Shifting and emerging market conditions are making it moredifficult for P&C and life insurers to continue to operate withtraditional business models. Growing competition, shifting consumerexpectations, heightened regulatory requirements, and unstableeconomic conditions make it imperative that insurers evolve theirexisting business models and embrace new technologies forsurvival.

Key to this is building strategies for consumerization anddigitalization. To stay competitive, insurers must improve theirawareness of changes in consumer behavior, expectations andattitudes, including growing use of social media, mobility,channel/interaction preferences, multi-channel use, and productneeds. Additionally, companies must adopt a digital businessmodel, including managing electronic channels, content, outputmanagement, and improved data capabilities.

These two strategies are the mantra for many mid-to-largeinsurers in 2012 and will continue to be a focus during the nextthree to five years as companies make this transition. Within thistransition, three themes emerge: 1) new approaches for operationalimprovement; 2) fulfilling customer-centricity; and 3) productexcellence.

New Approaches for Operational Improvement

P&C and life insurers are still focused on reducing costsand finding operational efficiencies. Traditional topics such aslegacy modernization, core systems replacement, systemsconsolidation, the paperless office, and business processmanagement (BPM) continue to be top of mind among CIOs.

However, new topics are on the horizon that will help companiesreduce operational costs and find new efficiencies. For example,many companies are evaluating alternative hosting platforms,including off-premise hosting, Software-as-a-Service, sharedservice centers, and business process outsourcing, as a way toreduce maintenance cost and total cost of ownership for the ITenvironment. Having a distributed IT and partner network willfurther allow companies to reduce operating expenses. However, italso introduces new risks around partner management, data security,and straight-through processing.

Additionally, BPM solutions have been widely adopted within thelast several years for process automation, especially forsimple product lines and no-touch processing. In 2011 and here in2012, many insurers are shifting their focus to tools to assistwith productivity and decision improvements for complexproducts. New approaches for complex decisions in areas suchas commercial/specialty lines P&C underwriting, for example,are garnering more interest as companies seek new underwritingworkstation capabilities with enhanced collaboration, datamanagement/analysis, case management, and business rulesmanagement. This trend will continue throughout the next few yearsas companies apply rules and process management concepts to bothsimple and complex processes.

Another area of investment growth is data management andanalysis. Finding new sources of data, including third-party andsocial, and improved modeling (including predictive modeling) aretop of mind among many insurers as they look for ways to improvepricing, claims handling, fraud identification, and underwriting.Focus on improved data management, big data and improved analyticsare critical success factors within the industry in 2012 and willbe a key differentiator through 2020.

Making Customer–Centricity aReality

Many insurers state the importance of customer centricity totheir business, but many fail to understand how to accomplish thistasks and prepare for the next generation insurance consumer. Thishas becoming a top initiative for 2012 and will continue to be afocus through 2020 as insurers invest in knowing the customerthrough enhanced customer data management and analytics,integrating the channels to provide mutli-channel access,strengthening the website experience, offering mobile access forsales and service activities, claims transformation, and empoweringthe agent with new tools/technologies.

Included in this effort is building digital agencies and optimalcall centers which have improved transactional capability andinteraction with customer (including video on demand, socialpresence, and mobile support). Empowering agents, distributors, andcustomer service representatives to be more effective andleveraging new technologies such as social media, improved salesforce automation, agent analytics, and mobile technologies areessential. Furthermore, revamping websites to support real-timeprocessing, interactive capabilities (e.g., chat and Skype, forexample), and improving the user experience through the use ofgamification are other milestones for insurers during the next fewyears.

Product Excellence

Insurers often overlook the need for both product innovation andmanagement. Having new processes to help reduce complexities intheir products through rationalization, as well as simply theprocess for creating new products in order to reduce speed tomarket for new product are essential. Leveraging productconfiguration based tools will help companies with both objectives,as well as pave the way to offer product bundling at point of salein the future and the ability to efficiently launch productstargeted at customer segments versus mass market.

Additionally, insurers need to find new ways to gather productintelligence including customer product needs and competitiveofferings. Using crowd-sourcing and mining social media forcustomer trends and competitive intelligence are two examples ofhow innovative companies are learning more about product needs.With this intelligence, companies can identify new products to bedelivered and improve product pricing with improved intelligence onrisk. Technology evolution is also opening new opportunities forP&C insurers for products using telematics devices, as well asmay play a disruptive role with the transition to the autonomouscar during the next 10 years.

The Path Forward to 2020

Creating new strategies aimed at transforming traditionalbusiness practices to be customer-centric and operationallyefficient will continue to be a priority through 2020, with newtechnical advances in mobile technologies, predictive modeling, andconsumer electronics leading the way in revolutionizing insuranceprocesses. Adopting these technologies, in addition to those inexistence today in areas such as agent automation, analytics, andcore systems will help P&C and life insurers be moresuccessful.