Tag Archives: modern technology

Why Insurers Need to Transform

Would insurers rather be enticed and pulled into the future by the motivation and promise of transformational technologies or pushed into transformation by circumstances that lie outside of their control? This is a question every CEO and CIO should face and answer as they evaluate the next steps in modernization that will lead to their secure futures.

In the past, the forces that had a bearing on insurers and their businesses were primarily competitive, lying within the insurance industry itself. Today, however, pressures coming from outside the industry, such as a digital way of life and widespread consumerization, are weighing upon the capabilities of entrenched systems and processes. The entire insurance industry, as a whole, is grappling with prototypes that will keep it relevant. A close look at the business with an eye on the future will yield a greater understanding of the reasons insurers need to transform.

In general terms, transformation is a matter of business priorities. Insurers need to transform to improve the business and meet business imperatives. This idea isn’t new. But insurance competitiveness is now at the forefront of industry concerns. Remaining competitive and growing the business is the main reason that transformation must occur.

Why Do Insurers Pursue Transformation?

Transformation Meets These Common Business Needs and Goals

  • The world is competitive. The company needs to compete and win.
  • Transformation enables the organization to grow.
  • Transformation can create optimal customer experiences.
  • An insurer needs good data, better data organization and segmentation and transformed views of data to understand its business.
  • Accelerating product development will make the company more agile.
  • Modern technology costs less to maintain.
  • Reducing technology debt will create efficiency in technology spend and reduce technical risks.
  • Creating business process efficiencies and reducing manual business processes will allow business resources to spend time on growing the business rather than administering it.
  • Eliminating the risk of business interruption by pursuing a guided, framework approach to modernization will maintain legacy system integrity during the process.

Transforming to compete is a necessity. The modern insurance model isn’t going to allow for old paradigms to remain unchallenged. The competition is becoming more agile, efficient and faster at every point of their operations, including customer service. They are learning faster than ever, as well, using increased access to higher-quality data to improve their data insights. All of this is being fueled by rapidly improving technologies for data gathering, data handling and analytics.

Improving the customer experience is a goal for transformation efforts because it answers a number of business improvement strategies (including competitiveness and growth). Nearly every process and technology within the organization is tied to the customer, if not directly, then indirectly. Most insurers agree that creating one brand experience across devices and channels leads to greater customer satisfaction. Transforming this area is also likely to contribute to the quality of data an insurer receives from its policyholders.

Transforming the gathering and use of data will accomplish a number of strategic business goals. It will lead to better service, greater distribution effectiveness, improved pricing assumptions, better claims experiences, less fraud (harmful to the company) and a lower risk of security breaches (harmful to the customer AND the organization’s reputation).

Transforming product development and creating efficiencies will enable growth. Transformation within core systems will unify data and environments, bring agility to areas such as product development and result in a simplification that saves time, effort and resources (as well as reducing fears and anxieties over legacy breakdowns). These internal modernizations will serve business by both simplifying architectures and by opening up more areas to access by business users. Growing levels of configurability and new methods of handling regulatory compliance can revolutionize an organization’s ability to compete. The efficiencies found in reducing manual processes and simplifying environments will also allow the organization to shift some resources away from administrative tasks and into growth pursuits.

Reducing/removing technology debt is a benefit that is strong enough to justify transformation all on its own. We have seen numerous examples of insurers that understood that the choice to modernize ended up saving long-term maintenance costs as well as potential loss costs if the organization was pressured to change in a hurry later.

Keeping the reasons for transformation in sight.
Transformation isn’t an end unto itself. It is a journey that needs continual monitoring and alignment. If an organization stays focused on its business imperatives and doesn’t allow transformation to diverge from those imperatives, it stands a logically greater chance of improving the business with each transformation effort.

A Report From MIT on the Next Revolution

Inspired. Extraordinary. Insightful. Transformative. Innovative. These are the words describing what I heard, saw and experienced at the recent MIT Sloan CIO Symposium, titled “Lead Your Digital Enterprise Forward:  Are you Ready for the Next Digital Revolution?” The symposium had more than 700 business and IT leaders, from  a wide range of industries, converging to discuss what was expressed by many panelists: We are at the forefront of witnessing the greatest disruption of every industry, the likes of which has never before been seen – the digital enterprise!

MIT leaders stated that the top issue expressed by executive boards and executive committees is the fear of the disruption of business models and the risk to revenue models because of new entrants, new technologies and new customer demands. Every industry is or will be affected, some sooner than others, and all will feel the pain of disruption. The degree of pain will depend on how well companies create new strategies; embrace innovation; fund transformation initiatives; and create a business that will be flexible, adaptable and valuable in the new digital future.

Sadly, only a handful of insurance executives attended the symposium. This stresses the danger we face and the challenge we have as an industry to recognize the disruption that is underway and our need to innovate and collaborate with leaders and thinkers outside our own industry. My observations align with SMA’s Top 8 Essentials for Preparing for the Digital Revolution, identifying critical elements that insurers must acknowledge and embrace as they rethink their businesses to become a Next-Gen Insurer.

  1. Digitalization is everywhere. And it is necessary for winning and retaining customers. We live in a world that is digitally charged and connected, and it is growing exponentially more so. This change is driven by new technologies and the customer experiences that have been reshaped by the use of these technologies, creating an increased preference for digital in the process. In response, modern technology and digitalization must now change how companies view themselves – no longer as value chains but rather as enterprise ecosystems that must be connected.
  2. Digitalization is dramatically destructive. A disruptive, foundational change is taking place in the way all businesses are approaching value creation. The ubiquitous connections of people via the Internet and emerging technologies (such as social media, the Internet of Things, crowdsourcing, mobile and cloud) are disrupting traditional business assumptions – from how to engage customers, to the products and services offered and, ultimately, to business and revenue models. The barrier to new entries into all industries is falling or is already gone, creating more risk to existing business and revenue models. New entrants are finding it easier to build, launch and sell much more rapidly.
  3. Data and information are the new currency in the digital world. And it is critical to the acquisition of insights about customers, the offerings of products and services, the creation of new products and services and more. Increasingly, data is being connected to the cloud, allowing data to be available anytime, anywhere and in any way.
  4. A massive paradigm shift in how we view and understand the world has occurred. The necessity to view businesses in a bigger frame of the world must follow suit, otherwise the view will be too small and detrimental. Align around a vision, projecting possibilities and outcomes. Spend to achieve an opportunity or possibility, not to complete a project; otherwise, you will find yourself trailing the competition. Just think big.
  5. Operational excellence is table stakes, and innovation is the price for future success. The absence of action and innovation creates significant business risk and a potential for lack of relevance. Innovation is the price for strategy enablement and the creation of possibilities. Life-long learning, creativity, an entrepreneurial spirit and the understanding of computer science, math and data are critical characteristics for future success.
  6. Innovation and collaboration are mandatory for future success. These are critical components for digital companies today, but the success with which they are employed will separate out the market leaders of tomorrow. The flow of information to engage collaboration through a network of resources and communities is vital to developing new products and services. The collective intelligence of ecosystems promotes entrepreneurship, provides a greater understanding of new technologies and stimulates the learning and creativity that together are key characteristics for future success.
  7. Customer empowerment defines new engagement models. We used to shape customer experience; now it is shaped for us by the rest of the world. As customers gain market power, are increasingly comfortable with technology, have a stronger voice and demand collaboration, companies must reinvent themselves and have a unified digital strategy that enables customer experience consistency and connectivity.
  8. All technology must be viewed as customer-touching. Social, mobile, analytics, cloud, wearable devices, robotics, the Internet of Things, telematics, driverless vehicles, biotechnology and much much more all influence and define customer relationships. Technology is super-connected. It’s creating new outcomes, new experiences and new products and services. And the future will be the cloud of things, with a world of distributed data, devices, technology, intelligence, computing and more that are highly connected.

Many insurers indicate they are on the journey to becoming a Digital Insurer, a key characteristic of a Next-Gen Insurer. Others are tactically investing in new websites, smart-phone apps or social media presence, but without a framework that can bring together a unified digital strategy and an omni-channel experience for driving consistent, connected customer experiences. But far too many others have yet to begin the journey. SMA’s coming digital insurer framework will help insurers to develop a strategy that brings together all of the critical components, recognizing that all  technology touches the customer in some way and at some level.

Yes … it is a brave new world. But, unlike the world of AD 2540, envisioned by Aldous Huxley in his 1931 book, Brave New World, we can envision and anticipate how the rapid growth and use of technology can bring about good and positive changes, and how the explosion of data and customer expectations can profoundly change each and every business for the benefit of everyone. The industrial revolution disrupted and transformed our world in the early 1900s, and the information age in the mid- to late 1900s. We are now in a new age of disruption and transformation. Rather than being cynical and afraid of these changes like Huxley was, we can welcome them. Embrace the digital revolution. Re-envision, reinvent and change the business. Be brave. Become a Next-Gen Insurer.