When the ball dropped on 2017 it opened another pivotal year for digital transition. Some insurers feel poised for digital success. For many others, small gains have been hard won and their positive business impacts quickly muted by a fast-moving business landscape. 2016 compounded their conundrum by exposing the vulnerable underbelly of insurers, Uber-style, to new business models—such as on demand insurance—new entrants, and emerging InsurTech. If all this caught you by surprise, and you have not had time to formulate a response, 2017 is now or never. Sorry, the party will have to wait.
2017 is the Reset Button
How to think about 2017? View it as a one big reset button.
What is the biggest challenge you must come to grips with? While the experts agree legacy systems are the greatest barrier to digitally-enabled insurance, by now you should already have a plan to replace them. It is a daunting task, but the bigger challenge is the legacy thinking that created those systems… this is what must change in 2017. Legacy systems supported business models, products, and customer journeys that are vanishing.
The top resolution for this New Year is to take advantage of the historical moment of core systems transformation (after all, it only comes around every decade or two for most companies) and think deeply about what market opportunities now exist and what new business models will capitalize on them. Ask yourself questions. For example: would embracing on-demand, lifestyle solutions and new, emerging risks demonstrate value to customers? If so, look at what your systems must do to support them.
2017 can be the reset button you keep pressing until you get the right questions to ask your organization, and the right answers to guide technology decisions.
I Think Therefore I Am
The massive pivot to digital is focusing investments in technology that will deliver product and service flexibility, new customer journeys, and broad connectivity in a growing insurance ecosystem.
During 2017, failing to make the necessary shift in thinking in this direction will widen the digital divide to an increasingly insurmountable distance. It will force some market players into roles they do not seek. Adverse selection will play its callous hand. Those that can add new models that add real value to the customer will take market share from those who cannot.
What side of the equation do you sit on? It is time to think about it.
Much—so, so much—was said in 2016 about the competition from InsurTech start-ups. Is one or more of them a credible threat capable of unleashing an Uber-style disruption on the sector? It is possible, but not certain.
What is certain is that InsurTech is showing us new ways of doing insurance by harnessing new technologies. It is enabling new ways of doing traditional processes—such as bots for underwriting, claims evaluation and customer service—and enabling new business models that better meet inexorable demographic trends. Consumers using goods versus buying assets, the instant economy, and peer-influenced purchasing decisions are examples of disruptive customer behavior patterns that are here to stay.
There is new thinking galore in InsurTech. Will your plan for digital transformation accommodate it?
A Big Year to Build for Success
At EIS we think that 2017 will be a mighty year for new insurance technology adoption and core replacement will continue to sit at the center of it. Support for this comes from Celent. In their P/C Insurance CIO Pressures and Priorities 2017 report, two initiative types lead the CIOs’ rankings: legacy modernization and digital (including analytics and the Internet of Things). Celent adds that a modern policy administration system, in particular, is a prerequisite to many digital initiatives.
Here then is our list of four things to include in your new thinking about core systems replacement. It positions you not only for the change you need today but for tomorrow:
- Becoming a customer-focused organization requires customer-centered core systems. Only unified front and back office operations make that happen via fully integrated policy, billing, claims, customer, and sales/marketing solutions. Integrated systems have huge advantages for improving customer data access and engagement, and reduce the burden of disruptive application upgrades.
- Take digital seriously. Don’t be blindsided by digital disruption. It is wise to not view digital initiatives —mobile, IoT and artificial intelligence—as simply add-ons to your core systems. Dig deep to understand how the way your new core systems configure processes and products, store data, and expose data and transactions—and how the stack itself is designed—will impact the efficacy of your digital initiatives.
- The cloud can be your friend. New offerings by leaders such as AWS and Microsoft make the cloud a highly-secure, fast, and flexible environment for development, testing, and deploying that will save more than 40% in infrastructure costs. Look for core vendor competency in leading cloud platforms with a focus on building software that leverages native cloud.
- You can accelerate your deployment. A cloud-based deployment model that leverages a combined continuous integration/continuous delivery approach (CI/CD) and agile methodology will significantly speed time to market for solutions and upgrades. There were notable successes with this approach in 2016.
Make or Break in 2018
Re-invention for the digital age will not wait. Going into 2018 without a clear vision and corresponding plan to meet new customer needs and to compete with new challengers is a risky play. Make 2017 count and, along the way, we might meet—with our thinking caps on. We will have a lot to talk about.