Digital transformation for insurance or simply competitive advantage?

Just when I thought the Elephant that is insurance was fully accepted as an aggregation of many participants’ perspectives, along comes Digital Innovation, Digitization, and Data Culture discussions as another example of many parts making the whole.  What makes effective digital innovation/integration for an industry or firm, is digitization the root of InsurTech, who in the firm should be taking the lead on evolving the firm into a digital world, all questions that crossed my media feed this week.  On one day!  And a big question- does digital transformation stand on its own as a business initiative, or is it simply one other activity that comprises a firm’s efforts to maintain or grow competitive advantage?

As for the academic approach to digital transformation, I’ll consider two authors of articles that make good points and have solid basis from which to speak. I contend that in some ways the authors are also subject to the potential narrow path of each of the vision-challenged men in the fable- a conceptual grasp primarily of what is immediate and not in consideration of whole issue.  Through whose eyes are the issues being considered?  Customers’? Staff? Leadership? The public?

While there as many definitions of digital transformation as there are discussions about it, this example is a pretty solid one:

“we define digital transformation as the integration of digital technology into all areas of a business resulting in fundamental changes to how businesses operate and how they deliver value to customers. Beyond that, it’s a cultural change that requires organizations to continually challenge the status quo, experiment often, and get comfortable with failure.”  The Enterprisers Project 

(Consider though, that even this description does not embrace transformation from the customer-backwards perspective.)

Two authors who have a good grasp on digital transformation and its effects/integration on/in business provide us some bullet points:  Jim Marous, global authority on marketing and strategy for retail banks and credit unions in his article, “Becoming a ‘Digital Bank’ Requires More Than Technology”, and Claudio Fuentes, Product Manager at Pypestream, as noted in “5 requirements for building a strong data culture”

Areas or components that the authors suggest are needed or are present for effective digital transformation within an organization:

Digital Transformation Pathways

Good summaries, good advice, but are the bullet points actionable across the entire spectrum of insurance or banking businesses?  What if the subject firm is brand new, tech-based, with no analog process ‘baggage’ to wrestle?  The reality of digital transformation is that businesses need to consider the principle as part of being competitive within their respective industries, and in being responsive to what their customers need or expect.  Transformation for the sake of being fashionable might be considered a fool’s chase.

Consider the challenges for the Nigerian insurance industry- very low insurance product penetration, and lower than average acceptance among the population regarding the need/purpose of insurance products.  One hundred million potential insurance consumers, urban and extremely rural.  Does digital transformation make as much sense for that insurance market, when the delivery to existing customers is meeting their needs, and expanding penetration to the balance of the population can be effected through smart devices (much higher penetration of smart devices than insurance) and InsurTech players?  Are digital efforts potentially transformative to existing processes if the customers have no expectations of improvement?  Would it be focus and funds not well spent?  And if an industry is being built from ground up, there is little transformation to be had as any efforts are greenfield.  The point- it’s competitive advantage and customer responsiveness that should drive transformation or not.

(if you want to read a good summary of Nigeria’s FinTech/InsurTech activity and challenges, see Segun Adeyemi,  Where are the Digital Insurance Platforms in Nigeria? )

 A recent article by Richard Sachar, titled Who is Responsible for Leading Digital Transformation Within Insurance Companies  prompted a discussion with one of my favorite InsurTech connections, Thomas Verduzco-Weisel, wherein I opined:

“Better question, one might say- who is responsible for maintaining (or gaining) competitive advantage for a respective insurance organization? Digital transformation has been continuous since the advent of electronic data processing; it simply has a rallying cry now called ‘InsurTech’.   Customers may not know how (what methods) they want their insurance products delivered, but they do know what is important to them.  Keeping that pulse drives how the firm needs to maintain its edge, and then applying process, admin, or tech innovation to keep that edge will direct the firm in who/how/when/and with whom any transformation is needed. What if a firm’s culture, processes, staff, and delivery are driving growth and profitability now, should there be a transformation just to be fashionable?  Good business practices should drive any change, and by extension strategy at the senior level, tactics at operational levels, and all levels keeping track of how customers and staff are maintaining comfort with operations. “

(However, if there’s an urge to be fashionable, innovate/transform from the customer backwards.)

Digital transformation is as fashionable a concept as is InsurTech, and needs to be approached within business context.  There is no question that if transformation is undertaken prudent businesses should follow a framework as suggested by Messrs. Marous and Fuentes.  But before jumping into the fashionable approach, is any transformation being undertaken as a standalone concept, or as part of a firm’s competitive or growth strategy? Have to consider the entire beast, not just one facet or part. And as my fine colleague who knows of such things, Karl Heinz Passler,  states, Stop Confusing InsurTech With Digitalisation.

Digital transformation makes sense where it makes sense, and when undertaken, it makes sense to consider what all the organization’s stakeholders need.

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Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post.

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