerage respondents strongly agree that agents are being successfully integrated into the industry’s digital transformation. Among carriers and brokers, 65% rank staffing challenges as creating the biggest impact on the goals of their digital transformation strategies, even higher than the responses for challenges from innovation budgets at 57% and inflation at 44%. 

The insurance industry has been struggling with a talent shortage over the past few years, exacerbated by the mass retirement of Baby Boomers during Covid, and concerns for talent only grow as half of the insurance workforce is expected to retire in the next 15 years. 

Carney notes that insurers will have to continue attracting new talent and form talent pipelines to overcome these challenges.

“One of the things you see insurance companies do more than banks and wealth management firms is targeting college recruiting,” said Carney. “One of the other things that you’re seeing them do from a tech standpoint is focus on knowledge management. How do we extract how things have already been done from our underwriters, adjusters and actuaries so we’re not key-man dependent or key-woman dependent? Knowledge management has existed forever and now you’ve seen this interesting pivot where we’ve got to have better knowledge management strategies.”