5 Key Challenges Facing Digital Insurance Companies Today and How to Solve Them

Businesses all over the world have been facing significant challenges since the onset of the COVID-19 crisis in the early days of 2020. However, the cogs of industry grind forever on and the time has come to take stock of the landscape and see where we go from here.

The insurance industry was already transforming before the pandemic as digital technology began to replace physical brokers - and that pattern is set to continue. So, let's take a look at some of the key challenges still facing digital insurance in 2021 and what might be done to overcome them.

#1 Data

We live in an era of unprecedented access to data, and companies which are hip to its potential can use such information to transform their business into true powerhouses of the industry.

Plenty of research has demonstrated that customers are willing to share their personal data if it means getting a more personalized service from companies. In fact, the COVID-19 pandemic has led to 50% of consumers stating they are now more willing to do so.

A massive 72% of insurance customers have stated they would be willing to share personal data if it led to cheaper premiums. Additionally, 33% would be willing to provide fitness and health tests, 32% would use home smart devices, and 29% would be happy to provide data from wearable tech such as smartwatches. However, only 20% stated they'd be willing to share social media data.

What this demonstrates is the data is out there for the grabbing. Insurance companies which are serious about thriving in the digital space would do well to make data a core part of their strategy and should even consider employing a data scientist or two to help them truly leverage the power of digital information.

#2 Internet of Things (IoT)

We are starting to see IoT devices become a common element of the insurance business - especially when it comes to car and other vehicular policies. However, the increasing proliferation of these pieces of tech brings a host of additional challenges.

Data security is a big one. IoT devices are notoriously vulnerable to cyberattacks and even the most apparently innocuous ones can open people up to a breach. A particularly notorious example comes from 2017 where a casino was hacked and a database of wealthy clients was downloaded through an IoT-enabled fish tank thermostat.

Not only this, but when IoT devices are attached to vehicles - usually as part of an agreement with younger drivers to restrict speed or milage in exchange for a cheaper premium - the possibility exists where drivers may take those devices into another country with a completely different set of data regulations, potentially opening the possibility of litigation issues.

IoT is a useful tool for insurers, but care must be taken to ensure all bases are covered and all stakeholders are fully informed and knowledgeable regarding the potential risks involved. Update security protocols regularly and consider implementing restrictions on drivers on not just how far and fast they can drive, but also where they can travel to.

#3 Cybersecurity

Naturally, as a business becomes more and more digitally focused, the potential for becoming the target of a cyberattack increases in kind.

Alarmingly, recent data suggests that "nearly 80% of senior IT and IT security leaders believe their organizations lack sufficient protection against cyberattacks despite increased IT security investments made in 2020 to deal with distributed IT and work-from-home challenges." In addition, the Federal Trade Commission has received 1.4 million reports of identity theft over the preceding 12 months - double the number reported in 2019.

The concerning conclusions we must draw from these data is that even though the risk of cybercrime is inexorably growing at an alarming rate, the seriousness with which the threat is being taken by organizations is not growing in line with it.

Insurance companies operating in the digital space must take their cybersecurity responsibilities seriously. If action is not taken to reduce the chances of a cyberattack it will open your customers up to serious consequences - not to mention the reputation and success of your business.

#4 Limited Resources

The pandemic has left many businesses and individuals in a very precarious financial position. With many businesses having been forced to close their doors for a prolonged period of time and people having to rely on government assistance to survive, there is not a lot of spare cash floating around right now.

This means your insurance business needs to find ways to do more with fewer resources. All the challenges described in this article require an investment of time, money, and personnel to solve - and your access to these three resources is likely to vary depending on the unique circumstances of your business.

This means you need to get more creative with your solutions and figure out where and when time, money, and personnel will be the most effective and productive. You need to set priorities and stick to them, all the while being cognizant of a potentially changing landscape and remaining agile enough to change direction when the situation calls for it.

#5 Competition

Without the need for a physical location from which to operate, we are likely to see more and more digital disrupters and challengers enter the industry over the next few years. These digital-only firms will be fully adapted to operating in the online space from the word go and could present significant challenges to more established businesses.

Compounding this issue is the increasing popularity of price comparison sites which will undoubtably enable smaller providers to rise to the top and into the awareness of the insurance buying public.

This is what makes everything we've discussed so far so very important. Adaptation is key, and your company needs to take every aspect of operating in the digital space seriously if you want to succeed in the future.

Digital Insurance Connect

These challenges and more are set to be hot topics at Digital Insurance Connect 2021, taking place November 30 - December 02, at the Rancho Bernardo Inn, San Diego, CA.

Download the agenda today for more information and insights.