"The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." – William Arthur Ward, Writer
New digital technologies, increased competition and changing customer demands are forcing 61% of insurance carriers and financial services firms to move away from traditional business models, according to a recent global study of C-suite insurance and financial services executives. While we don’t need a study to tell us that digital disruption is real, what’s mind-boggling is what the other 39% of organizations are (or aren’t) doing about it.
To use a maritime analogy, there are essentially three types of organizations out there. The pessimist says, “Humpf, this storm will surely wreck our ship, so we’re staying in port.” The optimist says, “We’ll stay the course and hope the storm passes.” The realist says nothing—and plots a new course.
Where does your organization fall? One thing is clear: The seas are changing, and the time has come to make some pivotal choices about where and how you’re going to steer your ship.
Ecosystems and interoperability are the waves of the future
All the waste and operational inefficiency that exists in the current P&C environment is simply not sustainable. By getting on board with a more open ecosystem, organizations can accelerate innovation and move our entire industry forward faster.
See also: Road to Success for P&C Insurers
The bigger the ship, the harder it is to stop or turn on a dime. You understand the need for change, but inertia is keeping you from dealing with a host of challenges—from complex, inflexible legacy systems to regulatory considerations, sunk development costs and just plain skepticism about whether new solutions can deliver on their promises.
I understand and can empathize with all of these hurdles, having spanned the spectrum of the insurance value chain in my career, from broker to modeler and now solution provider. Change is fraught with risk. But staying the course is its own risk.
“Well, in insurance, we move slowly,” isn’t an argument you’ll hear from those in the 61%. Not when there are a host of practical technologies and platforms, such as innovations in data and analytics, that have been built to complement existing systems—and can be implemented right now, not years from now.
Pragmatic innovations, ecosystems and interoperability accelerate change
Scott McConnell, divisional president for NTT Data Services, who published the global C-suite study previously mentioned, wrote in an Insurance Thought Leadership article
“Modernization and core systems have been a conversation for years, but insurers no longer have to face the costly and time-consuming option of replacing legacy technology – or continuing on the same limited path. With a digital business platform (DBP), they can adopt and integrate new technologies with their existing core systems, allowing them to work with a global ecosystem of partners to become more nimble and customer-focused.”
No matter the size of your ship or the complexity of your systems, reaping the benefits of more pragmatic technologies means tapping into an ecosystem of partners that can accelerate change without disruption to your legacy and core systems.
But, while having a host of practical point solutions to assist in core workflows is necessary, it’s not entirely enough. The ability to advance innovation and market efficiency hinges on improved connections between systems, or interoperability. To effectively leverage practical solutions, investment and attention must be paid by insurers, reinsurers, brokers and solution providers to advance interoperability among systems. This includes the formation of open data standards for the transfer of data in the marketplace, open modeling and data platforms to allow the market to leverage a best-of-breed view of risk across a multitude of expert providers. Likewise, open APIs are needed to facilitate seamless workflow integrations between in-house systems, technology providers and modelers/data providers.
Keep it smart and simple
It’s clear we’ve reached uncharted waters in our industry. Will you stay the course or brave new seas? Sure, there are regulatory and change management considerations along with competing priorities—all of this is true. The first step starts by acknowledging all of it and recognizing you can't just wait. There are practical innovations right in front of you that you can do and that can create momentum without heavy investment in time and resources, and without totally redoing your legacy systems.
See also: Provocative View on Future of P&C Claims
I challenge you to think about how you can bring simplicity to some very complex problems. Look to your partners. Look to your customers. Look to pragmatic technologies. And then plot a course for change.