By the year 2020, there will be more than 20 billion connected things in use around the world. Think about that. In a few short years, everything about our lives — including how we live, work, eat and sleep — will be captured electronically.
With more products coming online every day, some companies are already ahead of the curve when it comes to leveraging big data. Uber, AirBnB and Amazon, for example, have done an exceptional job of capturing customer information and analyzing it in order to offer hyper-customized products and a seamless, intuitive customer experience. But even with more information available than ever before, many P&C carriers remain unable to capture and utilize customer data.
In today’s increasingly digital world, failing to invest in and prioritize big data, artificial intelligence and machine learning capabilities will come at a cost to carriers. Here are three ways carriers can begin their technology transformation.
No. 3: Go outside your leadership comfort zone
KPMG’s 2015 study, "New World of Opportunity: Insurance Innovation Imperative," found that 60 percent of senior insurance executives believed their firm’s biggest opportunity over the next two years was to improve operational process and the use of technology. Further, 52 percent reported that the integration of digital technology into business objectives was the biggest opportunity, followed by using customer data analytics to improve underwriting, pricing and marketing (48 percent).
Unsurprisingly, two years later, carriers are still struggling to execute against these goals. For many, finding the right talent to lead such a project remains a significant roadblock. Carriers that are serious about their technology transformation must look beyond their existing leadership — many of whom are unfamiliar with new technologies and can be unknowingly limited by institutional thinking — to find the right project lead. Leveraging the firm’s chief data scientist or chief digital officer can be a good place to start, although some carriers will likely need to hire new talent with significant data and digital skills to fill the gap.
No. 2: Don’t start from scratch
Once the right talent is in place, carriers can turn to addressing technology-related challenges.
When looking to upgrade their capabilities, carriers often assume that their legacy systems cannot support advanced technologies and that they’ll have to build something entirely new. As most technology systems have a life span of close to 20 years — meaning they were built two decades ago when much of today’s technology didn’t exist — this is an understandable assumption. However, it is not always the case.
With an adjustment in how IT budgets are spent, many carriers can leverage their legacy IT systems as a foundation for technology advancement. Specifically, by shifting existing IT spend away from system maintenance and prioritizing system development, carriers can layer big data, artificial intelligence and machine learning technology on top of their existing systems. This doesn’t just mean that many carriers are further along in their technology transformation than they originally thought, but rather, they can also continue to derive value from previous, not to mention expensive, IT investments.
Carriers that are serious about their technology transformation must look beyond their existing leadership — many of whom are unfamiliar with new technologies and can be unknowingly limited by institutional thinking — to find the right project lead. (Photo: iStock)
No. 1: Take a walk in your customer’s shoes
Carriers’ previous focus on system maintenance has netted them one significant outcome: increased internal and back-end efficiencies. Unfortunately, in today’s digital world where customers can purchase food, clothing and other household goods at the click of a button but can’t yet do the same with insurance, these new carrier efficiencies do nothing to solve high-friction customer pain points.
As a result, companies like Trov, Metromile and Lemonade have seized on this opening and begun to build in-roads with customers by leveraging big data, artificial intelligence and machine learning to streamline the user experience and offer customized products that meet the needs of their individual customers. In order to remain competitive, not to mention relevant, carriers will need to do a better job of leveraging similar technologies to solve front-end challenges. Carriers can start this process by conducting a holistic review of all client-facing interactions and subsequently identifying those that result in the most friction. Not only will this process help make a carrier’s technology transformation feel more manageable (starting piece-by-piece is often easier than jumping in head first), but it will also yield the most significant ROI.
The journey begins today
A company’s technology transformation cannot happen overnight. In fact, it can take years before the benefits are fully realized. What’s important, however, is that carriers take the necessary first steps for embracing big data, artificial intelligence and machine learning today. How will you get started?
Tony Cid is global head of commercial insurance at Intellect SEEC. He can be reached at firstname.lastname@example.org.