When people think of the Renaissance, they most often consider shifts in art, architecture and a period of calm European advancement. In reality, the Renaissance was an upheaval. It was a rebuilding of an entire society, characterized by major new
developments in social and cultural behaviors, science, art, trade and thought. This shouldn't surprise us, since the word renaissance means rebirth. As old patterns disintegrated, an entirely new realm unfolded. The fertile soil of fresh thought provided a period of growth in fields of opportunity. Today’s renaissance in the insurance industry shares many of the same characteristics as the original Renaissance. Both represent fresh beginnings brought about by new ways of thinking, new methods, new technologies, new behaviors, and new resources.
The Role of IT in Rebirth — From Incremental to Incubative
So, how is IT changing within the insurance renaissance? For the last 5-10 years, the primary focus of IT vendors and internal IT departments was modernization of the legacy environment … from the architecture and infrastructure to core systems as well as supporting the business with incremental new product development, enhancing agent channels and streamlining operations. The assumption was that the insurance industry was essentially the same year to year. Improvements were incremental. Competitive advantages lay in marketing, products and within the excellence of operations and underwriting. IT was successful if it just kept up with incremental operational needs.
Today, competitive differentiation has moved well beyond incremental operational needs because the insurance industry itself, as a part of its renaissance — is undergoing a complete dismantling of industry foundations — and a rebirth that is restructuring the competitive landscape with a new set of ever-shifting guidelines. Like the first Renaissance, it encompasses major new developments in social and cultural behaviors, science, art, trade and thought. But its most striking development is the entrance of a thousand new interrelated entities. This would encompass greenfield companies, startup insurers, fresh investors, tech startups, industry incubators and new technologies that have never been used in insurance before. The industry isn't just being reborn; it is being reborn into a different competitive landscape … one that will be dramatically different than the past. And IT is at the center of this new world. IT is a driver, a partner, an enabler and a competitive innovator — but only if it is prepared to fill these roles.
The new world of risk, customer expectations, new technologies and more will not allow, let alone succeed with unlimited incremental changes without a wholesale rebirth. When increments are built on legacy foundations – from legacy thinking, legacy customer expectations, products and legacy insurance technology solutions, the increments tend to pile on an already ineffective IT foundation…making it even more unwieldy, unmanageable, and costly. IT can't be an innovator if it is encumbered by legacy culture.
The new world of insurance will, however, allow for and welcome incubation and innovation as alternatives. Incubation provides a space for the custom-fitted creation that will match new world insurance needs. It assumes quick-hit tests in smaller markets with niche products for niche segments. Incubation connotes a level of pre-design thinking that will anticipate quickly-changing market demands. Incubation isn't tied to the past…it is creating the future. An organization prepared to incubate its new ideas quickly is an organization ready to be reborn into the industry population. Its framework for transformation will have anticipated the need for a different insurance technology foundation.
Incubation also allows for multiple ideas to grow, independent or connected. In the new world of insurance, savvy competitors will be marked by their ability to fill a perpetual pipeline of innovations with incubations created inside the organization, through partnerships or purchased from outside the organization.
The Role of Tools in Rebirth — From Growing to Groundbreaking
The magnetic compass and the nautical clock changed navigation. The transistor enabled most of our advanced electronics. The database improved every industry's capabilities to know and interact with customers.
Closer to home we recognize that innovations have often fueled our biggest changes in insurance. Blood tests allow life insurers to more accurately accept risk and price policies. Motor vehicle records allow auto insurers to validate their insureds’ driving records. Location-specific data makes commercial insurance underwriting much easier. These tools have allowed insurers to improve what they do … not reinvent what they do. But today’s new technologies offer an opportunity for the insurance industry's rebirth, seen with the new business models and assumptions from startups and greenfields that are creating new leaps forward with products, customer engagement, service and much more. These new companies are redefining and simplifying insurance, rather than just layering on incremental improvements.
There is a difference between tools that foster incremental improvements and tools that erase previous notions and create a new paradigm of competition and expectations In today's technology climate, insurers will still use tools that foster improvements, but they will incorporate the new tools that will erase previous notions.
The term “tools” is a catch-all for a bogglingly-wide range of devices, sensors, software, processes and data management and analysis capabilities. These items are creating insurance impact and they are a large part of the reason that insurance is undergoing a renaissance. As these new tools come into common use, insurers will use them to break new ground in product development and service. Connected home sensors are a great example. They are not in wide use yet. But once homes are truly connected for the purposes of both economy (power consumption) and security, they will dramatically impact residential insurance with the groundbreaking ability to protect, predict and prevent homeowner loss.
Are residential insurers prepared for this rebirth? Is their digital footprint ready for connected policyholders? Are integration points ready? Can we capitalize on the new tools? These are the types of questions that insurers should be asking themselves now in preparation for their own rebirth.
The Role of System Solutions in Rebirth
In the next few months, the Renaissance of Insurance series will be looking closely at the players, technologies and preparations behind the new world of insurance. Because greenfields, startups and incubators will play such a dynamic role in fostering change, we’ll look at their impact upon distribution, their potential as partners and the business models that will help them to succeed. We’ll look at how medium to large insurers are pursuing their own greenfields and building their own incubators and we’ll explore the types of systems and solutions that will enable them to thrive. We will also look closely at how insurers can blaze their own trails in customer service and channel development, while simultaneously giving their customers a consistently excellent experience.
Innovation isn’t about entering a new world of complexity with sophisticated solutions. It is about finding the simplicity and relevancy that engages clients and prospects across their needs. At Majesco, we seek to provide those elegant solutions to our clients as they enter the rebirth of the insurance industry.
Is your organization ready to be innovative, incubative and groundbreaking? We will be exploring this and much more at our Majesco Convergence 2016 conference, October 2-4, in Atlanta and in upcoming research on consumer and small business owners expectations for insurance.