N° 132 : Digital transformation in the French insurance sector

Three main transformation drivers have pushed insurers to take up the digital transformation: firstly, the expectations of customers, whose digitised uses were confirmed by the recent health crisis; secondly, the competitive environment with the potential emergence of new players, “insurtech” and “big tech”, and lastly, the development of new technologies, which are renewing data analysis prospects.

Since the 2017 study, the competitive landscape has remained mostly unchanged: the main competitors of long-standing insurers are still bancassurance businesses that benefit from the implementation of their group’s digitisation strategies. “Bigtechs” have not entered the market, and insurers believe their entry to be unlikely in the short-term; “insurtechs” are seen as partners or niche competitors rather than as threats able to bring out major changes.

However, customer demand has spurred insurers to develop the applications and customer spaces that are essential in a world where remote relations are now part of daily life. Even though the health crisis has sometimes shifted the focus of insurance undertakings towards short-term operational priorities, it has confirmed the validity of these choices and, to a certain extent, heightened a sense of urgency that was already apparent in 2017, to carry on a “successful” digital transformation.

In terms of technology, the exploitation of data and the implementation of various “artificial intelligence” (AI) approaches are deemed the most promising avenues for development for insurers. Conversely, this study shows a more nuanced assessment of the potential of the blockchain, with several already-implemented financial centre projects being abandoned, and it also points to a more nuanced view of connected objects.

For insurers, the digital transformation is reflected in the revision of various strategic axes: reflections on their competitive positioning and their relationship with the ecosystem of innovation, harnessing technological potential, managing the risks induced by digitisation and internal transformation.

Insurers are gradually warming up to the ecosystem of innovation by establishing partnerships that could potentially accelerate their digital transformation, increase their operational efficiency or broaden the range of their offered services. A number of insurers increase their investments in innovating start-ups to reach the same goals. Some exploratory work is being conducted on the most novel models, such as “platformisation”.

The innovations that are deemed the most promising by insurers, which are therefore the ones being implemented the most, are those that allow for the collection of data, as well as the enhancement of from such data and its protection, including through an increased use of AI. The objectives of the most frequently cited use cases are, on the one hand, digitisation and the improvement of customer relations and customer service, and on the other hand, the improvement of internal operational efficiency. The customisation of prices and the fight against fraud emerge as the fields most likely to benefit from current technological progress.

The digital transformation makes it possible to automate and secure certain processes and, to that extent, is likely to reduce certain operational risks. At the same time, it increases the exposure of insurers to several risks, including cyber risk and fraud risk but also to the risk related to the use of state-of-the-art algorithms (AI). As a result and in line with regulatory recommendations, insurers are changing their risk management policies.

The internal changes necessary to successfully carry out the adaptations required to implement the digital strategies of insurers are undoubtedly the most significant challenge for industry players. The obstacles to the transformation remain essentially the same as those identified in 2017: the overhaul and update of legacy information systems is time-consuming, as is the acculturation of the workforce. Implementation capability is in fact limited by external constraints which sometimes require for sets of actions to be “deprioritised”. Often times, innovation is still viewed as a cost-centre...

Yet, the efforts made to overcome these obstacles are noticeable for almost all of the insurers surveyed. Most of them have set up an innovation department tasked with leading the innovation process in a cross-functional and coordinated manner; they have all allocated dedicated budgets -albeit with significant variations in terms of amount- dedicated to their internal digital transformation. The entire sample of insurers surveyed has also started tackling, to varying extents, an aggiornamento of their information systems aimed at increasing modularity, interoperability and enabling them to create interconnections with other systems. Lastly, in terms of human resources, insurers are implementing various mechanisms aimed at acculturating their employees to the digital era, instilling a culture of innovation and recruiting talent at a time when the most sought-after profiles are scarce.