Johanna Von Geyr, partner and EMEA lead banking, financial services and insurance at ISG, explores how to modernise the insurance industry with a shared cloud-based IT model
How can the insurance industry stave off disruption?
The pandemic has forced the hand of the insurance industry to modernise. Faced with the reality of having to enable employees to work remotely and assessors to carry out inspections without being on premises, and digitising the mountain of paperwork that the industry has always relied on, insurers are waking up to the fact that they need change, and they need it fast.
Some were already on the way to transforming their businesses to become more agile, transforming their business by embarking on long digitisation programmes and moving from legacy systems to cloud computing. (Their timescales shrunk, rapidly, as the pandemic hit.) But now there’s an even greater pressure on insurers: how to create an agile and adaptable business that can cope with changing consumer expectations and behaviour, both in the wake of the pandemic and into the future.
Expectations are changing
Consumer expectations are changing. We are all used to digitisation in our personal lives as a result of the pandemic. We use digital technologies to interact with each other. We use instant, live video chat to talk to retailers’ customer service teams. Why would we accept less from our insurance providers?
That means speeding up claims processes, digitising paperwork and making the whole process as smooth and seamless as possible. If a consumer can choose between an insurer who gives an instant quote, turns round claims processes in a matter of minutes or hours using video-based assessments and anti-fraud checks, and gives an almost instant decision on a payout, they are unlikely to choose one which takes days or months to process claims and payments, and produces a mountain of paperwork.
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Re-imagining the future
Pockets of the insurance industry are heading this way, by, for example, using vehicle trackers that reward good driving with lower premiums. But behind the scenes for many organisations is a mass of hugely complex products and equally unwieldy legacy systems that don’t provide them with the ability to work in a way that is agile and digital-first.
Assess your systems as they stand today and you may find that several, or possibly hundreds, have been redundant for some time. Eliminating these systems, which are nothing more than drains on the business’ resources, will allow for a greater level of agility.
By moving away from cumbersome legacy systems that are no longer fit for purpose, insurers can create a simplified system that unifies silos, making everyday work more efficient, and saves the business money. Money that they can reinvest into creating a customer-centric company that can rival its strongest competitors.
Imagine a world where you could simplify your product range, providing cover for the highest number of people with the fewest number of insurance products. Where you connect to partners, smart home devices and wearables to get a true picture of your customer’s needs and behaviours. For example, a smart home device might give a better picture of the risk of that home being burgled than just looking at its postcode.
Data from a fitness tracker will help an insurer understand the overall and ongoing health picture of an individual better than a form filled in at the start of the insurance. Shared data from a utility company could give an overall picture of home use – whether someone is home all day, or away regularly, for example. But you need the systems to be able to connect to partners’ data, to analyse and understand it continuously, and to use it effectively to inform future products.
This is a world, too, where assessors are only needed for the high value or complex claims, and they have the time to really dig deep into issues that need resolution. Customers interact with you via digital systems, and use configurable, easy-to-use applications that provide you with the data you need to innovate, to spot trends and build new products that meet the changing needs of your customers.
You use cognitive technologies and artificial intelligence to spot behaviour patterns that could indicate a fraudulent claim, for example. And you use all that data (include open-source data in collaboration with partners) effectively to reduce fraud, and improve decision making so that you can provide instant decisions on claims for the majority of customers.
This is the future of the insurance industry. But it means a complete overhaul of legacy systems, and this is the stumbling block for many organisations. Legacy systems hinder progress. If you are going to connect to partners’ data, for example, you need standardised core systems to allow for integration of data from multiple sources.
Currently, many of those systems are being built one-by-one, a patchwork of complex systems that fix individual issues and allow innovation in niche areas, but don’t allow the business as a whole to simplify and scale.
The right technology for this future
A single, shared IT platform will help insurers roll out innovations quickly, allowing departments to work together and share data and insights that can give a better, single view of a customer.
A cloud-based platform model means that insurers can standardise product development, which in turn means quicker roll outs, and better innovation across business units. It also lowers production costs, leading to savings of between 15 to 30% according to ISG’s own research. That’s money that can then be invested in innovations, such as new insurance models, platforms that meet new and future customer demands — creating a genuinely customer-focused insurance model that’s fit for the future.