Tag Archives: next-gen insurer

10 Essential Actions for Digital Success

Becoming a digital insurer is an essential requirement for being competitive in insurance today – but even more so for the future. Your digital strategy becomes the framework from which to leverage all other transformational initiatives, not only for the customer experience but for the employee and operational experiences, as well. This process requires clarity on priorities, focus and mindset to determine the path, the sequence and the right investments to reach the ultimate goal – going beyond a digital experience to transformation.

See also: Seeing Through Digital Glasses  

Our research shows us that while no single insurer is doing everything, every insurer is doing something, and some are doing more than others. So, how do you ensure you are doing the right things at the right times and in the right sequence? The following is a list the 10 essential actions required for success as you develop and execute your digital strategy:

  1. Understand Digital as a New Lens: Digital strategy touches aspects of all strategies – business, technology and operational plans, as well – consider it a new lens for clarity about the possibilities and linkage to strategies and plans.
  2. Obtain Executive Sponsorship: Given the transformational potential, digital requires buy-in from the top – the CEO/board level – to set the tone, priority, urgency and funding to create a new value proposition.
  3. Assign a Champion: Create a position for one executive with the vision, the power and the resources to champion your company’s digital transformation strategy. This role cuts across the enterprise, not just business or IT.
  4. Be Clear on the Definition: Define a consistent and comprehensive definition of “digital” across the company and recognize that there is a difference between digital and the customer experience. It’s essential to establish clarity on “what it is” and “what it is not.”
  5. Solicit Input: Ignite the synergy by gaining input and insights from the customers – policyholders, agents, brokers – and employees, as well. Set new experience standards and guidelines, leverage journey mapping, develop personas and create service blueprints.
  6. Understand Gaps and Opportunities: Conduct an assessment to identify the current gaps and future opportunities. Understand what the market leaders are investing in today, the lessons learned and implications for the future.
  7. Balance Customer and Operational: Remember to move up the SMA Digital Maturity Model diagonally – investing in both the external and internal experiences to create a seamless end-to-end experience.
  8. Leverage Emerging Technologies, Data and Advanced Analytics: Move beyond core modernization activities, and innovate with emerging technologies like artificial intelligence, Internet of Things (IoT), interactive voice response (IVR), microservices and open APIs that are available. Expand the application of external data, advanced analytics and big data. Explore the world of insurtech – partner, pilot and learn from their lessons-learned pivots.
  9. Create the Strategy and Road Map: Define the strategy, plan and begin to execute. Understand that this a journey. Plan five years out, but be prepared to adjust annually – because things are changing, maturing and pivoting around insurance.
  10. Rethink the Business of Insurance: Last but not least, take the opportunity to reimagine every aspect of your company. It’s not about implementing more and more projects, or just investing in technology. It’s about creating the new fabric of your company’s culture and business model.

These 10 actions are a significant effort for any company, but they are required. Just be mindful that all of them are not required on day one. This list can also serve as a reminder that digital transformation is a journey that will morph into something we cannot even define today. Over the next several years, each step and each accomplishment will be foundational to becoming a Next-Gen Insurer.

Extraordinary change is taking place throughout our insurance industry and the world around us. Digital transformation is the one strategic initiative that will set the foundation, set the context and set the direction for the next-generation insurance company you need to become – so let’s go and make it happen!

See also: Digital Innovation in Life Insurance  

For more insights on digital transformation – read our latest SMA report, Digital Transformation in Insurance: Discovering the Pathway to Digital Maturity.

How Acquisitions Are Reshaping Landscape

With the announcement that Insurity has acquired Valen Analytics, the core and analytics landscape has changed again. We have been tracking M&A activity and outside investments in the core systems space for some time, and the past year has seen a marked trend toward the acquisition of data and analytics firms by core systems providers.

Insurity and Valen are only its latest manifestation. Duck Creek acquired Yodil. In March 2016, Guidewire acquired EagleEye Analytics, and prior to that Millbrook. The momentum of these acquisitions and core providers’ other investments in expanded capability is morphing the core provider landscape significantly.

The insurance industry is awash in data, and more and more data presents itself every day. Historically, insurers had three choices for how to extend data and analytics capabilities across the enterprise. Many contracted with outside providers, for example, SAS, SAP and IBM. Others chose to build their own data and analytics capabilities. Both of these options had expense and skill set considerations that put these paths beyond the reach of most small and mid-tier insurers. They most frequently turned to the third option: spreadsheets. The big players had the best options – and smaller insurers having to make do struggled to join their ranks.

See also: Applied Analytics Are Key for Progress  

When SMA surveyed insurers on their plans for becoming Next-Gen Insurers, we found out just how important data and analytics are. We measured insurers’ progress along seven “bridges” – initiatives that provide defined pathways upon which insurers can build transformation strategies critical to becoming a Next-Gen Insurer. The results were published in the recent report, Insurance in Transformation: Building 7 Bridges to the Future. The number one bridge was “majoring in data and analytics.” 95% of insurers are making progress in this area. It is imperative, therefore, that insurers look for ways to further their data and analytics capabilities.

Based on insurers’ three options for data and analytics, smaller insurers have been at a disadvantage. Although they are well aware of the importance of data management and analytics, they are limited by resources and skill sets.

While core systems have advanced in many areas the past 10 years, their data and analytics capabilities have typically focused on business intelligence functions, like operational reporting and data standardization. Predictive analytics and link analysis have not been within the scope.

The analytics firms that we are seeing acquired by core solution providers, however, have the deep expertise in these areas that many insurers have never been able to access. Smaller insurers and others who depend heavily on the built-in capabilities of their core systems stand to gain the most from this trend of core providers acquiring data and analytics expertise. The benefits are significant. Insurers that previously were not able to gain necessary insights from their data will now be able to obtain them. New insights that will allow insurers to innovate will go a long way toward leveling the playing field.

See also: Why Data Analytics Are Like Interest  

Integrating the new acquisitions is a work in progress for the core providers. The major upside for insurers is that pre-integrating analytics into the core environment supports the trend of bringing analytics closer to real-time transactional processes. This is an important goal for all insurers to attain.

Convergence: Insurance in 2017

Convergence is emerging as the key theme for 2017.

As insurers continue major initiatives, launch new ones and respond to the external forces acting on the industry, the strategies are increasingly overlapping and becoming mutually dependent. On one hand, traditional challenges and related strategies are not going away. Insurers have a business to run every day — the management of their products in the market, customers requiring service and regulators and shareholders/members monitoring progress. On the other hand, the digital, connected world is full of new opportunities, but at the same time gives rise to some new and credible threats. Insurtech, emerging technologies and innovative products and business models create more pressure to change but also produce new ways to compete and generate new strategic initiatives.

The insurance industry is in the throes of transformation, with almost half of North American insurers stating that their companies are in transformation mode. At the same time, many are realizing that the pace of change within their companies is not matching the pace outside their company. Customer expectations, the digital world, emerging technologies and the disruption of other industries are putting more pressure on insurers to rethink and reposition their businesses. Interestingly, customer expectations have now been elevated to the point of becoming the number one driver of technology investments.

See also: CES2017: Cool Stuff, Insurance Implications  

One of the key findings of our recent research on strategic initiatives for 2017 is that digital is gaining more momentum than any of the 16 initiatives we have been tracking. Strategies to become a digital insurer have now reached a high penetration in the industry, with 72% of insurers now claiming that they have this initiative underway.

Another set of findings is that traditional initiatives, such as enterprise data/analytics and customer experience, continue to be highly important, while new initiatives such as insurtech investments, digital distribution ventures and greenfield insurers are starting to pick up. These initiatives do not occur in isolation; in fact, there are significant dependencies among the initiatives. Thus, the reshaping of the industry is more likely to be the result of blending the best of the old with the best of the new. This is the notion of convergence.

While tackling 16 major enterprise initiatives seems daunting for an individual company, each insurer will identify a subset that will be most important for them. Almost all the initiatives will have some role, but the priorities will differ based on current market position, business strategy, resources and funding. One way to prepare for the future is to create plans to address foundational capabilities. SMA has defined seven bridges to the future, or initiatives that represent pathways upon which insurers can build transformation strategies critical to becoming a Next-Gen Insurer, such as Go Digital, Major in Data and Analytics and Operationalize Customer Experience.

More information on these seven bridges can be found in SMA’s research report, Insurance in Transformation: Building 7 Bridges to the Future.

See also: 5 Topics to Add to Your List for 2017  

For insights on insurer plans and strategies for the 16 strategic initiatives, see the recently released report, Insurers’ 2017 Strategic Initiatives: The Convergence of Traditional and New Initiatives.

Blending the New With the Old

The insurtech phenomenon reached new heights at the InsureTech Connect 2016 event in Las Vegas in October. More than 1,600 attendees spent two days absorbing new ideas, connecting and making followup plans to explore working together.

I’ve participated in many of the insurtech and emerging tech (in insurance) events over the last couple years, but I have recently noticed a distinct shift. Most of the initial events included insurtech startups, investors and industry consultants and influencers. The focus was all on the “new” – exciting new ideas, developments and companies that were poised to transform the insurance industry. While a few insurance executives participated, the vast majority of people with insurance business cards were representing the venture capital arms of the companies. Recently, there has been a dramatic shift in the participants in everything insurtech. Companies and individuals representing the traditional, incumbent part of the industry are now actively participating. So, I am going to coin a term here: I’m calling this group MatureTech.

Insurance executives leading key parts of the business, driving innovation and creating strategies are now involved in force, representing all sizes of companies and all lines of business. Incumbent tech players are on the scene, as well. While there have been a few leaders involved in some of the early events and insurtech activities, there has now been a ramp-up of participation from these companies.

See also: 8 Exemplars of Insurtech Innovation  

This blending of the old and new is, in fact, a great development. Our central theme at SMA has been the need to bridge from today’s insurance company to the Next-Gen Insurer of the future. And it is really much more about transition and adaptation than disruption. This is not meant to downplay, in any way, the revolutionary ideas, new business models and innovative products and services emanating from the insurtech world. But there are some fundamental realities about the insurance business and operations that make it difficult to change overnight. Insurance is complex and highly regulated, especially once you get beyond the personal/individual products. Some of the key themes emerging that show how insurtech and MatureTech are beginning to blend are the following:

  • Partnering and new ecosystems are the path forward: All types of players are looking to create value in new ways and with new types of partners.
  • Core systems are called that for a reason: One way or another, there is still a need for automated solutions for policy, billing, claims and other core areas of the business. Although there can be new approaches, the reality is that integration with the existing systems that every insurer has today is important.
  • The MGA model is appealing: It allows companies to create and sell innovative solutions and own the customer relationship but not have to hold the risk and raise the level of capital required to be an insurer.
  • Insuring new things and offering new services are huge opportunities: Perhaps one of the greatest opportunities is microinsurance, which is now much more possible in the digital era. Offering new services in conjunction with insurance cover is enabled by the broad availability of real-time data.

See also: Calling all insurtech companies – Innovator’s Edge delivers marketing muscle and social connections

There is no doubt that the world of insurance is changing. There is an open debate about how rapidly that will occur and what parts of the business will be most affected. But one thing is for sure. Bringing together the strengths of the existing insurance world with the emerging new approaches is inevitable, and it is beginning to happen. And as insurtech collides with MatureTech, insurers must develop bridging strategies to become Next-Gen Insurers and capitalize on the opportunities ahead.

Bridging From Today to Tomorrow, Part 2

In part one of this blog, we looked at the transformational changes insurers are facing and the need to build bridges between today’s world and the future. Now it’s time to look at “the hows” – How do you respond? … How do you set a call to build those bridges? … And how do you stay competitive in this new world?

SMA recommends that insurers plan to bridge to the future, building in capabilities that will achieve near-term goals for improvement, while moving toward a Next-Gen Insurer model. The following seven suggestions should be part of your bridging strategy:

Operationalize customer-centric strategies: Improving the customer experience has been the top strategic initiative for insurers in 2015 and 2016 and is sure to remain critical in the years to come. Emerging technologies and the increasingly connected world have a large impact on customer needs, behaviors and expectations. More than ever in this fast-moving age, listening to the customer and creating a customer-centric business will be key.

Modernize core platforms: Technology systems for rating, policy administration, billing and claims are the hub of every insurance company. Many a company has discovered that legacy systems in these areas stand in the way of implementing new business strategies and seizing market opportunities. Modernizing those core platforms is a great place to start in the quest to become a Next-Gen Insurer and position for a changing world.

See also: 4 Technology Trends to Watch for

Build a flexible organization and workforce: Technology and process don’t improve by themselves. New business models, new ideas and ways to capitalize on emerging trends and technologies come from an organization and the people who are able to change. Culture, organizational structure, new roles and agile technology infrastructures are required as part of a comprehensive strategy to build an organization that can quickly and willingly respond to changes in the environment.

Major in data and analytics: Every insurer needs to create an enterprise strategy to leverage their internal data assets and capitalize on more external data in the marketplace. At a minimum, the strategy should start with master data management and include a strong business intelligence foundation. Building skills and capabilities for more advanced analytics and big data should be on the road map, as well.

Institutionalize innovation: Innovation is not a passing fad. The creative rethinking of the business is a requirement for success in a world that is transforming. But institutionalizing innovation means going beyond thinking or imagining new ways to do business and extends into operationalizing those ideas.

Go digital: Most insurers have been on a digital journey for a long time, but in many cases it has been on a department-by-department, project-by-project basis. Now is the time to create a more comprehensive strategy to improve digital operations across all aspects of the business. There may still be a long way to go on this journey, but it is important to have an overarching strategy and framework.

Keep your finger on the pulse of the emerging trends and technologies: Not all emerging technologies will require the attention of every insurer. But each insurer should identify those with the most potential impact for their own company; develop a plan to monitor them; and invest, experiment and incorporate elements into the strategy over time.

SMA has created a Next-Gen Insurer framework that brings together all of these elements into a common vision to aid insurers as they prepare for future success. This framework has innovation at its core and includes four related elements:

  1. Creating a strategic plan that starts with customers
  2. Establishing capabilities to develop innovative products and services
  3. Adapting and capitalizing on technologies and data
  4. Implementing new and revised business models.

As insurers consider the impact of emerging technologies for their companies, the SMA Next-Gen Insurer Model helps in planning how to bridge from today’s business to the insurance business of tomorrow.

See also: Next-Gen Analytics Drive Efficiency

Bridging is so important to insurers today that is a major theme of the SMA Summit this September. Insurers recognize that timing is critical, and the exponential changes taking place now in technology will only increase. Finding ways to build those bridges between today and tomorrow is paramount.

Change is here, and it’s not going away. Now is the time for insurers to prepare and execute plans to ensure their company’s future.