The paper will provide a strategic framework for an Insurance company looking for a digital transformation roadmap

1. WHAT IT TAKES TO
FULLY DIGITALIZE
AN INSURER
Authored by
Tarun Pattnaik

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Table of Contents
1. Abstract......................................................................................................................................................................... 1
2. Introduction ................................................................................................................................................................... 1
3. Identification of Opportunities of Value Creation ............................................................................................... 1
3.1. Analysis of external forces................................................................................................................................... 1
3.1.1. Customer:............................................................................................................................................................. 1
3.1.2. Supplier/Partner ecosystem:........................................................................................................................... 1
3.1.3. New Entrant/Disruption:................................................................................................................................... 2
3.1.4. Competition:........................................................................................................................................................ 3
3.1.5. Mega Trends ...................................................................................................................................................... 4
3.2. Analysis of internal forces .................................................................................................................................... 4
3.2.1. Value chain analysis.......................................................................................................................................... 4
3.3. Define a Digital RoadMap for the Insurer........................................................................................................ 5
3.4. Design Implementation Strategy......................................................................................................................... 5
3.4.1. Right People ....................................................................................................................................................... 6
3.4.2. Right Process....................................................................................................................................................... 6
3.4.3. Right organization............................................................................................................................................. 6
3.5. Conclusion................................................................................................................................................................. 7
1. Abstract
The term digitalization has become a buzzword in the last few years. Highly regulate insurance industry is
also not insulated from the limitless possibilities that digital technologies bring along with it. Just like any other
industry, Insurance industry is also trying to explore newer avenues of value creation through digital means. The
essence of digitalization for an insurer lies in its ability to explore all possibilities, which can fulfil the needs of its
customers better, compete in the market stronger and manage its business better. Digitalization of an insurer
therefore must start with a digital vision centred around its broad business strategy. Once the vision is drafted it
should assess all the roadblocks for successful executions and accordingly prepare implementation strategy. An
insurer’s capability to successfully implement a holistic digital vision is the key for fully digitalize it .This paper will
try to address this by providing a structural framework to draft the digital vision along with certain guidelines for
a successful implementation.

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2. Introduction
Before one tries to find out what it takes to
digitalize an insurer, it becomes imperative to define the
meaning of digital. In simple terms a digital enterprise is
one which has a digital culture and which uses digital
technologies such as IOT, Social, Mobile, Cloud,
Analytics etc. to create new frontiers of value creation.
For some it may be through the inclusion of a new
business model whereas for others it may be through the
transformation, extension or enhancement of existing
business models in a more efficient and cost effective
manner. The ultimate aim of digitalization of an insure
should address the changing expectations & behaviour
of internal and external customers or partners in the eco
system. First step of digitalization must start with a clear
vision about its digital. At a broad level, it must touch
 Company’s Business Model
 Company’s Operating Model
 Company’s capability to execution
This paper will try to answer the problem of
digitalization through a standard Framework. It
will provide a guidance as to how to look at
various forces affecting insurance business and
come up with a digital vision. It will also provide
some guidelines of implementation. The paper is
structured in to three sections: -
 Steps for digital strategy and digital
roadmap creation
 How to implement the digital roadmap
 Capabilities from the point of view
people, process & organization for the
implementation
3. Identification of Opportunities of Value Creation
Defining digital roadmap is the core of
digital journey of an insurer. Process of identifying
any such opportunity must have a multi-dimensional
view of business and should apply multiple lenses
to gaze through each such prism with an objective
to identify new opportunities. It requires a relook
at the forces which drive business both externally
and internally.
3.1. Analysis of external forces
Michael Porter in his famous five forces model tried to identify the forces behind an industry’s profitability.
Analysing some of these forces with an appropriate view will also provide a great insight into value creation from
a digital standpoint.
Step 1:
Opportunities identification
• Analysis of external
forces affecting business
• Analysis of mega trends
both general and
insurance specific
• Internal assessment
Step 2:
Digital Vision and Roadmap
• Consolidation of all
opportunities
• Have a system approach
in analysing the
opportunities
• Define digital strategy
roadmap by considering
opportunities of strategic
importance
Step 3
Implementation
• Define right
organizational structure
• Identify and hire relevant
talent outside as well as
inside
• Define implementation
methodology.

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(Fig 1)
3.1.1. Customer:
Customer is at the core of any successful strategic framework. Hence it is of paramount importance to
understand all aspects (including but not limited to) behavioural, psychological and expectational aspect of the
customers. For retail insurance business, major segment of customer base belongs to the millennial generation. This
generation, grown up in a time of rapid change, has set of expectations & priorities which are starkly different
than its predecessor.
Some of the traits which makes this generation different and hence poses a threat as well as opportunity for
an insurer, are listed below.
 As suggested by various reports, by 2020 millennials will constitute half of the global
workforce and in case of country like India it’s going to be even more than 64%.
 Highly active on various online platform especially on social media
 They use multiple devices to connect online
 They prefer buying brands having online presence than not.
 They prefer buying stuff online
 They want access to information anywhere and anytime but on their terms
 Their benchmark for product/service experience may come from different industry such as
amazon, Netflix, Uber etc.
Looking deeply in to the requirement of this customer segment will necessitate the need of reimagination of
products, services as well as user experience to remain attractive. Few such opportunities for an insurer could be
I. Online presence for awareness and feedback
II. Omni channel user experience and seamless navigation across channels
III. Personalized product or service offering
IV. Online presence etc.
3.1.2. Supplier/Partner ecosystem:
Supplier ecosystem is an integral part of insurance value chain. From a traditional insurance ecosystem
consisting of brokers, agents and insurer to a desired eco system consisting of new distribution channels, new
partners for data gathering along with partners who can help preventing risk factors can be winning proposition
for an insurer. Digital technologies can provide means to re design this eco system relevant to modern era.
Reimagining partner ecosystem through technology can enhance the ability of an insurer to not only reduce risk of
External
Forces
Customer
New
Entarnt
Competit
or
Supplier

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the insured objects but also to provide personalized service at a lower cost and hence a more loyal happy
customer. Digital technology has also made it possible to target new segment of customers through the digital
channels such as policy aggregators.
A study from ibef in 2015 estimated that that in India growth
of online insurance sale is going to grow at a sky rocketing pace
from 700Crs Rs. to 15000Cr Rs in 5 years’ timeframe. From a
digitalization point of view, it makes a lot of sense to have some
opportunities identified in these areas.
Fig 2 : Online sales in India
As an example, research from BCG highlights three prominent ecosystems of partners emerging in
insurance as in the table given below. This can work as a guideline while reimagining partner ecosystem.
1. Segment one
Distribution
2. One stop shop eco
system
3. Connected object eco system
Customer Value
Proposition
Personalised service
and product offering
based on customer
insight
- High engagement
channels enabling
early detection of
needs and real
time profiling
Addresses integrated set
of need domains, including
insurance
E.g.: Services for 50+, all
for second hand cars.
Proactive, sensor based
management of risk object. -
E.g.:
-Advanced telematics detecting
driving habit which in turn will
decide premium.
- Home sensors to prevent &
mitigate fire or water leakage.
Possibility to imagine an
eco-system of connected objects
or partners to create a unique
value proposition is limitless.
Example Bought by Many: Bring
together customers
with similar needs for
customized offerings
Discovery Vitality :
Integrated wellness
program that incentivize its
5m + members for healthy
behaviour.
Integration of process with
business partners such as medical
providers, repair shops, telematic
sensors etc.
(Ref: BCG)
3.1.3. New Entrant/Disruption:
Over the past few decades particularly with technology and shared economy lot of traditional
industries have been disrupted like never before. These new entrants, mostly through disruptive models, completely
change the nature of business and make incumbent business houses obsolete at a rapid pace. Be it Uber, Airbnb,
Wikipedia etc. have disrupted their respective traditional industries by disintermediation or reintermediation of
values across the chain. Hence preparation of digital roadmap should have a close watch on such new entrants
with disruptive models. This will help traditional insurer with its strong user base and strong finance to either
replicate such models or to think of partnering or buying such disruptors.

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Typically, a disruptive model starts to
appear as making noise before it dethrones
incumbent’s business model. Any digitalization
roadmap should have plan for countering
such noises after careful evaluation & by
constantly asking
 What drives my business model and can
technology challenge it?
 Is there a new business model that could
better match needs of at least some of
my customers?
Figure: 3 (Disruption S-Curve)
During identification of opportunities for
digitalization, an Insurer should also look for
disruption at demand side by fixing undistorted
demand in traditional market to the catering to
unconstraining supply. Digital disruption hexagon
model as proposed by McKinsey (Fig 4) can be a
great framework to look at disrupting existing
business.
Fig 4 : Disruptive Models(Mckinsey)
3.1.4. Competition:
Competing forces in the market that an insurer competes on, impact its revenue and profit. For an example,
Insurance industry in country like India is saturated with lot of insurers. Lot of these insurers are targeting same
customers with similar offerings. As a result, this market will become highly competitive red ocean leading to a
price war. An ideal strategy in such situation is to create differentiation in terms of product mix or target different
segment of customers or target different markets. Digitalization of an insurer should try to find answers to
questions related to competition
As an example, an insurer may think of targeting only certain demography living in tier 2 and tier 3 cities.
In a traditional approach, set-up cost required to target such a segment may not have been feasible earlier, but

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with proliferation of affordable mobile device and affordable internet in these markets have made it possible for
insurers to target these customers. Technologies such as advanced data analytics have made it possible to further
segment of customers within the traditional customer group. Analysing the competitive forces and the market place
in which insurer operate may lead to newer opportunities in digital roadmap.
It has been seen that companies with a
digital approach to business have a competitive
advantage in terms of gaining market share,
increasing top line as well as bottom line to their
business.
(Fig 5)
3.1.5. Mega Trends
Mega trends which emerge due the convergence multiple factors impact societies, cultures, life styles and
preferences. There are generic mega trends which transcend business or economies and affect every industry.
There are also certain mega trends which are specific to an industry. Ramification of such trends could be profound
and worth analysing. Thinking analytically of such trends will provide insight to a future which will define an
industry including insurance and hence opportunities for digital vision.
Example of some of such mega trends are
 Increased rate of globalization &mobility
 Drift of economic power from west to east
 Knowledge intensive workforce
 Urbanisation and rise of smart cities
 Connectivity and convergence
 Green initiatives etc.
3.2. Analysis of internal forces
3.2.1. Value chain analysis
Digital technology affects every part of insurance business starting from customer acquis ion to claims
processing. Providing omni channel experience during customer onboarding to an efficient process design at each
customer touch point, to the redesign of a better, transparent and time efficient claims management, looking at
each block in the value chain holistically will give birth to all such opportunities. Trying to find an answer for each
pain points and cost structure in the value stream may lead to the reimagination of an operating model through the
inclusion of Mobile app, AI and sensor based model that not only will be cost effective but also more efficient.
One sample framework for the analysis can be defined as below

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 Identify each state in the value chain
 Imagine a desired state
 Identify the benefits from different aspects such as cost/User experience etc.
Those desired states with maximum impact can be considered to be part of digital vision.
End to End Mapping of states (Just
an indicative)
Current
State
Desired
State
Cost
Impact
Customer
Experience
Impact
Customer
Acquisition
Sales and Marketing
Policy
Issuance
UW New business
Create Proposal
Create Policy
Policy
Servicing
Policy Change
Policy Renewal
Claims FNOL
Adjuster Appointment
Survey and Report submission
Claim Processing
Process & Settlement
Support
Functions
Policy Accounting
Report Generation
3.3. Define a Digital RoadMap for the Insurer
Defining the final roadmap to digitalize an insurer starts by consolidating all the opportunities identified
in the step above. The consolidation of the opportunities must be done by a team who understands both business &
technology as well as decision makers who can prioritize such opportunities. Only those opportunities which have
greater value, are in line with the business strategy of the insurer and are feasible (both technically to implement,
should take precedence in the list of things. Holistic business and Operational knowledge are the two key skills
required to prepare a vision from all of opportunities identified in earlier phases.
One representative guideline for prioritization can be as follows
Opportunities
identified
Perceived
Value to
Business
(High/Medium
/Low)
Functional
Mapping
(Strategic/O
perational/T
actical)
Timeframe
(Long
Term/Medium
Term/Short
Term)
Risk(High/
Medium/Lo
w)
Capability Viability Recommendation
(Deploy/Selectively
experiment/Wait)
Make vs Buy
vs Partner
3.4. Design Implementation Strategy
Drafting a successful digital vision and a roadmap doesn’t guarantee an insurer’s successful journey to
digitalization. In order to be successful, the most painful part may lie in its capability to execute. Because of the
very nature of digitalization which demands at relooking and perhaps sometimes challenging the status quo, it may
lead to a resistance and lack of cooperation. At the same time getting the right talent who have the depth of
digital technology and breadth of business can be a difficult proposition to get. Hence to successfully implement a

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digital vision an insurer must ensure a combination of right organization, right processes and right people, defined
in a clear implementation strategy.
3.4.1. Right People
For an insurer to be truly digital it should have a culture of digital innovation. It should have the right
capability and right brain who help in both envisioning and implementation. The dilemma most of the insurers of
today face is that a fairly successful not so digital business model comes face to face with an innovative digital
model which requires a different skill set and different way of doing things. Hence acquiring right talent with right
skills is one of the key elements to the successful implementation of these projects. The right team should be a
combination of those who understand internal business of the insurer and people who understand digital
technologies. The business knowledge in the team people can be hired internally and for technological knowledge
people can hired externally.
3.4.2. Right Process
Being digital is about a vision and boldness of execution. A successful model to implement those would give
competitive advantage whereas doing it wrongly may put you at the risk of losing business. Hence the internal
process should be structured in such a manner that it would give the cushion against failures. Perhaps the best way
to look at this would be to think big and try small. To start with, companies may choose to work on small teams with
a minimum viable plan and start with new service/ product offerings. This will insulate the spill over of failure from
already running business. It is also important to work in agile mode because that way it can minimize the risk of
failure simply through early detection. Agile also helps in scaling up for the small successful efforts.
3.4.3. Right organization
Being a fully digital insurer, involves undertaking projects which are transformational and many times
challenge the way existing business is done. It may need a lot of change from people who are at the receiving end
of that change. This may lead to resistance and lack of co-operation from some pockets. Hence digital
transformation process should always involve decision makers and influencers within the organization such as top
management. Lot of examples are there in which transformation failed because of proper organizational support.
Kodak, Nokia, Sony etc. are the example of failure which failed due to a lack of proper organizational
culture, even though these were the first to invent the type of digital products, which ultimately disrupted them.
Nokia was the first to create an early version of smart phone yet they were beaten in the smart phone market.
Kodak was the first to design digital camera technology yet they got beaten in the digital camera market.
The best way would be to work in cross functional team mix of both people who understand business and
those who understand digital technology. And let the team work under the direct supervision of top management
bypassing middle management. For those who work on projects that directly challenge the existing model may
work as separate unit with its P&L responsibility and directly reporting to top management. Studying how IBM
constantly reinvent itself from hardware to software to opensource can give some insight worth practising

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3.5. Conclusion
Hence being digital is not about the ability to reimagining business or reimagining newer frontiers of
value creation. It’s not about hyped technologies. It’s also not about the boldness to experiment. It’s about a right
combination of all of these. Companies such as KODAK, Sony, Nokia are the ones who invented the first digital
products in their respective industry. But were disrupted in the same digital product business because dominant
nature of their traditional business dint let them change. At the same time companies such as encyclopaedia which
were dominant in their business got disrupted because another company reimagined the business better than the
incumbent.
3.6. References:
 Digital-disruption-incumbent-discussion-guide from McKinsey
 White Paper on ”Insurance-Tech-Ecosystem” from BCG
 https://www.ibef.org/industry/insurance-sector-india.aspx
 https://www.forbes.com/sites/ajagrawal/2016/08/03/6-things-to-know-about-marketing-to-
millennials/#6fd8272e7f2c