Other parts of this series:
Many insurers are falling behind other organizations in their expenditure on digital technology and few of them generating good financial returns from these investments.
Insurers are lagging many of their counterparts in other industries in the scale of their investments in essential digital technology. What’s more, they’re achieving lower financial returns on this spending than lots of their peers in other sectors. To catch up, insurance providers need to rethink their digital strategies.
Our research shows that only five percent of insurers have been able to couple significant investment in digital technology with strong financial performance (see illustration below).
Another 10 percent of insurance companies, according to our recent global survey, have ramped up their digital capabilities substantially but have been unable to translate this investment into stronger financial performances. This is about half the cross-industry average. The bulk of insurers, around 75 percent, are getting by without significant investment in digital technology. This is well up on the cross-industry average of 60 percent. The remaining 10 percent of insurers are managing to produce strong financial performances while retaining their legacy technology. Around 16 percent of all the companies we surveyed fall into this category. Insurers’ average annual investment in digital technology has been around US$45 million (€41.5 million) a company for the past three years.
Our survey of 343 leading global companies from eight industries reveals significant differences between organizations that are generating strong financial returns from their digital investments and those that are not. By applying our Digital Performance Index to our research data we were able to measure these companies’ digital expenditure against four critical business functions.
Plan (Digital strategy): Examines how organizations are incorporating digital trends in their strategic plans and gauges their success at implementing these plans.
Make (Digital production and delivery): Assesses the use of digital technology in the innovation, production and delivery of products and services.
Sell (Digital customer experience): Evaluates the management of the customer experience, including engagement, sales and after-sales service, across digital channels.
Manage (Digital corporate culture and operations): Studies how organizations evaluate their digital culture and infrastructure and their use of digital technology to improve operating efficiency and resources.
Our analysis reveals that many of the insurers that have invested heavily in digital technology are not reaping sufficient value from their investments because their expenditure lacks sufficient focus. This is significantly impairing revenue growth and return on equity.
In my next blog post, I’ll discuss three areas of digital technology investment that insurers can address to multiply the value they generate from this expenditure.
Until then, have a look at this link. I’m sure you’ll find it worthwhile.