Digital Strategy for Insurance

Abstract:

In the recent times, we are compelled to nod our head to the fact that the concept of insurance has remain unchanged over years from its origin, but the other aspects which are associated with insurance businesses are continuously changing day-by-day for the betterment of industry. Even there are certain testimonials to confirm the ongoing paradigm shift in industry includes gradual increase in number of insurance companies, growing customer demands, improvisation in regulations by the authority, government’s strategic move towards the tax exemption for investment in insurance, promotions in daily newspapers and branding advertisements in televisions to create awareness, launch of innovative products to target explicit customer segments and surge in the foreign direct investment (FDI) limit to 49%, etc. Whereas on the other hand in strategic viewpoint, the intricacy involved in running the successful operation is not by capitalizing consolidated approach towards the independent and vital business towers. Every such divisions has its own unique strategic move to conquest over the existing industry challenges like adhering to regulations, practicing the cost advantageous model, competing with contemporaries, defining quality measures, directing the business towards profitability, ensuring the customer protection and intensifying the business hubs. While looking at the current market, there are numerous operational frameworks, strategic and tactical practices are adopted by the industry to speed up the growth and progress towards accomplishing the break-even. During this pace of evolution, to alarm the insurance companies, but this time fortunately not the new regulation has been passed by the regulatory, then again unfortunately its customers demand which is considered as more authoritative than the regulatory. Obviously, which made all the insurance companies to re-arrange their priority list and urge towards to understand the digital world much better and to implement as soon as possible because consumers are the so called supreme power and axis of the business wheel. Digitalization is the latest mantra which has been uttered by lot of people in the industry and believe that this tactic will permit the segment to fast track the growth by means of customer acquisition, servicing, and retention. Nevertheless, this initiative may threaten the existing distribution frameworks, but complying and adopting to this latest methodology with their hands-on business familiarity will enable them to lead the market and empower to infiltrate in larger target segments. 

Introduction:

The gist in running the successful business is not that the entity has never encountered any challenges and obstacles during its operations, but they have equipped themselves with a futuristic vison, strategy, proactive approach, and solution in place to overcome it. So, it’s recommended for any organization that eyeing into an initiative or transformation program that has to set-up the stage for its implementation to accomplish the anticipated outcome. It’s also vital that for any transition, the principal attention must be the objective behind the inevitability of need, approval from the board members, adequate budget provision and resources capability to carry out the successful implementation. Similarly, in any organization, it’s well-known that the management is holding the responsibility to make numerous key decisions on multiple challenges which are erupting on regular intervals. However, they also have a choice to delegate the actionable items towards the group of key stakeholders to collaborate, understand and acquire the comprehensive awareness on a subject which the entity is keen to enforce in routine process. Its prudent decision that the key stakeholders must involve in productive brainstorming discussions that should comply with the principle of five Ws (What, Why, Where, Who and When) and 1H (How). In line with digitalization perspective, the preliminary analysis addressed must be comprising of

• What is digital strategy?
• Why it is required?
• Where it will get effected?
• Who will outline the digital strategy?
• When it has to get implemented?
• How it will be beneficial to the organization?

At present, the phase of digitalization in India is as similar to the era of mobile phones trend that we had during the early 21^st century.  But the jaw-dropping latest statistic is that “India holds 3^rd position in the smart phone market and by terrific technological drive, as it will surpass USA to become world’s 2^nd  largest smartphone market with 200 million+ users by 2016”^[1]. Apparently, this is the vibrant evidence that makes all other industries including the insurance companies to gear up for digitalization in terms of marketing, communication, service, sales, market research and product development. As a reasonably innovative model, there is also a necessity to collaborate amongst the technological and operational stakeholders to define the effective strategy and to take it forward. Since it’s the niche and new trend, the phase-wised approach will help the organization to get in to digital world smoothly. The timely decision from the management and clarity in cascading the wide-ranging stakeholder will permit the employees to co-operate and contribute towards the digital journey. The phase wise digital strategy has to be proposed on the basis of industry need and areas of concern which may deprive the speculated new business opportunities includes email, websites and social networks or e-payment, online registrations and mobility. To certain extent, the concept of digitization dwells in the hands of insurance companies by looking at it as an opportunity to progress or threatening trend or contemporary’s coercion. 

Digital strategy

Digital strategy is the major component of an implementation roadmap for defining the overall digital approach, including what, when and how we will achieve the desired results. It is a thought process which helps in identifying the requirements and helps in charting a clear plan for digital journey. It is also referred as the crucial phase in an organizations’ s digital way to ascertain its vision, objectives, opportunities and associated activities like readiness for implementation, accessibility of skillset, evaluating the necessity for improvisation, budgeting, identification of key stakeholders, defining the scope of work, finalizing the approach and framework, proposing high level schedule, effort estimation, governance model, risk mitigation, recommendation, deliverables and value adds, etc. This will be the critical portion for the entity because of its intention to maximize the organization’s benefits and accomplish the desired outcomes by implementing digitalization. Correspondingly, digitalization approach also requires reciprocal support from customer-side which includes customer intelligence and collaboration. But the substantial element and pure advantage of adopting to the digital distribution is principally because of most of target customers are already well aware about the technology and no additional training or awareness is necessary from the insurer or regulator end which will considerably boost up the new business and instantaneous go to market to get achieved. The digital strategy document is the key document required by the digital implementation team and which defines the success of the overall program. Organization’s creating the strategy with following focus points based on its expertise and experience for implementation will ensure the smooth transition.

• Effective implementation plan adhering to the planned schedules

• Pragmatic approach by considering the multiple dependencies

• Identification of all known risks, issues, dependencies and mitigation plans

• Contingency planning and create back up plans for all key dependencies

• Identification of right tools and resources

• Optimization of resources, tools and technologies with clear commercial advantage

• Collaboration model considering the multiple stakeholders and applications including upstream and downstream dependencies.

• Reusability – Model for creation of reusable assets by having a long term plan

• Enabling effective Return on investment (ROI)

• Governance Model with clearly defined RACI matrix and escalation model

• Entry and Exit criteria - Definition of Quality gates with committed SLAs

• Regulatory and compliance requirements if any

• Assumptions and other key factor specific to the implementation and application landscape

Why it draws industry's instant attention

At the outset, the insurance industry is vigorously marching towards this revolution is not just because they wanted to diversify their distribution channel or upgrade their existing system architecture but to a great extent, insurers are imposed into this digital transformation due to growing customer expectations and demands. Virtually, internet of things (IOT) has become an integral part of day-to-day life for majority of urban and nominal rural population, often it turn into trend that people surfs the information over internet to find the pros and cons about the product before they buy it for their usage. Undeniably, many customers even prefer to carry out the end-to-end business transactions through the online assets to avoid stepping out from their residence. Starting from sharing their personal information and thoughts through Facebook, twitter, etc. and their professional experience through naukri, LinkedIn and carrying out all the day-to-day activities like banking, payment of mobile bills, DTH, internet bills, electricity bills, groceries, tickets booking, tour plans, insurance premiums, hospital appointment, medicine purchase, etc. the whole lot got in to digital platform which clearly hints the insurance industry uttering its high time for them to deep dive in to this segment for customer acquisition and retention. In addition to that, the insurance companies can leverage customer’s existing digital awareness by targeting the niche segment with innovative products accordingly and intensify the servicing arena with the objective of retaining existing insureds. As well, the industry experts has to envisage the challenges that may arise due to regulatory compliance like personal data protection, data privacy, prevention of information etc. However, diversifying the channel to the digital distribution arena will be not “one and the same”, but best of all. So, the management has to take a wise decision to create the provision for IT infrastructure, because it’s very tough and competitive to keep up with the pace of progress in digital world except if the organization has viable capital, ready to deploy skill-set, mitigation plans, back-up for business continuity and compatible system architecture in place which supports the integration with external downstream or upstream systems.

Decisive authority must be part of key stakeholders

The core of any successful transformation is depending on the identification of key stakeholders for its implementation. Also, it’s essential that the team of members to understand and influence what, really, is the significance from digital that has to be accomplished. The crew’s primary accountability must be predicting the challenges, laying down the prospective benefits and disadvantages of digital. Bringing the flair to the existing business framework will impact many diverse functions operating across the organization. In line with digital distribution initiative, it has to get supported by sales and marketing, branch and hub operations, finance and information technology division etc. It’s advisable to have a key decision making authority to take part in digital stakeholder’s forum which will help the group to control and monitor the wide-ranging departments. Having the C-level executives in the panel will benefit the organization includes

• It’s universally known fact that the final approval has to get vetted by senior management before the execution and sometimes it may also get delayed due to non-availability of individual or he/she might be choked up with some other priority bottlenecks.
• Under top management’s purview, other stakeholders will own their responsibility
• Avoids blame game
• Enables completion of work within turnaround time and
• Permit one-stop solution
• Empower guidance and supervision
• Evaluate dependency and budget constrain.
• Evades the last minute rush
• Allows to compete with the contemporaries on time. 
• Finally, having the key person in the strategic panel will smoothen the decision making requirements.

Digital Strategy – The Ideal way and its components

In earlier times, new tools and techniques got introduced into a market occasionally but the current trend is like, there are numerous tools and techniques are getting tossed regularly somewhere around the world.  Moreover, the usage and awareness on technology is increased multifold amongst the people in community which drags the insurance companies to improvise the existing business model with new distribution channels like digitalization. Followed by the spark of going ahead with the most obligatory transformation process, the organization’s has to emphasis on the strategy in place to envisage the end to end project information.  In market, there are abundant methods available to experiment digital way, however all the diverse approaches will chart the fundamental indicators to attain at the common goal which includes

• Ascertain the opportunities in a business model where digitalization can be implemented
• Identify the challenges and sourcing them with the solution or work-around
• Recognize the demands of the external stakeholders/ customers which is corresponding to digitalization.
• Design the framework which will meet the organization’s objective and fulfill the needs of the external stakeholders.
• Position the priority model which needs to be rolled out based on the customer demand and allocated IT budget.
• Identify the challenges and sourcing them with the solution or work-around
• Recognize the demands of the external stakeholders/ customers which is corresponding to digitalization.
• Design the framework which will meet the organization’s objective and fulfill the needs of the external stakeholders.
• Position the priority model which needs to be rolled out based on the customer demand and allocated IT budget.

During the strategy design, on top of expert’s guidance, it also has to rationalize other elements such as stakeholder’s convenience, existing business framework’s capability and organization’s perception from customer standpoint. The best part in framing the effective digital will itself pave the way towards successful implementation and assists in discharging organization’s stress from its digital journey. Post outlining the digital strategy, it’s just all about coordinating and integrating the necessary systems to ensure the logical flow of business data. An example to understand the components covered while designing the digital strategy document encompasses. 

• Organization’s objective
• Project details
• Scope of work – Inclusions, Exclusions & Assumptions
• Environment availability and readiness
• Integration touch points
• High level system architecture – Existing and proposed model
• Approach for implementation
• Entry criteria
• Approach & frameworks
• Quality gates
• Interaction model
• Escalation model 
• High level Schedule 
• Resources – Ramp up / ramp down
• Roles & responsibilities 
• Risk, contingency and mitigation
• Deliverables 
• Commercials

The cautious effort must be taken during the strategy phase on data usage. Being the second most populous country in the world with over 1.27 billion people – organizations will end up with so much of data available. So, the strategy must be framed deliberately in such a way to chase and evaluate only an actionable, meaningful and useful data. Or else, the junk data consumption will results in unreasonable effort spend and stuffing of database space without any substantial usage. Having flexible and adaptable framework with effective strategy will acts as a key driver for long term success in any implementation roadmap. Furthermore, the entity has to build the seamless integration between existing business framework and digitalization enterprise, so by that it can leverage real-time customer needs, their responsiveness and data analytics. The decision to implement digital may vary between the players based on their urge towards it and depends on financial viability. The industry players who wants to feed the customer demands on time will possess a long term approach towards the digitalization and tends to diversify their company’s brand, irrespective of channel. Similarly, few players may opt to attack the transformation through stand-alone initiatives and collating the end results with the existing business model. This approach can allow them to sustain for short-term but not support them to yield the expected results in long-run when the divisions operates in silos. 

An example for digital framework has been illustrated below to understand the end-to-end flow of key activities which needs to be carried out during the transformation.

 

Being the intangible product, life insurance segment is constantly facing many challenges during its marketing and promotion phase. To get relived from this pressure the whole industry is eyeing to find a potential distribution method which will ease the life of life insurance industry. Fortunately, the buzz created by digital distribution made the entire industry to equip themselves to fly with the additional distribution wing to infiltrate into the second most crowded country in the world. Moreover, the best part in making investment in digital distribution is that the ongoing trend has been instigated by customer demand. So, the risk of getting failure followed by implementation is certainly limited when compared to any new initiatives has been taken by insurance companies themselves to pitch into the market. The additional benefit of digitalization is which will serve many divisions across the organization includes the marketing & communications, customer services, operations, sales, research and developments, etc. To begin with the new digital initiative, it’s recommended to initiate the pilot approach to start with and slowly can get in to full-fledged digital environment to service better for end customers. Listed below are the admirable components which can be made available in the existing business framework to satisfy the customer demands. 

• Website
• Search engine optimization (SEO)
• Search engine marketing (SEM)
• Competitor website analysis 
• Newsletters / Blogs / Subscriptions
• Online 24/7 chat through chatbots
• E-mail campaigns
• Feedback / suggestion forms
• Remarketing
• Search Engine Marketing 
• Google Ads through different types of Campaigns
• Search Ads
• Display Ads
• Video Ads
• Shopping Ads
• App Ads
• Smart Ads
• Discovery Ads
• Influencer Marketing 
• Conversion Rate Optimization 
• Content Strategy 
• Ecommerce for customers - Self Servicing Portal
• Request for quotation
• Consulting on appropriate coverage based on individual needs
• Access to view illustration document comprising graphs, analytics, etc., 
• Buying policy online
• Payment of premium
• Endorsement request
• Claim intimation
• Policy certificate & premium receipt download
• Accumulated bonus information - for with profit policies
• Renewal remainders
• Tracking endorsement and claim request
• Updates on launched products, regulatory information
• Search nearest branch
• Escalation matrix
• Platform for Agents & Brokers - Self Servicing Portals
• Request for quotation for their customers
• Illustration document & quote comparison facility
• List of servicing customers
• Details of blocked customers and declined lives database (DLD)
• Scheduled appointments 
• Customer's anniversary and birthday remainders - to build customer Rapport
• Conversion ratio - new business & Renewals
• Trend analysis - location, customer segment, product-wise, etc.,
• Claims-loss ratio
• Commission/brokerage summary and detailed statement
• Summary and details of commission settled and pending
• Aging analysis 
• Statement of Accounts (SOA)
• Raising & tracking customer's endorsement & claim intimation request on behalf of customers
• Payment of premium
• Download customer's policy certificate & premium receipts
• Timely update on renewals to follow up with customers
• Updates on launched products, regulatory information
• Training and marketing material on products 
• Contest promotion & eligibility
• Platform for Employees - Front End Portal to work on the go
• Reports on customer leads - mobile no & e-mail id
• Creating customer login and maintenance 
• Trend analysis - branch wise, location wise, customer segment, product-wise, agent/broker wise
• Cancellation & blocking of access
• Uploading the details of training material, contest, launching product and regulatory information
• Cross verifying the policy details with core system 
• Validating the status of raised endorsement & claims
• Coordinating with the finance team on collected premium through e-commerce
• Platform for Third party administrators  - Self Servicing Portal
• To raise pre-authorization
• Upload and compare the price list amongst the providers
• Retrieving the policy details
• Upload of documents - specific to claims
• Reports on pending and settled payments
• Claim-loss ratio summary - specific to customers, providers, location, branch, etc.
• Updating & tracking of claim status and details
• Social network page
• Facebook 
• Twitter
• LinkedIn
• Pinterest
• WhatsApp/Viber/Platform /Line - Country Specific 
• Instagram 
• YouTube
• Online Reputation Management 
• Polls, Surveys, rating and reviews
• Customer forums / community
• Mobility
• Mobile self-service Apps 
• SMS campaigns
• Responsive Mobile websites
• Mobile promotions/ advertisements
• Awareness through games
• Payment remainders
• Cold calling through interactive voice response (IVR)

How it will bolster the business

Undeniably, niche skill-set is mandatory to strategize and implement the digital distribution, but the benefit out of it can be enjoyed by all the internal and external stakeholders of the organization.  This new practice in distribution will permit the insurance companies to connect with its customer through online assets will absolutely enhance the customer experience, increase the sales, speed up the go to market and reduce the cost to serve. Post the successful implementation of digital, organization’s will certainly recognize few benefits which are listed below as samples in terms of new business acquisition, policy servicing and customer retention. 

• Customer behavior
• Leads Generation
• Customer Interest
• Market analysis
• Customer grievance
• Customer expectations
• Need Based Analysis
• Product Performance
• Service channel trends
• Customer preferences
• Cross/Up sell opportunities
• Customer escalations
• Attrition insight
• Tendency to buy
• Service feedback
• Competitive intelligence

Conclusion

The most recent buzz and demand on digitalization is adding one more feather on customer centricity’s cap. It’s prudent enough to prove the fact that even in the existence of lawful regulatory, numerous insurance companies, breathtaking infrastructure, skilled resources, multiple distribution channels, well developed service-oriented architected (SOA) systems are in the current business model, still the industries overall bridle is in the hands of people. All organizations including insurance industry has to make themselves flexible and adaptable to satisfy the demands and expectations of the consumers to sustain in long standing business.  Besides, the ever growing technology has become the part of consumer’s normal life. So, the long awaiting opportunity has been provided to the insurance companies to become the part of their routine.  The alarming truth is that the insurance companies are not in the position to decide whether to go ahead with the digital way or not, because the customers have already started preferring to do the business through online assets in various modes. Therefore, it’s a wise decision for any organization to equip themselves with technology to service the customers appropriately.  Last but not the least, while implementing the initiative, the digital stakeholders must also keep on their back of mind about the impacts of regulations such as the personal data (Protection) bill (2013), data protection and the IT act, India and security of the data stored in system (Ex. Encryptions, secure socket layers, etc.) and have a duty to improvise the operation business process by bagging customer’s affirmation for volunteering to disclose the personal information.

References:

 ^[1] http://trak.in/tags/business/2014/12/23/smartphone-users-india-global-growth-chart/