Technology Challenges: The Changing Situation For Insurers
The traditional way of running an insurance business has worked well for a long time. But it is also starting to feel the impact of digital. The digital wave is changing how products and services are delivered, and it will continue to change the nature of those products and services and even the business models themselves. We are sure that insurance companies will find new opportunities in the digital world. However, the opportunities will not be distributed evenly. Organisations that respond quickly and decisively are more likely to thrive. Those that do not will find it difficult to deliver results.
The digital challenges that insurers have to deal with are changing quickly, and so is the industry as a whole. Incumbents want to make things easier and connect with customers quickly and easily. They do this by using straight-through processing and no-touch underwriting, and they also focus on digital sales. New digital tools are created, such as the Aviva Investors Platform. Many specialty insurers use Lloyd’s platforms, and many more intermediaries operate in Lloyd’s marketplace. Cyber insurance is rising because more businesses are making their platforms digital. No-touch claims processes are the new gold standard companies aim for.
Another important objective for insurers when creating new offerings is to be data-driven. Insurance companies cannot sell as aggressively as they used to, especially when it comes to mortgage insurance, so they're looking to digital as a new way to market. So, instead of a "push" style of product development and sales, they'll need to focus on putting the customer first. To do this and offer personalised services, insurers need to be able to quickly process a lot of customer data and create new digital offerings.
Customer Centric Approach
An emphasis on the customer as the primary focus.
Customer-centricity is essential for any insurance company that wants to meet customer expectations and be ready for future market trends.
Customer-centricity is not just about providing great customer service. It also means offering customers a pleasant experience from the time they first learn about a product or service all the way through the time they own it. It means putting your customer first and making them your business's main focus.
The Incumbents’ Struggles With Digital Transformation
However, insurers have been struggling with successfully carrying out digital transformations to modern standards. Incumbents suffer from low transparency, slow customer service, and low IT security and do not yet fully use analytics and big data. This results in sub-par customer experiences as clients have to fill out lots of paperwork, have no overview, and get little interactive feedback.
Furthermore, few digital standards are developed for APIs, data formats, or digital interfaces. This makes it harder to connect different services, which is a bottleneck because insurers do not make much of their own software. Instead, they mostly buy Software as a Service (SaaS) or Custom Off-the-Shelf Software (COTS) from third parties.
Integration with other software systems is challenging for insurers because companies are always growing and need to do a lot of work to integrate new insurance companies they acquire. Some of these challenges come from relying on privately managed data centres and legacy software. These problems stemming from the past aren't noticed until they become big problems during integration, modernisation, and innovation projects—in other words, until they stop progress. The constant need for integration is met with piecemeal, case-by-case solutions, which often lead to situations that deteriorate future integration capabilities since companies now have to deal with the "new" legacy in addition to the "old" legacy.
When it comes to dealing with the transition from legacy, incumbents are often limited by their size, the size of their operations, and their technical skills. They are afraid of “big bang” transformations or big re-platforming initiatives. Since insurers don't have a strategy for choosing IT professional services suppliers, this makes it easy for vendors to take over. Further, legacy challenges make it difficult for insurers to find the right people since developers rely on legacy software and see their day-to-day operations as detrimental to career advancement. And even if companies have the technical expertise and desire to innovate, they are often limited by regulations and contracts. Some companies can't move their mainframe software to the cloud due to software/versioning limitations and company buy-in because running two identical systems costs twice as much.
Addressing these challenges is seen as core to the development and competitiveness of businesses. Even more urgent is the need for change because of competition from Insurtechs and big tech companies getting into insurance. Both of these are better prepared than existing insurers to respond to changes in the market and technology in particular.
So what needs to be done?
Because of the development of Insurtech, traditional insurance businesses have recently been pushed to think digitally. The insurance industry is moving away from legacy systems and toward technologies that will let them use their data to create new business models and products. This transformation is enabled by the advancement and use of emerging technologies.
To respond to all the challenges discussed, Codification combines domain knowledge with a deep understanding of cloud native technology, which lets us work with you on a wide range of digital needs.
Get in touch with us to help you define your organisation's future vision for customer value and optimisation.