The future can be hard to predict, but it doesn’t have to be hard to prepare for it. Insurers are grappling with the new and difficult business, investment and regulatory environments that are emerging from the financial crisis. However, the industry also faces much broader challenges. Changing demographics, the rise of emerging market power and changing customer behavior will help shape the long-term future of the industry.
Digital technology is a global megatrend that is transforming a variety of industries, including the insurance sector. The insurance industry has been a bit slow in adopting IT due to rapid changes in technology and because their distribution channels are still conservative, i.e. run by agents and brokers and, in fact, were not ready to adopt new technologies. However, the adoption of digital technologies by customers including social networks, smartphones, electronic transactions, etc., enabled by cloud services, e-commerce and mobility models, are having an impact on technical capabilities and commercials of many insurance companies. Insurers are rushing to capitalize on this trend.
The factors that we believe bring about these changes can be categories in:
Social: The balance of power is shifting towards customers.
Technological: Advances in software and hardware that transform ‘big data’ into actionable information.
Environmental: The emergence of more sophisticated risk models and risk transfer to address the increasing severity and frequency of catastrophic events.
Economic: The rise of economic and political power in emerging markets.
Policy: Harmonization, standardization and globalization of the insurance market.
Key business drivers for insurance IT adoption:
Engage customers using multiple customer interaction channels and include all age segments
Design strategies to include the growing investments in Internet and mobile channel strategies for faster and more instant communication.
Collaborate with partners to launch innovative products in areas such as microfinance, wealth management, etc.
Automate underwriting processes using data analytics and business intelligence (BI) and predict real-time fraud analysis, risk analysis
Leverage Bancassurance banking systems and regulations available in each country to explore the cross-selling of insurance products, particularly in emerging markets such as India
While 63% of insurance companies report that they are ready to move towards more digital practices, only 23% of these companies are ready, reports a joint study by Forrester and Accenture. To speed up this process and ensure a successful transition to digital workflows, there are a few key areas we can expect insurers to embrace as they look to create more user-friendly and automated processes.
Adopt on-premises and cloud-based infrastructure
Just two years ago, 84% of companies were operating in the cloud and more than half of these companies reported that the cloud reduced the amount of work for IT teams, says PC World. Still, IT teams in the insurance industry struggled with what information regulators allow to be stored via the cloud versus on-premises. To add to this, the proliferation of legacy technology is challenging the cloud-only approach. Many insurers are using 40-year-old back-end technology designed to manage the claims process, says a recent TrustMarque report. This type of technology is hampering innovation, but insurance agents are far from instantly replacing such mainframe technology.
This year, as the insurance industry embraces a more streamlined workflow, we can expect a significant increase in the use of technology that can be operated via hybrid cloud and on premises, ensuring maximum flexibility for customers and a strong adherence to ever- changing government regulations within the insurance environment.
Automation of business processes when needed
The key to moving towards a more digital environment and improving customer service is to automate workflows when needed. With social media overuse on the rise and across multiple channels, customers expect maximum interaction and personalization from their insurance agents and brokers.
While standard face-to-face interaction may be less common between insurance entities and their clients, relationships are still as important, if not more so.
