This article originally appeared in Best's Review (subscription required).

Most insurance executives realize they have to step up their digital investments to meet customers' expectations for anytime-anywhere interactions. Yet many remain unclear about where to start and how to proceed in organizing for digital innovation and redesigning their processes.

Bain & Company's new benchmark survey of 70 property/casualty and life insurers worldwide finds that many lack confidence in their ability to execute the digital transition. Almost half of the companies do not believe they have set up a realistic plan, because they are missing some key elements for the journey, such as a clear vision or compliance and risk processes. Indeed, on average, P/C carriers have a digitalization index score of just 48 out of a possible 100, and life carriers have a score of 45.

There is a practical way forward--actually, four ways. The benchmarking reveals patterns of responses that, when combined with qualitative analysis of current strategies, allows us to identify four major pathways that leading insurers are taking to realize digital progress.

These pathways--advanced analyzer, digital distributor, customer-centric insurer and effective operator--help orient companies on their digital journeys. They define the competitive advantage that companies can obtain, informed by their points of departure, their existing pre-digital business models and their core strengths. While the majority of insurers have chosen one of the four major pathways, 21% of the companies have no clear path and the lowest average digitalization level, putting them at a disadvantage in making the digital transition.

The Advanced Analyzer

At 31%, advanced analyzer is the pathway chosen by the largest group of respondents, which is not surprising given the importance of analytics to the industry as a whole and the hunger to exploit big data. Many insurers have strong analytical capabilities in their actuarial group, focusing on how loss prediction can improve pricing or better detect fraud. But the potential for analytics is much broader, and the methods go beyond classic actuarial analysis. Some high-performing firms deploy advanced customer analytics for risk selection, customer loyalty and claims management.

Progressive Corp., for instance, has benefited from being out front with in-vehicle telematics and from running thousands of tests a year to systematically vary messages, product design, pricing, delivery channels and more.

Much of the data now generated comes from outside the policy administration system, including unstructured data like sensor readouts, user reviews on social networks and videos. Excelling in analytics thus will require the capability to capture data at the various points of interaction with customers, and to glean wisdom from messy data. It also requires an organization that is skilled at and enthusiastic about innovation and experimentation.

Read the full article in Best's Review (subscription required).

Florian Mueller, Andrew Schwedel and Harshveer Singh are partners in the Global Financial Services practice at Bain & Company.