Like many sectors, the insurance industry has to take a long hard look at traditional ways of working to improve efficiency, protect data and meet customer demands, whilst at the same time future proofing against the competition.
For too long the sector has been reliant on solutions that have long been disregarded by many other markets.
Sticking to old methods doesn’t help staff or customers
The use of spreadsheets and the manual re-keying of data between systems continue to dominate many insurance firms. This is a great example of an old method that has been replaced with software in other sectors.
These spreadsheets are typically huge and unwieldy, leading to inaccuracy and bottlenecks in data getting to where it is needed and frequently crash. Such scenarios are often further complicated by the fact that only one person knows how the calculations actually work.
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This is just one example of where the insurance industry is someway behind other industries in the implementation of new technology. A recent survey undertaken by Willis Towers Watson (WLTW) showed that 58% of senior executives in the sector acknowledge the fact that they are behind other financial services sectors, with digital technology in particular.
Those insurers that are more consumer facing have started utilising digital technology, certainly more than their counterparts in the commercial/corporate field.
However, overall, in an industry where there is so much complexity, many are sticking to old methods, rather than, what might seem to them, to be a riskier option of looking at new solutions.
Drivers for change
There’s no doubt that customer experience or ‘CX’ is now a key part of business strategy across a range of sectors, and the insurance industry cannot risk being left behind here.
Across almost every aspect of their lives, customers are used to, and in fact expect to, interact easily with brands across all their devices. With some insurers, customers can access their policy information and progress of claims through engaging and interactive digital portals.
This is driven by the trend towards self-service across all sectors and leaps in software design. In fact research shows that user centric, design led companies outperform those who do not have such a focus by 211% (Design Management Institute/Microsoft).
Customers also do not expect to have to repeat their information when being transferred between departments. Software integration technology is enabling companies to join up their data into one seamless system.
>See also: What’s stopping the insurance industry’s digitisation?
Equally, staff and investors are demanding innovation from the insurance sector. Investors are looking for ways to help bring down the cost of premiums or reduce pay-outs.
And recruitment can be hampered by old green-screen technology. The old adage of doing more of the same no longer holds water, insurance companies need to keep up.
Re-innovation of legacy systems
The trouble is, taking huge quantities of information from legacy technology and transferring it onto innovative solutions is daunting. The risk of losing data, the system not working or customers being dissatisfied holds back many in the insurance sector.
Written in older computer programming languages, legacy system can be difficult to maintain. They just don’t excite today’s young developers so finding specialist suppliers/partners to help support or enhance these systems is increasingly difficult.
There doesn’t have to be a complete scrapping of legacy solutions though. ‘Re-innovation’ (as well as innovation) enhances old systems to ensure those that would otherwise be too costly to replace can remain relevant and work effectively, prolonging their life and protecting your IT investment.
Again, integration is an effective way to adopt new cloud, data and mobile applications to keep legacy systems useful and allow a more gradual approach to system updates.
The best thing to do is start with an audit of your different systems. Identify security gaps, data silos and user experience issues. Only then can you make effective decisions (replace, enhance or integrate).
Better regulation through data transparency
The status quo is not going to last forever. Developments in data visualisation, the Internet of Things and machine learning should not be dismissed as tech buzzwords and are already affecting the insurance industry. Indeed, insurers have more to gain from these new opportunities than many other sectors.
However in the WLTW survey, 42%of senior-level executives in the insurance industry felt that the complex regulatory requirements remain the largest barrier to the adoption of digital solutions.
>See also: Protecting against the inevitable: why cyber insurance is no longer optional
In reality, these new technologies actually help with the regulatory landscape. Data visualisation and analytics for example, helps insurance firms leverage customer and risk profiling data to generate better insight, whilst also ensuring the accurate and timely provision of data for Solvency 2 regulations.
That said, these tools should not be adopted in isolation without considering the security and data impact on existing systems. There is much to be considered, but it should not be seen as a distraction from the end goal of implementing such technology.
Existing competitors not start-ups are the threat
A recent KPMG survey showed that 48% of global insurance companies are experiencing disruption from new, more nimble competitors. This seems to be particularly the case in North America, but is increasingly so in Europe.
However, according to the research it is not just start-ups that are creating innovation challenges within the sector. Four-in-ten respondents say that increased competition from their existing competitors would create significant challenges over the next two years.
This certainly points to a window of opportunity for organisations in the sector. Those that look to immediately embrace the latest technology, or look to use what they have more effectively will give themselves a significant advantage.
Certainly, the threat from start-ups should be a concern, but it is the traditional competitor who grasps the technology first that will be in the driving seat.
Sourced by Anthony Peake, manager director at Software Solved