The future can be hard to predict, but it doesn’t have to be hard to prepare for it. Insurers are grappling with the difficult new business, investment and regulatory environments that are emerging from the financial crisis. However, the industry also faces much broader challenges. Changing demographics, the increasing power of emerging markets and changing customer behavior will help shape the long-term future of the industry.
Digital technology is a global megatrend that is transforming a variety of industries including the insurance sector. The insurance industry has been a bit slow in adopting IT due to rapid changes in technology and because their delivery channels are still conservative, i.e. run by agents and brokers and were not, in fact, ready to adopt new technologies. However, customer adoption of digital technologies including social media, smartphones, electronic transactions, etc., enabled by cloud service models, e-commerce and mobility, are having an impact on technical capabilities and commercials of many insurance companies. Insurers are quick to capitalize on this trend.
The factors that we believe bring these changes can be categories in:
Social: The balance of power is shifting towards customers.
Technological: Advances in software and hardware that transform ‘big data’ into actionable information.
Environmental: The emergence of more sophisticated risk models and risk transfer to address the increasing severity and frequency of catastrophic events.
Economic: The rise of economic and political power in emerging markets.
Policy: Harmonization, standardization and globalization of the insurance market.
Key business drivers for insurance IT adoption:
Engage customers using multiple customer engagement channels and include all age segments
Design strategies to include the growing investments in the Internet and mobile channel strategies for faster and more instant communication.
Collaborate with partners to launch innovative products in areas like microfinance, wealth management, etc.
Automate underwriting processes using data analytics and business intelligence (BI) and predict real-time fraud analytics, risk analytics
Take advantage of Bancassurance banking systems and regulations available in each country to explore cross-selling of insurance products, particularly in emerging markets such as India
While 63% of insurance companies report they are ready to move toward more digital practices, only 23% of these companies are ready, reports a joint study by Forrester and Accenture. To speed up this process and ensure a successful transition to digital workflows, there are a few key areas we can expect insurers to embrace as they look to create more user-friendly and automated processes.
Adopt an on-premises and cloud-based infrastructure
Just two years ago, 84% of companies were operating in the cloud and more than half of these companies reported that the cloud reduced the amount of work for IT teams, says PC World. Still, IT teams in the insurance sector struggled with the data that regulators allow to be stored via the cloud versus on-premises. To add to this, the proliferation of legacy technology is challenging the cloud-only approach. Many insurers are using 40-year-old back office technology designed to manage the claims process, says a recent TrustMarque report. This type of technology is hindering innovation, but insurance agents are far from instantly replacing such mainframe technology.
This year, as the insurance industry embraces a more streamlined workflow, we can expect a significant increase in the use of technology that can be operated through hybrid cloud and on-premises, ensuring maximum flexibility for customers and a strong adherence to ever-changing government regulations within the insurance environment.
Automation of business processes when necessary
The key to moving towards a more digital environment and improving customer service is to automate workflows when necessary. With the excessive use of social media on the rise and across multiple channels, customers expect maximum interaction and personalization from their insurance agents and brokers.
While standard face-to-face interaction may be less common between insurance entities and their customers, relationships are still just as important, if not more so, than in the past. As such, insurance agents need more time to interact with their clients and less time to sort documents, scroll through documents, and stay on top of claims processing.
Choose programs and systems with customers in mind
A Forrester-Accenture report recently dubbed this year the “age of the customer,” where customer experience is at the heart of the digital movement. This means that new digital technologies and processes cannot be implemented with a management-first mindset.
Take, for example, something as simple as a digital application. While some technologies may actually require three different phone numbers or two different email addresses from the customer, how convenient is that for the customer completing the application? Today’s customers expect a smart and seamless process from insurance companies. While this may indicate some disruption to internal processes for the agent, the end result should be to make the programs easier to use for the customer, not just the IT team.
Social media analysis
Insurers are turning to social media as a marketing medium and collaboration platform. Social networks are widely used to establish contacts with friends and business partners. Smartphones and mobile devices make it easy to use social media. Insurers can target new customers based on their life events and can also use social media to communicate with internal and external stakeholders.
Focus on SaaS solutions
Insurance companies are deploying applications by adopting SaaS solutions because it offers superior infrastructure, high levels of security, and low risk. Insurance companies have the advantage of accessing the latest IT infrastructure and platforms at low cost. SaaS offers a perfect solution for insurance to improve efficiency with minimal capital costs.
Real-time architectures for agility
Real-time data sources are mobile technologies and social networks that insurance companies can take advantage of to be more competitive. Capturing real-time data from online channels is proving to be a gold mine for insurance companies because they provide insights into customer behavior based on which insurance products are crafted into the strategy. Insurance companies are implementing data analysis tools, BI platforms, and data visualization tools to reap the full benefits of real-time data.
Data analytics and big data
The ability to capture data in real time, big data, and analytics play an important role for insurers in terms of leads. The recent trend is the adoption of sensor technologies called telematics used to monitor individual driving behaviors. These technologies help insurance companies provide usage-based insurance policies.
Information plays an important role in the insurance industry in terms of product pricing, development, risk management, claims processing, and fraud detection. These functions can be performed by collecting data from multiple sources and by using software tools to gain meaningful insights from the data. To implement insurance operations effectively, the insurance industry needs to adopt IT systems, new technologies, and networks to capture real-time data and bolster its data storage capacity for analytics to capitalize on more customers.
