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Driving digital transformation in insurance

Head shot of TomBy Tom O’Malley

For insurance companies, digital transformation isn’t a business decision, it’s a survival strategy.

Insurance firms have been slow to implement new technologies when compared with banks and other financial services providers, however, they are catching up fast.

The industry is undergoing rapid and profound transformation, driven by the competitive threat of insurtech startups and the pressing need to improve customer experience. Technology lies at the heart of these changes and is fundamental to success.

The process of introducing new technologies, known as Digital Transformation, aims to solve traditional problems by integrating them with existing infrastructure or replacing legacy systems.

Why insurance firms are riding the digital transformation wave

There are many strategic reasons why long-established insurance companies are investing heavily in new technology. Although, it took the rise of insurtech startups to trigger meaningful action from many of the dominant market players. New entrants have been quick to deploy next-gen technology to launch user-friendly apps and build modern platforms which have disrupted the industry.

Aside from protecting market share, insurance companies are implementing large-scale digital transformation projects to reduce costs, automate processes and increase efficiency. They also leverage technology to access real-time data, enhance financial performance and meet regulatory requirements.

However, at the forefront of their initiatives is the customer. Customers are central to most digital transformation projects across various industries. For insurers, new digital capabilities will allow them to enhance customer relationships, streamline the onboarding process, meet expectations and increase satisfaction. Ultimately, insurers want to encourage customer loyalty in what is an increasingly competitive market.

Teething problems with digital transformation

Positive intentions don’t always lead to positive outcomes.


An estimated 1 in 5 digital transformation projects has and is going to fail.

Most failures occur because of a lack of systems integration, a lack of collaboration with IT and budget restraints. Other reasons why projects have been unsuccessful include a skills shortage and insufficient knowledge of technology. The latter highlights the importance of leaning on experts in their field who have the required skills and experience.

The role of artificial intelligence in transforming digital capabilities

Insurance providers kickstarted their digital transformation projects by maximizing capabilities of cloud technology and data analytics tools. Now, and within the next few years, insurers plan to adopt artificial intelligence (AI), machine learning and blockchain to accelerate their efforts. They believe these next-generation technologies will have the most profound impact on their businesses.

Many insurance firms have already implemented AI to automate processes such as claims management, underwriting and fraud detection. As a result, they are realizing benefits including time saving, greater efficiency, increased standardization and improved customer experience.

For example, MetLife uses AI to assist call centre agents when dealing with customer enquiries. Its technology recognizes cues in the customer’s tone of voice and gives the agent suggestions on how best to respond. This allows for improved customer service and makes interactions more productive.

Insurance companies are also using AI to develop customer-facing applications that are personalised, interactive and user friendly. To successfully deploy AI in client-facing products like online portals, firms need to carefully consider the user experience (UX) design.

The importance of UX design in digital transformation

As insurance firms push for increased personalisation and automation, they need to ensure they communicate these features in the user journey through simple UX design. Failure to do so could result in loss of trust and a poor customer experience.

In general, people do not trust robots, machines or artificial intelligence, and most people do not understand what AI is or how it works. Artificial intelligence is reliant on data, both in the short term and over time, to continually deliver on objectives such as personalisation. To collect data, insurers ask customers to provide information first-hand, and they also monitor user behaviour on apps and other digital products to inform strategy and algorithms.

When capturing data first-hand, customers should have a transparent view of why insurance providers need the information and what they’re going to use it for. This is where the role of a UX designer comes in. Although, not only is this a consideration of UX design, it’s also a regulatory requirement of GDPR. As data protection laws tighten, creating a watertight user journey becomes more critical to business success.

UX design and AI in practice

As mentioned, one of the primary objectives of digital transformation is to achieve customer satisfaction and loyalty. With this in mind, it’s important that new technologies such as AI do not impede the goal of building consumer trust.

Users need to be well informed to trust AI with their personal data. And so, insurers will need to educate their policyholders on the fundamentals of AI through prompts in the user journey.

For example, if an insurance firm provides personalised product recommendations, they should communicate to users why they’re seeing that information. There are several ways to do this and experts in UX design will be able to suggest the most suitable option. One option could be to add text such as ‘Why am I seeing this?’ with a hover box that gives a brief explanation. Alternatively, insurers could signpost the recommendations with the caption ‘Customers who bought this item also bought…’.

Another use of AI in insurance is to automate and streamline processes using chatbots. For example, sophisticated AI chatbots can pull information from various sources including social media to identify the individuals they’re communicating with. Using this information, the chatbots can address new users personally, provide tailored quotes and complete the onboarding process. For many, this could arouse suspicion make them feel a sense of intrusion. To avoid this, UX designers and copywriters need to set customer expectations by communicating the chatbot’s capabilities and the fact that it is powered by technology. What’s more, to ensure great customer service, firms should readily provide alternative methods of communication for those who are not comfortable talking to a robot.

At the intersection of developing AI in insurance and delivering customer satisfaction is the lifeblood of UX design – gathering feedback. To continually improve AI-powered products insurance companies require data to feed their algorithms. Likewise, to continually improve customer service they require information about usability. To obtain this information firms can proactively ask for feedback. Not only will this provide them with the data they need, it also helps to improve customer experience and satisfaction. It’s essential that insurers gather as much feedback as quickly as possible on their application of AI in client-facing apps and software. This will help them to avoid mistakes as they get to grips with the new technology.

It is clear to see how important the role of UX design is in ensuring successful digital transformation. As such, UX designers should be involved in these projects as early in the process as possible. Importantly, if firms do not have the required expertise in-house, they should seek to work with an agency or a consultant who can fully support them in their objectives.

The insurance industry is simultaneously tackling two interconnected challenges head on; rebuilding trust with customers and implementing digital transformation – the latter of which can be leveraged to achieve the former.

This is no small feat, however, when the competition from insurtech startups is so rife, traditional insurance firms cannot afford to get it wrong.

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