The macroeconomic challenges of recent years have shined a spotlight on the need for insurance companies to adapt to an increasingly digitized marketplace. According to the ACORD Insurance Digital Maturity Study, its 2022 analysis of the world’s largest insurance companies – “existing market demands, amplified by a global pandemic, made digital channels—from remote work to online stakeholder engagement—suddenly not just an option, but a requirement.”
In fact, of the 200 insurance companies surveyed, those that had the highest level of digital maturity more than tripled share prices. Digital laggards, companies that failed to invest in digitization, saw investor returns less than half of the average over a 10-year span. As the industry reaches an inflection point, tried and true methods of doing business will no longer be viable – companies that capitalize on the digital transition will likely endure while those that fail to navigate this new uncertainty may not, according to ACORD.
Bill Pieroni, CEO of ACORD, believes that the difference between successful digitized competitors and low-performing digital laggards lies in the fact that high-performing digitized competitors “do not simply analyze data to understand in retrospect why certain events occurred, they use data to drive and optimize results.”
According to the study, high-performers capitalize on three critical strategic imperatives:
- Consumerization: Consumers are now accustomed to a digitalized environment, which relies on online and app-based user experiences. Digitized competitors are aware of this new shift in insurer-consumer relations and tailor their services to meet the needs of the digital consumer.
- Ecosystem Integration: Digitized competitors are able to integrate across the greater insurance ecosystem and are effective at managing the increasing importance of partnerships, alliances, third parties, and vendor relationships.
- Data and analytics: Digitized competitors invest in the development of tools and techniques to ensure that data is leveraged at the right place and time, pouring resources into the mining, aggregation, and analysis of information.
By not limiting themselves to predicting what is likely to happen in the future, successful companies are able to make adjustments in real-time, putting themselves in a position to make more accurate decisions.
Success in analytics isn’t the only thing separating digitized competitors from the pack, in fact, Pieroni believes that one of the defining reasons why digitized competitors have been able to achieve success is because of their approach to investing in technology. “Digitized competitors largely focus their investment on technological renewal and enhanced positioning. They consider the full capability continuum – process, organization, and technology and their investment framework include not only explicit capabilities but implicit ones as well – such as the underlying architecture and infrastructure supporting the business. They identify which capabilities are accretive to value, but are also disciplined about investing to avoid dilutive ‘technical debt.’”
According to Pieroni, digitized competitors reached their position in the market because they possessed capabilities and a culture that made them more likely to embrace digitization.
“High performers ask, ‘What is the best thing that can happen, how can we help make it happen, and how can we position ourselves to most effectively execute around it?’ They’re not only more ready to act than their competitors, but they have more flexibility around their strategic options,” says Pieroni.