Digital Transformation of Insurance by Prathibha Kiel
Digital Transformation of Insurance by Prathibha Kiel
Digital Transformation of Insurance by Prathibha Kiel
Department of Finance
Semester : Semester 1
Year : 2021/2022
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Declaration
I certify that this report does not incorporate without acknowledgment, any material
previously submitted for a degree or diploma in any university, and to the best of my
knowledge and belief, it does not contain any material previously published or written by
another person, except where due reference is made in the text.
W.P.W.Kiel
BM/2019/379
25/06/2023
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Acknowledgment
I would like to sincerely thank our lecturer for the Principals and Practices of Insurance
course for helping me through this project by giving the essential details and making the
necessary adjustments to put us on the right road. By leading us through this semester's
practical subject and providing us with both theoretical and practical information as well
as practical exposure, especially through this assignment, I was able to gain a great deal of
new concepts from our lectures both conceptually and practically. My sincerely thanks
extended to the lecturer for leading us and providing us with information and experiences.
Additionally, I would like to thank my friends and all the other people for their help and
willingness to collaborate with us on this assignment.
Thank you all.
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Executive Summary
Insurance industry in Sri Lanka is a critical component of the country's financial landscape,
providing individuals and businesses with risk protection and contributing to economic
growth. The insurance market in Sri Lanka is competitive, with multiple insurance
companies vying for market share. The presence of both local and foreign insurance
companies has led to innovation and the introduction of new products and services in the
industry. Mainly Insurance companies are implementing digital platforms for policy
issuance, claims processing, and customer services. In past two to three years can be seen
drastic technological advancements in the insurance industry.
Digital transformation, micro insurance, bancassurance, advancement in regulations,
customer centricity, risk management and blockchain technology can be identified as few
of prevailing trends in insurance industry. Analyzing those trends in the industry gain
number of benefits for insurance companies and all stakeholders. Such as, Insurance
regulators and policymakers need to analyze current trends to ensure the industry operates
in a stable and compliant manner. Insurance companies gain valuable insights into the
market dynamics. Trends help in the development of new insurance products that align
with the evolving needs of consumers. For insurance companies, analyzing trends assists
in strategic planning and decision-making.
Digital transformation takes significant place in the insurance industry. With the digital
transformation, insurance companies implement online insurance purchase, mobile apps,
Automated Underwriting and Claims Processing, Robotic Process Automation, data
analytics, cloud computing, etc. Investing in AI, embracing digital platforms, utilizing data
analytics, enhance cyber security, streamlining internal processes, focusing on customer
experience can be seen as strategies for success in digital era. By implementing these
strategies, insurance companies can adapt to the digital transformation, optimize their
processes, and meet evolving customer expectations, achieving success in the digital era.
While the insurance industry has made significant progress in digital transformation, there
are ongoing challenges, such as cybersecurity risks, legacy system integration, and
regulatory compliance. However, the successful adoption of digital technologies has
undoubtedly transformed the industry, making it more agile, customer-centric, and
technologically advanced.
Addressing risks and uncertainties of insurance industry due to digital transformation
requires a proactive approach, including robust cybersecurity measures, compliance
frameworks, ethical guidelines, continuous training programs, and a customer-centric
focus. Insurance companies should collaborate with technology experts, legal advisors, and
industry regulators to navigate the challenges successfully. The future of the insurance
industry in Sri Lanka lies in embracing digital transformation. By adopting Insurtech
solutions, developing user-friendly digital channels, leveraging data analytics, prioritizing
cybersecurity, fostering collaborations, educating customers, and ensuring regulatory
compliance, insurance companies can thrive in the digital era and provide enhanced value
to their customers.
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Table of Contents
Background ..................................................................................................................................... 1
Insurance industry in Sri Lanka ................................................................................................... 1
Prevailing trends in insurance industry ....................................................................................... 2
Importance of analyzing insurance trends in Sri Lanka market ............................................... 3
Digital transformation in insurance industry of Sri Lanka ........................................................ 4
Implications of the digital transformation for the insurance industry and its stakeholders ... 4
Key factors driving the digital transformation in the insurance industry. ............................... 5
Opportunities and challenges of digital transformation in insurance industry ........................ 8
Risk and uncertainties with the digital transformation ............................................................ 10
How Insurance companies are adapting to digital transformation and their strategies for
success. ........................................................................................................................................... 10
Future outlook and recommendations........................................................................................ 11
Conclusion ..................................................................................................................................... 12
References ..................................................................................................................................... 12
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Background
The digital transformation in the insurance industry refers to the integration of digital
technologies and processes to improve the efficiency, effectiveness, and customer
experience in the insurance sector. It involves the adoption of technologies such as artificial
intelligence, big data analytics, cloud computing, Internet of Things (IoT), and automation
to streamline operations, enhance risk assessment, personalize services, and create
innovative insurance products. The digital transformation in the insurance industry is
reshaping the way insurers operate, interact with customers, and develop insurance
products. It offers significant opportunities for growth, improved efficiency, and enhanced
customer satisfaction in the rapidly evolving digital landscape.
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Prevailing trends in insurance industry
Digital transformation - Like many other industries, the insurance sector in Sri Lanka has
been embracing digital transformation. Insurers have been investing in technology to
streamline operations, enhance customer experiences, and provide online services such as
policy purchases, claims processing, and customer support.
• Union Bank and union assurance collaborated for the bancassurance service.
• The Company strategically partnered with many leading banks to expand the
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Risk management - Sri Lankan insurers have been placing greater emphasis on risk
management practices to mitigate potential risks and improve underwriting profitability.
This includes leveraging data analytics, implementing robust risk assessment frameworks,
and adopting advanced risk management techniques.
Eg: Softlogic life uses IT for risk management.
• Analyzing insurance trends helps insurance companies gain valuable insights into
the market dynamics. It allows them to understand customer preferences, changing
demands, and emerging risks. This information is vital for insurers to develop
innovative products, tailor their services, and stay competitive in the market.
• By examining trends, insurance companies can assess the evolving risks and adjust
their underwriting practices accordingly. This enables insurers to price their policies
accurately, manage their risk exposure, and maintain profitability.
• Insurance regulators and policymakers need to analyze current trends to ensure the
industry operates in a stable and compliant manner. Monitoring trends allows
regulators to identify any emerging issues, such as fraud or consumer protection
concerns, and take appropriate actions to safeguard the interests of policyholders.
• Understanding current insurance trends helps in the development of new insurance
products that align with the evolving needs of consumers. Analyzing trends also
aids in identifying gaps in the market and exploring untapped segments, allowing
insurers to expand their product portfolio.
• It enables consumers to make informed decisions about their insurance needs. By
staying updated on current trends, consumers can understand the available options,
compare offerings, and select the most suitable policies. It also helps them assess
the credibility and financial strength of insurance companies, ensuring they choose
reliable providers.
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• For insurance companies, analyzing trends assists in strategic planning and
decision-making. It provides valuable data for forecasting future growth
opportunities, evaluating potential risks, and adapting business strategies
accordingly. Insurers can identify areas where they need to invest, explore new
distribution channels, or enhance their digital capabilities based on the emerging
trends in the market.
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Key factors driving the digital transformation in the insurance industry.
The key factors driving digital transformation in the insurance industry include evolving
customer expectations, technological advancements, changing customer behavior, data
availability and analytics, cost reduction, market disruption, regulatory requirements, and
collaborative partnerships. Insurers that embrace digital transformation can enhance
customer satisfaction, increase operational efficiency, and stay competitive in the evolving
marketplace.
Changing customer behavior.
With the proliferation of digital channels and mobile devices, customers are increasingly
comfortable with conducting transactions online. They prefer self-service options,
including purchasing policies, managing claims, and accessing policy information. Insurers
are responding to this shift by developing user-friendly digital platforms and mobile apps.
Customers now expect seamless digital experiences across industries, including insurance.
They demand convenience, personalized services, and instant access to information.
Insurers are embracing digital technologies to meet these expectations and provide a
superior customer experience.
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Softlogic Life introduces an
automated chat bot to answer
customer queries and it makes
customers’ life easier.
2. Mobile Apps: Insurance companies are developing mobile applications that enable
policyholders to manage their policies, make premium payments, file claims, and access
policy documents through their smartphones. Mobile apps enhance customer engagement
and offer a seamless user experience.
• Softlogic Life plc expand the micro-insurance channel where the selling process is
done through a mobile platform and focuses on social media marketing.
• Life up - New Life Insurance Advisor on your smartphone. Introducing Softlogic
Life. Life-UP is the latest innovation in the life insurance industry and is designed
to provide sheer convenience and a host of benefits to life insurance.
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process. This enables faster policy issuance and reduces the need for manual intervention,
making the process more efficient and accurate.
Digitalization has streamlined the claims processing system. Insurers are implementing
digital platforms to facilitate the submission and tracking of claims. Mobile apps and online
portals allow policyholders to report claims, upload supporting documents, and track the
status of their claims in real time.
Machine learning is an artificial intelligence (AI) that provides systems the ability to
automatically learn and improve from experience without being explicitly programmed.
4. Data Analytics: The use of big data analytics and predictive modeling helps insurers in
risk assessment, fraud detection, and pricing optimization. Analyzing vast amounts of
customer data allows insurers to offer personalized policies, improve risk management, and
enhance overall operational efficiency.
• Softlogic Life plc uses the “PCU app” to record and track all collections-related
transactions.
5. Robotic Process Automation: Robotic process automation automates ordinary repetitive
tasks and thus reduces the non-value-adding workload and cost of operations while saving
time, money and improving customer satisfaction.
• Softlogic Life implemented programs such as RPA for bank reconciliation and RPA
for cheque printing, with plans to expand further.
6. Internet of Things (IoT): IoT devices such as telematics in vehicles or wearable devices
provide insurers with real-time data on policyholders' behavior, driving patterns, or health
metrics. This data can be utilized to tailor insurance premiums, incentivize safe behavior,
and offer personalized products.
7. Cybersecurity: As digitalization increases, ensuring the security of customer data and
protecting against cyber threats becomes crucial. Insurance companies are investing in
robust cybersecurity measures to safeguard sensitive information and maintain customer
trust.
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Overall, the digital transformation of the insurance industry in Sri Lanka is improving
customer experiences, increasing operational efficiency, and driving innovation. It enables
insurers to adapt to changing customer expectations, offers personalized solutions, and stay
competitive in the evolving marketplace.
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• Regulatory Compliance: Insurance is a heavily regulated industry, and digital
transformation brings new compliance challenges. Insurers need to navigate
regulatory requirements related to data protection, customer privacy, and digital
transactions to ensure compliance while embracing technological advancements.
• Change Management and Cultural Shift: Digital transformation often requires a
significant cultural shift within organizations. Employees may need to adapt to new
ways of working and embrace digital tools and processes. Effective change
management strategies and employee training are essential to overcome resistance
and ensure a successful transformation.
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Risk and uncertainties with the digital transformation
The digital transformation in the insurance industry brings numerous benefits, but it also
introduces potential risks and uncertainties.
1. Cybersecurity issues: With increased reliance on digital systems, the risk of cyber-
attacks and data breaches becomes more significant. Insurance companies store huge
amounts of sensitive customer data, making them attractive targets for hackers. Breaches
can result in financial losses, reputational damage, legal liabilities, and regulatory penalties.
The below image illustrates how Softlogic life manages the risk of cybersecurity.
2. Ethical considerations: The use of emerging technologies like artificial intelligence (AI)
and machine learning (ML) in insurance introduces ethical challenges. For instance, the use
of predictive analytics or algorithmic underwriting may raise concerns about fairness, bias,
and discrimination. Insurers need to ensure transparency, accountability, and unbiased
decision-making when leveraging these technologies.
3. Workforce transformation: Digital transformation often requires reskilling or upskilling
the existing workforce to adapt to modern technologies and processes. Employees may face
job displacement or changes in their roles, leading to resistance, uncertainty, and the need
for retraining initiatives. Managing this transition effectively is crucial to maintaining
employee morale and productivity.
4. Regulatory and legal complexities: The insurance industry is heavily regulated, and
digital transformation adds new complexities. Companies must navigate evolving
regulatory frameworks, which may vary across authorities, to ensure compliance. Legal
uncertainties can arise regarding liability, authority, and data ownership, requiring careful
legal guidance.
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Softlogic Life mainly uses smart IT digitalization strategic pillar for success in a digital
era.
Investing in artificial intelligence (AI): AI-powered solutions are being used by insurers
to automate processes and improve efficiency. Machine learning algorithms help automate
underwriting decisions, claims processing, and customer service interactions. AI chatbots
assist customers with policy inquiries and provide real-time support.
An automated claim processing system is provided by Softlogic Life.
Embracing digital platforms: Insurance companies are leveraging digital platforms to offer
a wide range of services online. This includes enabling customers to purchase policies,
submit claims, and access policy information through user-friendly web portals and mobile
applications. By providing self-service options, insurers can reduce administrative costs
and enhance customer convenience.
Claim it, pay online, life up app services are provided by Softlogic life.
Utilizing data analytics: Insurance companies are increasingly utilizing data analytics to
gain insights into customer behavior, risk assessment, and underwriting processes.
Advanced analytics techniques, such as machine learning and predictive modeling, enable
insurers to analyze vast amounts of data quickly and accurately. This helps them make more
informed decisions, identify potential risks, and personalize their offerings based on
customer preferences.
Softlogic life uses big data and predictive analytics to make data-driven decisions to drive
profitability.
Enhancing cybersecurity measures: As digital transformation expands; insurance
companies are increasingly aware of the need for robust cybersecurity measures. Protecting
sensitive customer data and preventing cyber threats is a top priority. Insurers invest in
advanced security systems, encryption protocols, and employee training to mitigate risks
and build customer trust.
Softlogic life company conducts employee awareness programs regarding cyber security,
Regular IT system audits by external expertise, and conducts IT governance practices.
Focusing on customer experience: In the digital age, delivering a seamless and
personalized customer experience is paramount. Insurance companies are investing in user-
centric design principles, intuitive interfaces, and personalized communication channels.
By understanding and fulfilling customer needs and preferences, insurers can increase
customer satisfaction and loyalty.
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Focus on Cybersecurity: As digitalization increases, Insurance companies must prioritize
robust cybersecurity measures to protect sensitive customer data and maintain trust.
Implementing encryption protocols, firewalls, intrusion detection systems, and regular
security audits is essential. Collaborating with cybersecurity experts and staying updated
on emerging threats will be critical to ensure a secure digital environment.
Invest in Customer Education and Engagement: Digital transformation brings changes in
the way customers interact with insurance companies. It is crucial to educate customers
about the benefits and functionalities of digital platforms. Offering user training, online
tutorials, and interactive customer support can help in building trust and encourage
adoption. Regularly gathering feedback and incorporating customer insights into the digital
transformation process will also lead to continuous improvement.
Conclusion
In conclusion, analyzing current insurance trends in the Sri Lankan market holds significant
importance for insurance companies, regulators, policymakers, and consumers. It helps in
gaining market insights, assessing risks, ensuring regulatory compliance, developing new
products, raising consumer awareness, and facilitating strategic planning. By staying
informed about market trends, stakeholders can navigate the dynamic insurance landscape
effectively and drive sustainable growth. By understanding the threats and opportunities of
trends, the company will be able to face successfully for the dynamics of the industry. To
survive in the industry, companies must be up to date with new technologies.
References
Anon., 2022. softlogiclife. [Online]
Available at: https://softlogiclife.lk/annual-reports/
martamajewska, n.d. [Online]
Available at: https://www.linkedin.com/posts/-martamajewska-_insuranceindustry-
insurance-insurancemanagement-activity-7023174986840326144-CeSI/
softlogic life plc, 2021. annual report, s.l.: s.n.
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