… tough choices for IT as digital transforms insurance into an information industry
Insurance does not enjoy an enviable position in people’s perceptions. For many, it is simply a necessary evil – a product we all need but very few of us are inclined to see as more than something we want to get at the right price (which usually means as cheaply as possible for the cover we need).
However, the advent of digital is changing the way we buy. Customers seeking convenience, flexibility and high standards of quality and customer care can now readily shop around, compare prices and experiences and find different ways of sourcing insurance. For example, aggregators enable quick and easy comparison of prices and features. Social networks offer new opportunities to reinvent the mutualisation of risk. And innovators in other industries are bundling insurance products into service packages, such as, for example, car insurance as part of an overall “pay as you drive” package.
While buying patterns and behaviours are changing, it is not clear whether general insurers are in step with the new world order. For example, while insurers want “through-life” relationships with their customers, they encourage promiscuity with the anachronistic practices of annual renewals and selling and servicing completely separate and siloed insurance products (car, house, pet, travel). Or, to give another example, few insurers can, at the press of a button, understand exactly what business any individual customer has with them and what tailored propositions might appeal to those customers.
Insurers need to move with the times, and it is digital that holds the key. The digital insurer can:
- Create a compelling new model for insurance based on digital technologies that deliver personalisation, convenience, speed and efficiency to a new generation of digital-savvy customers
- Develop deep insight into those customers’ needs, behaviours and preferences to constantly invent, refresh and refine tailored lifestyle propositions instead of line-of-business products
- Turn “big data” into insight and intelligence that allows sophisticated analysis of risk at a level of individuals, families or groups.
It’s an exciting vision for the future of insurance, but there’s one major hurdle that stands in the way – the divide between business and IT. For the new world order to prevail, the old world order needs to be dismantled. A complete re-think of the typical business/IT divide is required that far exceeds mere alignment.
What is required is a fundamental recognition that insurance is an information business. On that basis, the technology that enables the effective management of information for decision-making is everyone’s business. Working in partnership with the business, the IT function must not only deliver a robust enterprise architecture but also the technology-enabled innovation required for the digital insurer. This means that the CIO must make some tough pledges:
- The legacy estate will be managed to extinction: applications and systems will be decommissioned and removed
- Investment in the legacy estate will be minimised and focused on true “must do’s” and change that delivers significant and tangible short-term business benefit
- Investment will focus on creating a platform for the digital insurer – modularity, flexibility, agility, multi-channel capability, separation of data, process and rules
- The vast majority of IT services will be delivered using a service-based ecosystem.
General insurers that do not start this transformation within the next two years will find themselves outwitted, outpaced and out-performed by the competition. CIOs and their IT teams — working collaboratively with their business counterparts — can usher in a new era where lifestyle and convenience, rather than just necessity, are the new bywords for the sector.