Shifting and emerging market conditions are making it more difficult for P&C and life insurers to continue to operate with traditional business models. Growing competition, shifting consumer expectations, heightened regulatory requirements, and unstable economic conditions make it imperative that insurers evolve their existing business models and embrace new technologies for survival.

Key to this is building strategies for consumerization and digitalization. To stay competitive, insurers must improve their awareness of changes in consumer behavior, expectations and attitudes, including growing use of social media, mobility, channel/interaction preferences, multi-channel use, and product needs. Additionally, companies must adopt a digital business model, including managing electronic channels, content, output management, and improved data capabilities.

These two strategies are the mantra for many mid-to-large insurers in 2012 and will continue to be a focus during the next three to five years as companies make this transition. Within this transition, three themes emerge: 1) new approaches for operational improvement; 2) fulfilling customer-centricity; and 3) product excellence.

New Approaches for Operational Improvement

P&C and life insurers are still focused on reducing costs and finding operational efficiencies. Traditional topics such as legacy modernization, core systems replacement, systems consolidation, the paperless office, and business process management (BPM) continue to be top of mind among CIOs.

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

Additionally, BPM solutions have been widely adopted within the last several years for process automation, especially for simple product lines and no-touch processing. In 2011 and here in 2012, many insurers are shifting their focus to tools to assist with productivity and decision improvements for complex products. New approaches for complex decisions in areas such as commercial/specialty lines P&C underwriting, for example, are garnering more interest as companies seek new underwriting workstation capabilities with enhanced collaboration, data management/analysis, case management, and business rules management. This trend will continue throughout the next few years as companies apply rules and process management concepts to both simple and complex processes.

Another area of investment growth is data management and analysis. Finding new sources of data, including third-party and social, and improved modeling (including predictive modeling) are top of mind among many insurers as they look for ways to improve pricing, claims handling, fraud identification, and underwriting. Focus on improved data management, big data and improved analytics are critical success factors within the industry in 2012 and will be a key differentiator through 2020.

Making Customer–Centricity a Reality

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

Included in this effort is building digital agencies and optimal call centers which have improved transactional capability and interaction with customer (including video on demand, social presence, and mobile support). Empowering agents, distributors, and customer service representatives to be more effective and leveraging new technologies such as social media, improved sales force automation, agent analytics, and mobile technologies are essential. Furthermore, revamping websites to support real-time processing, interactive capabilities (e.g., chat and Skype, for example), and improving the user experience through the use of gamification are other milestones for insurers during the next few years.

Product Excellence

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

Additionally, insurers need to find new ways to gather product intelligence including customer product needs and competitive offerings. Using crowd-sourcing and mining social media for customer trends and competitive intelligence are two examples of how innovative companies are learning more about product needs. With this intelligence, companies can identify new products to be delivered and improve product pricing with improved intelligence on risk. Technology evolution is also opening new opportunities for P&C insurers for products using telematics devices, as well as may play a disruptive role with the transition to the autonomous car during the next 10 years.

The Path Forward to 2020

Creating new strategies aimed at transforming traditional business practices to be customer-centric and operationally efficient will continue to be a priority through 2020, with new technical advances in mobile technologies, predictive modeling, and consumer electronics leading the way in revolutionizing insurance processes. Adopting these technologies, in addition to those in existence today in areas such as agent automation, analytics, and core systems will help P&C and life insurers be more successful.

Special Reports /

The Insurance Technical Evolution, 2012-2017

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