It can be tough to decide sometimes. We can’t have it all. In life and in business, we are faced with choices. It’s kind of like owning a home that you would like to remodel. You can think about all of the changes you want to make, but it’s impractical to do them all at once. You have to live in the space while it is in the midst of change. That means prioritizing. It means making some tough choices.
In the realm of insurance, most insurers are also finding themselves in the middle of a dramatic remodeling project. Some choices must be made. Some insurers would like to tear down the one house and just build a new one next door. But that’s just as impractical. Transformation efforts need to be aimed at real business improvements while the business keeps moving forward. Which changes will make a difference? Does it matter which order we choose when it comes to transformation projects?
Last week we started this series with a blog on Strategies, Plans and Budgets. I invited two well-known industry experts – the Deans of Disruption - Rob Galbraith and Bryan Falchuk to brainstorm with me about the state of technology transformation in the insurance industry — asking them where most insurers are heading and what considerations they should make as they plan for 2021.
Rob is the author of The End of Insurance as We Know It. Bryan wrote The Future of Insurance: From Disruption to Evolution. You can listen to the full conversation in our webinar, Planning and Preparing for Tomorrow — Today: What You Need to Focus on for the Future of Insurance.
In part two of our conversation, we discussed areas where insurers need to accelerate. My questions to Rob and Bryan were these:
As insurers begin their 2021 planning, what are the key areas of business and digital transformation that insurers need to accelerate?
Which areas are going to get the priority, the resources, and some acceleration?
We started by painting a picture of revised time-horizons. COVID-19 and its digital pressures have reduced previous time assumptions. Many project investments that were slated for a 3 to 5-year path for testing and implementation have now been moved to 18 months or less. When we look at specific tools, it’s easy to see why. Most high-profile accelerations are due to the need for improved customer service in an environment where service is in the midst of radical change.
“We are seeing a lot of digital enablement through the use of APIs. Insurers need to support a newer generation of digital brokers and digital agents. Insurers are asking themselves, ‘What sort of self-servicing tools are we putting in? What communication tools are we offering to people? What are we doing on the claims side?’ As an industry we are seeing the acceleration of communication, risk evaluation and claims adjusting tools.”
In fact, the types of tools desired are a source of acceleration measurement because most are specific to their portion of the value chain. This carried our conversation into the idea of specific tool acceleration vs. enterprise-wide transformation. If transformation had once been seen as an enterprise-wide concept, it has now clearly shifted to a two-speed process, including both the enterprise-wide view – speed of innovation to create the future business and the narrower speed of operation to address specific operational needs by function.
“Proof of concept is much easier to do today, especially with cloud-based tools. You can get up and running quickly. You don’t have to do a heavy integration to make it work. I’m seeing carriers testing things out more and “playing around” on small but impactful tools. A lot of the “playing” that was going on in 2020 is now flowing into the budgeting for 2021, adding it to production.
“The other major tool transformation is around data and analytics. Insurers are pulling some of their (longer range) projects into 2021 to gain some AI or machine learning analytics tools to make better decisions.
“Of course, tools also involve people. We’re all working remotely. What tools, what models and what insights can we pull in that will make it so that people can still grow and learn and do a better job with smart support?”
“I think we’re seeing fewer “moon shots” and a lot more “must haves.” The outside scenarios and the game changers that innovators like to dream up (like being the next Uber or Amazon) — a lot of those ideas are out the window.
“Start with your efficiencies. You can get ROI within a year on reducing manual work, using RPA or OCR technologies. These technologies are getting a lot better and the cost point is ratcheting down. Companies are becoming more successful at deploying these with partners. Apply some of these technologies to get quick wins.
“The second part is distribution. There is a plethora of digital agencies. The way insurance is bought and sold is radically changing. People don’t want to walk through the front door of a brick and mortar agency anymore. Think about how you partner with your current agencies as well as with the new players. Make your current offerings very accessible and easy to integrate within a variety of different formats.”
Accelerating products among other priorities
With the increase in prioritization of initiatives, it makes sense to question the ability to launch new products. Though they shouldn’t be competing initiatives, any investment in new product development could, in theory, detract from any other investment on the project list. Is there a middle ground?
“Coming up with innovative new products is the part that is fun, but a lot of carriers are delaying on new products. They are harder to stand up. It is more capital intensive.
“At the same time, there is a great need for new products. We are seeing that there are exposures which aren’t covered and there are groups of customers out there who are not being served properly by the market.
“If you are in a strong position…If your processes are automated and streamlined…If your company is easy to integrate with and you have strong distribution on your current offerings, then I think this is an area where you can differentiate yourself from your competitors. You can bring new products to market during a time when you won’t see as much of that due to the economy.”
“One of the things that I’ve seen in recent conferences is the growth of low code/no code policy and product creation solutions.
“People are trying to see where there is a new niche. Where can they meet market gaps? What are the gig economy areas that aren’t being covered in the way that the exposure actually needs them to be covered? Even giant carriers are playing around with small and nimble core systems or side systems that connect back to the core in order to allow them to spin products up. This method turns product development into a sort of laboratory to analyze where the economy is going to grow.
“This isn’t something that every carrier is doing, but it’s happening in pockets and it’s an interesting thing to watch. This could be where the next big product innovation comes from — system capabilities that will allow for that laboratory of development of insurance products.”
New and Innovative Products
This is also where Majesco has seen a lot of activity, working with customers to stand up products rapidly, in a few weeks. Organizations are concerned with getting their products to market in a timely manner. Industry-wide we are seeing a demand for “on-demand” and “pay as you use” insurance. This speaks to the need for both digital service AND rapid, prioritized product development.
The customer is the focus. Customers want to make sure that you have a product that will fit their risk profile and their risk needs at the right time. So, whether that involves parametric insurance or on-demand insurance, increasingly people are going to be asking, “Do I really want to pay for something that I don’t use all the time?” It’s like the difference between cable television, where you have to buy everything, and the television services that are streaming what you want.
In many ways, on-demand insurance is the prototype for well-paired digital service/digital product offerings.
“The early gig-economy solutions weren’t viable. Carriers would cancel and rewrite policies to approximate the on-off nature of the exposure. It’s really expensive to do that, versus switching it on and switching it off or having a product be event-specific. There is a lot of flexibility that comes with these new tools. This may unlock a completely different-looking insurance market. These are the areas that can challenge our existence or they can be a point of opportunity for us. It all depends on how we engage with them.
Accelerating to meet market threats
Between products and technologies and strategic priorities, most insurers find themselves coming back to one point of concern: the competition. We know how to respond to our traditional competitors, but what about the threats from non-traditional sources. Will any of our accelerating priorities match what they are doing?
“You see a lot of ink and industry press on Lemonade, Root and Metromile. But (startups) have a big problem when it comes to distribution and they have difficulty with underwriting. They don’t know risk. Traditional insurers are experts on risk and they are much more likely to hone in on the right formula quickly.
“Overcome your technological hurdles to become more nimble. If you can be as agile as an InsurTech, then you really have a big advantage. You know the market well. You can evaluate risk profitably. Companies that get this right will be the ones that will start pulling away over the next decade.”
Investing in your priorities
Of course, acceleration and innovation require some level of investment. Insurers need to step back and say, “How do we invest in our own business?” Is there a better way to put our capital to work than in accelerating our customer-focused product and service transformations? Can we transform this period of uncertainty into our greatest phase of innovation and preparation for the future?
In part three, we discuss what it takes internally to become adept at accelerated transformation. What are the hurdles that stand in the way for insurers? Is there a way for testing teams to get buy-in from entrenched stakeholders? Where will today’s technology choices place us in the markets of the future?
To listen in on answers to many of these questions, tune into Planning and Preparing for Tomorrow — Today: What You Need to Focus on for the Future of Insurance.