Transformation is difficult for many insurers, due to requirements for time, people and resources. For several years, the insurance industry has been attempting to evolve the business through new strategies, emerging technologies and legacy modernization.

Speaking at ACORD LOMA 2014 in Orlando, Fla., Kimberly Harris-Ferrante, vice president and distinguished analyst for Gartner Research, graded the P&C industry on eight top business trends for 2014 and highlighted how to drive transformation through best practices.

"In two, three or four years from now, the world is going to be different," she says. "Tradition is really holding us back."

1. Digitalization
Grade: C+

A digital journey will take 5 to 7 years, Harris-Ferrante says. This includes using digital concepts with your existing concepts, such as e-forms, to engage in collaborative transactions. This spawns new data, content, output and products, all of which point toward standards, processes and analytics.

Harris-Ferrante says that 72% of insurance companies have a digital strategy in place, but the most common leader of that strategy is the IT department. Digitalization is a business transformation, so companies should hire a chief digital officer to oversee it, she says. In addition, most companies monitor their digital ROI on improving efficiencies. Instead, monitor digitalization by its business growth

2. Customer experience management
Grade: D

A true customer-centric world includes business strategies where customers come first. Understand their lifestyles and life events, and create processes communications and channels based on understanding your customer. "But we do an inside-out approach," Harris-Ferrante says. 'We create products based on how legacy systems are coded."

The industry is system-centered and products-centered, not customer-centered. In North America, 29% of P&C insurers have customer experience management strategy, and only 15% say they are ready for the next gen customer, she says, quoting research from a 2013 Gartner study. "We haven't even mastered the customer of today, but we need to talk about the customer of tomorrow.

3. Product innovation and expansion
Grade: C+

CIOs and CEOs name three business priorities, Harris-Ferrante says. These include new customer segments (niche and affinity products, online products), product creativity (new products for small businesses, leveraging the Internet of Things, crowdsourcing for development), and product standardization (creation of product chassis, simplification of product portfolios).

The industry has had some product innovation, especially around telematics. Investments are occurring in technology to create new products. But business innovation is slow, she says, and there's little focus on crowdsourcing. "Bring your customers into the dialogue," she says, "and ask what is your vision of insurance."

4. Distribution growth
Grade: B-

There's a growing demand for multichannel integration, but don't build a new channel and expect customers to go to you, Harris-Ferrante says. Instead, how can you get in front of the customer? Compare military to retired teachers to college alumni. Think of the relationships they already have and determine how do you get in front of them.

The industry is making tech investments to manage new distribution channels, and improve agent portals and customer-facing portals. But these investments are being made on a piecemeal basis: Customer-facing websites lack advanced capabilities like social media integration, chat, gamification or video support. "In other industries," she says, "when you buy online, you can take it back to the store" and the insurance industry must join other industries and offer multichannel integration.

5. Distributor loyalty and effectiveness
Grade B+

Harris-Ferrante names 10 strategies that boost distributor loyalty:

Agent loyalty, effectiveness and efficiency improvements
Agent segmentation and performance analytics
Establish a service culture
Drive the next gen workforce
Distributor-customer match
Integrate agents into all channel activity via MCI
Enable social presence
Promote mobility
Empower through technology (searchable knowledge management)
Improved tech capabilities (video, portals, agency CRM, analytics, collaboration, private social platforms.)

Investments in supporting agency sales forces is on the rise, especially for independent agents. Most insurers are increasingly investing in new capabilities and technologies to support their agent operations, she says. Emerging technology is now being adopted, such as mobile collaboration, analytics and distribution management tools. Social platforms are lacking in investments, she says, as are strategies to attract the next gen agency workforce

6. Improving underwriting discipline
Grade: C+

The goal is improved underwriting profitability through workflow and process automation, data-driven decisioning, productivity enhancements for case management and collaboration, and underwriting analytics.

Insurers greatly are investing in legacy modernization, Harris-Ferrante says, but there's low adoption of best-of-breed underwriting solutions for special and commercial risks, low investments in new data solutions and analytics, and low investment in collaboration solutions. "This is the secret sauce of the insurance company, and if we have low investments, what risk and negative outcomes will that put on you?"

7. Information intelligence and business analytics
Grade: C-

As insurers collect data, storage and processing requirements increase. Part of that data is unstructured and that requires new technologies and knowledge to process.

Harris-Ferrante says Gartner asked CIOs in a survey how they utilize big data, and only 27% of respondents have spent resources on data. Of those who have spent or plan to spend in the next two years, 39% say their strategy is for knowledge gathering and 35% are developing a strategy. Only 17% have pilot programs and 9% have deployed those programs.

"The reality is, we say it's great but there's no ownership," Harris-Ferrante says.

8. Extending the value chain via business process outsourcing
Grade: C

The drivers of business process outsourcing are organizational channels, new business demands, financial considerations and competitive differentiation. This can be broken down to commodity (low IP, automation based, high volume, business process utility) or specialties (high IP, people based, low to moderate volume, knowledge process outsourcing).

Harris-Ferrante says there's moderate use of TPAs for niche business processes, but low demand for BPO for product introduction. A low adoption of BPO for non-value added tasks is emerging, but no real market yet for utility services such as a billing as a service.

Special Reports /

Grading Insurers on Top 8 Transformative Business Trends at ACORD LOMA

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