Tag Archives: the shift gains momentum

Update IT Systems One Slice at a Time

Every business today has legacy processes and systems and faces the dilemma on how to transform the business to adapt to the rapidly changing market dynamics that are driving the shift to the digital age. Is there a proper approach? Insurtech is embracing these dynamics and powering the shift through the significant capital flowing to new technology and startup companies from MGAs and insurers. There is much discussion and debate on how the shift will reshape the insurance market as we have known it for the last 50 years. But the industry should not forget that this same disruption has also affected other industries such as retail, media, travel, telecom and banking, where successful companies created new business models, technology solutions and more.

The insurance industry has long had a degree of protection from new entrants, provided by the complexity of the regulatory environments. However, regulators are quickly realizing they need to understand the new digital technologies and work with the insurance industry to integrate them into the market. Today, we are seeing that new entrants are making strong moves into the market by working with regulators. At the same time, existing insurers are bringing new, innovative products to market within their current businesses.

Irrespective of where one operates within the insurance market and across the insurance value chain, change is coming. The change is being driven by a combination of new customer needs and expectations, the rapid adoption of new technologies that offer significant opportunities to innovate and the changing market boundaries that expand market reach. The result is the rapid emergence of new entrants who see the selling, marketing and servicing of insurance in a very different light to the more traditional entities.

See also: How to Enhance Customer Service  

For existing insurers with legacy technology estates, tinkering around the edges or waiting to be a fast follower will not work, given the pace of change. As we have described in our research, Future Trends 2017: The Shift Gains Momentum, we are experiencing a tectonic shift that is creating a market dynamic that we call Digital Insurance 2.0.

If you embrace the need for change, what should you do to help adapt and innovate for the new world? Which slices should be approached first? Here are some suggestions:

Understand and Listen to the Customer. This is basic stuff, but the industry does not do it so well. In Majesco’s research, The Rise of the New Insurance Customer and The Rise of the Small-Medium Business Insurance Customer, insurance ranks at the bottom in its interactions with customers. In today’s digital age, the customer is in control. So, to transform a business, it is imperative to take the time and make a concerted effort to understand your customer needs and expectations … because your new competitors are.

Evaluate alignment of your strategy to your current systems’ infrastructure and organization. You’ll most likely find that your legacy systems’ estates are inhibiting your ability to change, let alone shift to Digital Insurance 2.0. Digital Insurance 2.0 requires a modern, open architecture that is cloud-ready and has open API capabilities to integrate new data sources, new technologies and more. Trying to apply a closed technical infrastructure to address the needs of Digital Insurance 2.0 is the proverbial square peg in a very round hole.

Prioritize. You can’t flip an established business on its head overnight. It’s just not going to happen. You need to grow the existing business while transforming and building the new business. This is crucial. Marketing and distribution should not pull back from traditional business in anticipation of the launch of new business models, new products or new channels. The current business is funding the future and needs to be kept running efficiently and effectively as the market shifts.

At the same time, you need to optimize the existing business while building the new businessIdeally, one would seek to transform a “sliver” of the operation which goes from “front-end” right through to the “back-end” function. If an organization’s teams have been working toward placing digital front ends on the traditional business to engage customers, they shouldn’t stop in the middle of the bridge. Any process that can be optimized on the traditional side will help to maximize the existing business, reduce the cost of doing business and provide a bridge from the past to the future while beginning to enable realignment of resources and investment into the new business. These are very often the incremental changes that will also gently shift the customer base through new ways of doing business.

Evolution vs. Revolution. Evolving a business is not going to be without its difficulties; but the greatest risk is allowing “old thinking” to solve “traditional issues.” This is not an ageist issue but a state of mind – “We cannot solve our problems with the same thinking we used when we created them.” – Albert Einstein.

As you bring your thinking into what the new world looks like – most likely it won’t look like what is currently in place. From an organizational perspective, one should also be very open to creating “greenfield” entities — new structures built on a clean slate approach rather than replicating the traditional silo approach so frequently seen in large corporations.

Increasingly, insurers are developing a new business model for a new generation of buyersSome insurers have made the mistake of envisioning their digital front end as their big leap into the future, not realizing that they have only just touched the new landscape. They need a strategy for a new business model that supports simultaneous leaps forward that will create new customer engagement experiences underpinned by innovative products and services. This will create growth, competitive differentiation and success in a fast-changing market.

Creating the requisite infrastructure to address the realities of the market shift shouldn’t be underestimated; it will not be a trivial investment. Many insurers are looking at justifying investment based on growth strategies as well as competitive survival. Strategically, more are moving to the buy vs. build approach. Forward-looking companies are seeking a cloud-ready platform with a modern architecture that can support all the insurance business functions, as well as increasingly sophisticated digital and data capabilities to support the customer and distribution channels.

See also: Roadblocks to Good Customer Relations  

These solutions seamlessly integrate core insurance processing with a growing ecosystem of other technology providers, third-party data sources and the growing number of external sales/service platforms or marketplaces. As systems and their underlying architectures become more open, products and services will be sold and serviced as part of “non-owned” processes. As a result, insurers will need to integrate their data collection and transactional requirements into portals and platforms that they don’t control directly.

Clearly, we are seeing the shift to Digital Insurance 2.0, a key topic of discussion and strategic planning in the boardroom, though many may not fully appreciate the extent and ramifications of this shift. Truly transforming a business to Digital Insurance 2.0 will be a customer-centric, digital-first endeavor. The digital age shift is creating both a challenge and an opportunity for insurers. The time for plans, preparation and execution is now — recognizing that the gap is widening and the timeframe to respond is closing.

This article was written by Mike Smart.

How Basis for Buying Decisions Is Changing

Building a business around speed and convenience is nothing new. Fast food drive-thrus, cell phones and FedEx overnight delivery services were just some of the predecessors to today’s Ubers, apps and same-day Amazon orders. But in most of these cases, purchase decisions were based upon simple factors — “I’m hungry,” or “We need delivery of a legal document,” or “Of course it would be nice to be able to make a call from my car.”

There were other services for which people understood that immediacy wasn’t an option. Many financial decisions took time. If you wanted to earn a little extra interest by using a certificate of deposit instead of savings, you would have to wait months or years for maturity. Securing life insurance was a multi-week (sometimes multi-month) underwriting process. Applying for a home loan with multiple credit and background checks took time. For the most part, people accepted these elongated processes and delays with resigned and good-natured patience. This was life. Important decisions required time, not only in the preparation, but also in the education and execution. Two hours with a life insurance agent would allow you to learn about all of the products available and understand their complexity, and it would help the agent to fit products to your needs. You valued the time spent learning, understanding and choosing based on the trusted relationship with your agent.

The convergence of generational shifts and technological advancement created a new mindset that rewrote expectations and priorities for many. Patience is no longer always considered a virtue. Insurance relationships are no longer always valued. Time-crunched people seek time-saving services. Value is seen in immediacy, uniqueness and ease.

See also: Innovation: a Need for ‘Patient Urgency’  

Enter the new generation of insurance companies redefining the insurance engagement. Lemonade, TROV, Slice, Haven Life and others who are redefining speed and value to a new generation of buyers … are placing traditional, existing insurers on notice.  From purchasing a policy in less than 10 minutes to paying a claim in less than three seconds … speed and simplicity are the new competitive levers.

Out of necessity, this has changed an insurer’s view of competition. Insurers used to know their competitors. They understood their distinctive value propositions. They debated on what were the real product differentiators. Insurers understood the reach of their agents, their geographic limitations and the customer and agent loyalty they could count on because of their excellent service.

While all of these factors still guide insurance operations, the competitive landscape has shifted to different factors critical to acquiring and retaining customers. Insurers are feebly groping for just a tiny bit of space in consumer minds —enough to plant the seed of need and just a little more to water the plant into engagement and completing a transaction — because today’s consumer isn’t going to listen well enough to grasp distinctive details. He or she is looking for an easy and quick fit.

A 2015 study of Canadian consumers estimated that the average attention span had dropped to 8 seconds from 12 seconds in 2000, driven at least in part by consumers’ constant connections through digital devices.

Need. Purchase. Done. Happy.

A 2012 Pew survey of technology experts predicted what is now coming true, “the impact of networked living on today’s young will drive them to thirst for instant gratification, settle for quick choices and lack patience….trends are leading to a future in which most people are shallow consumers of information.”

Only five years later, insurers are feeling the impact.

A key reason many of the new, innovative companies are appealing to consumers and small and medium-sized businesses (SMBs) is because they simplify and remove some of the cognitive effort required to make decisions about insurance. In his book, Thinking, Fast and Slow, the Nobel Prize-winning behavioral economist Daniel Kahneman described human decision making and thinking as a two-part system. Greatly simplified, System 1 thinking produces quick (i.e. instantaneous and sub-conscious) reflexive, automatic decisions based on instinct and past experiences. These are “gut” reactions. System 2 thinking is slow, deliberate, reason-based and requires cognitive effort.

In general, most of the decisions we make each day are through System 1, which can be both good and bad; good because it increases the speed and efficiency of decision making, and because in most instances the outcomes are acceptable. However, not all outcomes are good, and many could have been improved had System 2 thinking been engaged. The problem with System 2 is that it takes effort, and humans naturally try to minimize effort.

See also: Insurtech: Unstoppable Momentum  

So, a traditionally complex industry is intersecting with a cognitive culture that is mentally trying to simplify, reduce effort and be more intuitive. This has consequences for decisions throughout the customer’s journey with an insurance company. Good decisions about complex issues like insurance should be based on System 2 thinking. However, during the research and buying processes, the cognitive effort to do so can lead many people to choose other paths like seeking shortcuts to in-depth research and analysis or delaying a decision altogether.

In a recent report, Future Trends 2017: The Shift Gains Momentum, Majesco examined how impatience is driving a shift in behavior that is causing insurers to look at the anatomy of decisions. What behaviors are relevant to purchase? To renewals? To service? How can insurers still provide risk protection to individuals who won’t take the time to learn about complex products? We’ve drawn some of these insights out of the report for consideration here.

For one thing, insurers clearly recognize that the trends affecting them are far broader and bigger than the insurance industry. Businesses and startups across all industries are capitalizing on the lucrative opportunity afforded by meeting the ever-increasing demands for speed and simplicity made possible by technology and re-imagined business processes. Amazon Prime, Netflix, Spotify, Uber/Lyft, ApplePay/Samsung Pay, Rocket Mortgage (Quicken Loans), Twitter, Instagram and other technology-based businesses represent contemporary offerings that have simplified the customer journey.

Retailers such as Walmart, Best Buy, Staples, Amazon and even eBay are testing same-day delivery for items ordered online. Simplifying a customer’s entire journey with a company by making it “easy to do business with” is more critical than ever for insurers.

What is the good news in the world of impatience? Insurers are quickly finding ways to counter the disparity between the need for speed and the need for good decisions. They are also using a bit of psychology to positively influence decisions, and they are buying back some brain space with techniques that both inform and engage.

In Part 2 of this series, we will look at these techniques as well as product adaptation, framework preparation and planning for transformation that will meet the demand for quick decisions. For more in-depth information on behavioral insurance impact, download the Future Trends 2017 report today.