Digital Transformation in P&C Insurance and 5 Key Challenges

The property & casualty (P&C) insurance industry stands at a pivotal moment, facing crucial decisions and opportunities for growth. A fast-changing risk landscape has created a number of opportunities for insurers, but technological adoption has been lagging overall.

To stay ahead in today's competitive landscape means adopting digital transformation for P&C insurance. Insurance companies must embrace technology to meet evolving customer demands and adapt to the ever-changing market dynamics. 

One of the main challenges with digital transformation for insurance policy administration is that most technology does not provide a good one-size-fits-all solution. Instead, insurance businesses must evaluate current and future needs and create a unique solution that supports success.

Learn more about different policy administration options for your business in our video below. 

They are fast, simple, and cost-effective. Their team is an extremely reasonable group of people who care, really care, about your success. Every launch has some bumps - they worked above and beyond to make sure those bumps didn't disrupt our launch or our ability to write new business. Without Solartis, I wouldn't be projecting a 30% increase in topline growth.

– Cameron Linder, CEO, Western Bowling Proprietors Insurance (WBPI), Rednil Insurance Brokers, Inc.

Benefits of Digital Transformation for P&C Insurance

Digital transformation can benefit P&C insurance businesses in a number of ways:

• Improving innovation and agility

• Increasing employee productivity

• Unlock additional revenue

Companies that commit to technological adoption can realize cost controls, improve customer experiences, and manage sustainable growth.

Digital Transformations Impact on P&C Insurance Operating Costs

According to research from McKinsey, technology comprises a larger percentage of operating costs than in previous years. On average, the portion of operating expenses attributed to technology for P&C insurers rose by 36% over the past ten years.

The key driver is increasing digitalization—at both the front end, where technology enhances the customer experience, and the back end, where digital drives productivity gains and operational performance.¹

With the numerous advantages of embracing insurance digital transformation, it begs the question: why have P&C insurers been hesitant to adopt these changes? The answer lies in the multitude of challenges that digital transformation presents in the insurance industry.

Key challenges of Digital Transformation to P&C insurance companies:

1. Multiple Legacy Systems
2. Investment of Resources
3. Lack of IT Expertise
4. Change Management
5. Data Management

1. Multiple legacy systems

Unless your company is a startup, you already have at least one software program – and process – in place to manage your insurance policy administration system. These systems are considered' legacy' when they are outdated and critical to core business functions.

Legacy systems pose a significant obstacle to the digital transformation of P&C insurers. Integrating new technologies into outdated systems is a complex and costly endeavor, and developing custom APIs can be both challenging and expensive.

Despite the high costs associated with maintaining legacy policy administration systems, the expense of changing them poses a significant challenge for insurance companies looking to undergo digital transformation. This dilemma puts these companies in a precarious position as they strive to modernize their operations and stay competitive in the ever-evolving insurance landscape.

One way to future-proof your insurance system is with modern, microservice-enabled, and market-tested policy administration software. 

2. Investment of people + technical resources

Digital transformation requires insurance companies to commit to a number of investments: in money, as well as time invested in strategy, implementation, and user training. Moreover, as recently noted in the Harvard Business Review², digital transformation is about more than just technology; it's about building skills and bridging a talent gap – another expensive proposition.

"Technology is always about doing more with less, yet that combination is effective only if you pair technology with the right human skills."

3. Lack of IT expertise

Adopting new technologies requires IT expertise that may be difficult for an insurance company to acquire. In fact, a recent survey³ found that 81% of insurance executives are concerned about the availability of talent with key skills.

Insurers’ most immediate priority is recruiting or developing systems specialists who can design, build and maintain elements of these emerging technologies.

It’s not all about a candidate’s technology skills either – fit requires an employee to have a number of characteristics to contribute fully to the job. Finding a candidate with the right combination of technical skills, soft skills, and experience can be incredibly challenging – and competition for ideal candidates is high.

4. Change management

Digital transformation isn’t just about buying an insurance technology solution and implementing it. It involves managing the change to processes, procedures, and daily activities of employees impacted by that solution.

Maximizing the return on investment in technological advancements requires companies to ensure that employees not only receive training but also actively utilize technology. By optimizing user adoption and fostering a culture of applying technology in daily activities, P&C insurance companies can fully leverage the benefits of digital transformation and enhance their overall success.