3 ways to digitally transform essential insurance operations

Digital transformation has become a critical driver of operational excellence in various industries, and the insurance sector is no exception. With a rich history spanning over 200 years, the industry is no stranger to evolution and adoption. In this era of compound volatility, the combination of increased short-term risks and long-term structural changes, the importance of embracing digital technologies to streamline operations and improve customer experience has never been more critical to remain competitive.

As insurers continue their digital transformation journey, here are three key ways digital transformation is critical to achieving operational excellence across their value chain.

1. Develop a comprehensive AI strategy. In the last 12-24 months there there was a significant focus on generative AI. It has generated widespread recognition among the clients I engage with for its immense capabilities. This technology is seen as both a crucial catalyst for future innovation and a means of gaining competitive advantage. However, while there is widespread recognition of its vast potential, great uncertainty remains as to how this technology can be harnessed and leveraged effectively.

To ensure the successful pursuit of operational excellence, it is essential to establish a clear roadmap for the implementation and integration of AI technologies across various functions in the insurance industry, such as underwriting, claims processing and customer service.

KPMG 2024 CEO Outlook survey showed that 81% of insurance CEOs consider Gen AI a top priority (compared to 64% for CEOs across all sectors). The top three areas of expected investment are: IT (68%), Finance and Accounting (60%) and Sales and Marketing (58%). Any AI strategy should also address the potential risks associated with AI, including data privacy and security concerns. By developing a well-defined AI strategy, insurers can effectively leverage the power of AI while mitigating the associated risks.

2. Strengthening cyber security measures. Improving cyber security measures is another crucial aspect of digital transformation to achieve operational excellence. As insurers adopt digital technologies and digitize their operations, they become more susceptible to cyber threats. Only 54 percent of insurance CEOs feel well prepared for a cyber incident, despite often being in the business of providing cyber insurance coverage, according to CEO survey results. By fully embracing their digital transformation initiatives, insurers can implement advanced mechanisms for threat detection and response.

By leveraging technologies such as machine learning, artificial intelligence and behavioral analytics, insurers can effectively detect anomalies, identify potential threats and respond promptly. Real-time monitoring and analysis of security events enables insurers to proactively identify and mitigate cyber risks, thereby minimizing the impact of security incidents. These measures are critical to maintaining trust with customers, making cybersecurity a vital component of insurers’ digital transformation journey and pursuit of operational excellence.

3. Promoting a culture of risk management. Last but not least is using digital transformation to drive a culture of risk management.

Similar to the benefits of a strong cybersecurity network, digital transformation in insurance enables real-time monitoring and reporting of key risk indicators. By implementing digital tools and technologies, insurers can track and analyze risk data in real time. Such timely visibility enables insurers to identify emerging risks, monitor risk exposure and take proactive measures to mitigate them.

Finally, digital transformation helps to further integrate risk management into decision-making at all levels of the organization and ensures that risk management becomes an integral part of daily operations.

As an insurance leader, I recognize the immense value the industry holds in this era of compounding volatility. For insurance leaders, the journey to operational excellence begins with recognizing the central role that digital transformation plays in empowering organizations. Finding the right balance will better position them to continue to grow and achieve their desired goals.