Transformation is difficult for many insurers, due torequirements for time, people and resources. For several years, theinsurance industry has been attempting to evolve the businessthrough new strategies, emerging technologies and legacymodernization.

Speaking at ACORD LOMA 2014 in Orlando, Fla., KimberlyHarris-Ferrante, vice president and distinguished analyst forGartner Research, graded the P&C industry on eight top businesstrends for 2014 and highlighted how to drive transformation throughbest practices.

"In two, three or four years from now, the world is going to bedifferent," she says. "Tradition is really holding us back."

1. Digitalization
Grade: C+

A digital journey will take 5 to 7 years, Harris-Ferrante says.This includes using digital concepts with your existing concepts,such as e-forms, to engage in collaborative transactions. Thisspawns new data, content, output and products, all of which pointtoward standards, processes and analytics.

Harris-Ferrante says that 72% of insurance companies have adigital strategy in place, but the most common leader of thatstrategy is the IT department. Digitalization is a businesstransformation, so companies should hire a chief digital officer tooversee it, she says. In addition, most companies monitor theirdigital ROI on improving efficiencies. Instead, monitordigitalization by its business growth

2. Customer experience management
Grade: D

A true customer-centric world includes business strategies wherecustomers come first. Understand their lifestyles and life events,and create processes communications and channels based onunderstanding your customer. "But we do an inside-out approach,"Harris-Ferrante says. 'We create products based on how legacysystems are coded."

The industry is system-centered and products-centered, notcustomer-centered. In North America, 29% of P&C insurers havecustomer experience management strategy, and only 15% say they areready for the next gen customer, she says, quoting research froma 2013 Gartnerstudy. "We haven't even mastered the customer of today, but weneed to talk about the customer of tomorrow.

3. Product innovation and expansion
Grade: C+

CIOs and CEOs name three business priorities, Harris-Ferrantesays. These include new customer segments (niche and affinityproducts, online products), product creativity (new products forsmall businesses, leveraging the Internet of Things, crowdsourcingfor development), and product standardization (creation of productchassis, simplification of product portfolios).

The industry has had some product innovation, especially aroundtelematics. Investments are occurring in technology to create newproducts. But business innovation is slow, she says, and there'slittle focus on crowdsourcing. "Bring your customers into thedialogue," she says, "and ask what is your vision ofinsurance."

4. Distribution growth
Grade: B-

There's a growing demand for multichannel integration, but don'tbuild a new channel and expect customers to go to you,Harris-Ferrante says. Instead, how can you get in front of thecustomer? Compare military to retired teachers to college alumni.Think of the relationships they already have and determine how doyou get in front of them.

The industry is making tech investments to manage newdistribution channels, and improve agent portals andcustomer-facing portals. But these investments are being made on apiecemeal basis: Customer-facing websites lack advancedcapabilities like social media integration, chat, gamification orvideo support. "In other industries," she says, "when you buyonline, you can take it back to the store" and the insuranceindustry must join other industries and offer multichannelintegration.

5. Distributor loyalty andeffectiveness
Grade B+

Harris-Ferrante names 10 strategies that  boostdistributor loyalty:

• Agent loyalty, effectiveness and efficiency improvements
• Agent segmentation and performance analytics
• Establish a service culture
• Drive the next gen workforce
• Distributor-customer match
• Integrate agents into all channel activity via MCI
• Enable social presence
• Promote mobility
• Empower through technology (searchable knowledgemanagement)
• Improved tech capabilities (video, portals, agency CRM,analytics, collaboration, private social platforms.)

Investments in supporting agency sales forces is on the rise,especially for independent agents. Most insurers are increasinglyinvesting in new capabilities and technologies to support theiragent operations, she says. Emerging technology is now beingadopted, such as mobile collaboration, analytics and distributionmanagement tools. Social platforms are lacking in investments, shesays, as are strategies to attract the next gen agencyworkforce

6. Improving underwriting discipline
Grade: C+

The goal is improved underwriting profitability through workflowand process automation, data-driven decisioning, productivityenhancements for case management and collaboration, andunderwriting analytics.

Insurers greatly are investing in legacy modernization,Harris-Ferrante says, but there's low adoption of best-of-breedunderwriting solutions for special and commercial risks, lowinvestments in new data solutions and analytics, and low investmentin collaboration solutions. "This is the secret sauce of theinsurance company, and if we have low investments, what risk andnegative outcomes will that put on you?"

7. Information intelligence and businessanalytics
Grade: C-

As insurers collect data, storage and processing requirementsincrease. Part of that data is unstructured and that requires newtechnologies and knowledge to process.

Harris-Ferrante says Gartner asked CIOs in a survey how theyutilize big data, and only 27% of respondents have spent resourceson data. Of those who have spent or plan to spend in the next twoyears, 39% say their strategy is for knowledge gathering and 35%are developing a strategy. Only 17% have pilot programs and 9% havedeployed those programs.

"The reality is, we say it's great but there's no ownership,"Harris-Ferrante says.

8. Extending the value chain via business processoutsourcing
Grade: C

The drivers of business process outsourcing are organizationalchannels, new business demands, financial considerations andcompetitive differentiation. This can be broken down to commodity(low IP, automation based, high volume, business process utility)or specialties (high IP, people based, low to moderate volume,knowledge process outsourcing).

Harris-Ferrante says there's moderate use of TPAs for nichebusiness processes, but low demand for BPO for productintroduction. A low adoption of BPO for non-value added tasks isemerging, but no real market yet for utility services such as abilling as a service.