June 8, 2015
Why Insurers Need to Transform
In the past, competition came from within the industry. Now, pressure is coming from outside forces like digitization. The only option is 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.