Insurance industry is challenged by digital future, says KPMG | Firm News | The Lawyer

Based on interviews with insurance leaders globally, ‘Transforming Insurance’ — KPMG International’s latest industry report — highlights the sector’s priorities and progress, particularly firms’ digital maturity, to meet the digital challenge, including insights into gains in adapting to customers’ mounting digital preferences.

Gary Reader, global head of insurance and partner at KPMG in the UK, said: ‘Our research shows that the industry recognises the imperative of reinventing operating models to respond to and capitalise on digital technologies, but it also shows that insurers are struggling to develop digital strategies that align with their business objectives and to resolve legacy infrastructure and business processes.

‘Digital advances, the rise of social networks and the “internet of things” are having a transformational impact on the volume, variety and velocity of data coming at organisations, adding further complexity.’

Mary Trussell, report author and global insurance innovation and high-growth markets lead at KPMG in the UK, added: ‘The insurance industry is at an inflection point. To date, insurers have largely embraced digital capability as a supplement to existing customer service channels. Our survey shows a massive 108 per cent increase in the number of respondents who want to use digital technology to enter new markets in the next three years as compared with the previous three years. That reflects growing digital ambition but significantly raises the stakes.

‘Yet around the world, we still see many insurers and intermediaries focused on product and channel silos, facing significant challenges from legacy systems rather than unlocking value for customers and investors. This suggests the need for more than digital transformation. Such a transformation represents a massive cultural change.’

Respondents understand that emerging technologies can enable them to reinvent dated operating models and product delivery channels or perform sweeping re-engineering of end-to-end management. Yet there are some significant challenges to achieving this:

• The survey shows a 108 per cent increase in the number of respondents who want to use digital technology to enter new markets in the next three years as compared with the previous three years, and a 43 per cent increase in those who plan to use digital means to deliver new products and services.
• This is unfolding against a backdrop where 65 per cent of respondents feel the regulatory environment does not yet support product and channel innovation.
• These changes will also alter the operating model — 69 per cent more respondents plan to use digital to optimise their supply chain as have done so in the past.
• While more than two thirds of respondents in the report say their digital strategy goes beyond their website, only just over a third say their digital initiatives are aligned with their company’s strategic objectives.
• Thirty-one per cent of respondents said the leading challenge with data analytics is capturing reliable data and 35 per cent cited legacy systems as the underpinning issue.
• More than half of respondents identified human barriers to implementing a data and analytics strategy rather than technical constraints.

‘Transforming Insurance’ identifies some new paths to overcome challenges. Among the tactical recommendations for success, the report advises insurers and intermediaries that:

• Digital is about people: digital experiences do not have ‘users’ — they live with people in a more intimate and direct relationship than software from an earlier generation.
• Don’t be afraid to fail: but learn to fail swiftly and safely by building a ‘test, learn and e

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