The fundamental challenge for insurers and their IT departments is keeping up in a world where, according to Matthew Josefowicz, managing director at Novarica, "the only constant is change."
Keeping pace with technological change means spotting trends early, before they merge with the mainstream, says Josefowicz. Companies that can't consistently do so will ultimately find themselves at a competitive disadvantage, whether they're in the property-casualty or the life-annuity side of the insurance business. "Insurers have to stop skating to where the puck is," he explains, using an ice hockey reference, "and instead skate to where they believe the puck is going to be."
Where's the proverbial puck heading for the insurance industry? What key trends in technology, agile development, product development and elsewhere should insurers and their IT departments be watching in order to stay a step ahead strategically and operationally? Those questions were the focus of a panel discussion among Josefowicz and fellow analysts Kimberly Harris-Ferrante, vice president and distinguished analyst at Gartner, and Mike Fitzgerald, senior analyst at Celent at the ACORD LOMA Insurance Systems Forum. The session is titled, "Certain Strategies for an Uncertain Future."
Their views and outlooks on specific issues may differ, but the three analysts are united in a desire to help insurers trend-spot to stay competitive. "Our goal is to help separate hype from reality to determine what's really important to their business," says Josefowicz.
"We're trying to think one or two steps ahead about issues people might not be considering yet," adds Harris-Ferrante. "What are the challenges that will keep CEOs and CIOs up at night, not only today but in the future?"
Out With the Old
The future is now, particularly in the area of customer-facing technologies, says Fitzgerald. "Tomorrow is really here today, and it's all around technologies that are changing the customer experience."
The huge leaps made in information accessibility in recent years with the rise of social media and other technologies have heightened the expectations of insurance consumers, according to Josefowicz. "The bar has been raised dramatically as far as customer expectations about access to information."
Yet there's a gap between expectation and reality, he says. "A lot of companies are still operating within a 20th century framework. They need to adapt."
"Thirty- and 40-year-old legacy and core systems just aren't going to cut it," echoes Fitzgerald. "These systems have to be brought up to snuff, which is a costly process and one that is prone to failure."
The irony is that the insurance industry was once on the technological vanguard, as one of the first industries to embrace automation, he notes. Now, certain segments of the industry are followers, not leaders, on the technology front.
The most successful insurers will be those with the tech systems in place to harness the power of data and analytics. It's about being equipped to compete in the "big data" arms race, says Fitzgerald. "The data is there. It's available. [Insurance companies] have to get better at analyzing it. They need fairly sophisticated analytics tools and they need to know how to use them."
The impact of technology also will be felt increasingly on the product side, where telematics systems, for example, are giving rise to new automotive policy configurations based on driving habits, Fitzgerald says. "How long until your chief underwriting officer comes into your office and says, 'We need a telematics-based product to compete?' Technology can change a business model."
Know Thy Customer
Technology will play a major role in how well insurers adapt to a new customer-centric business model, one that's shaped largely by the consuming public's desire for products and solutions that "feel close to them, that offer a more personalized purchase experience," explains Harris-Ferrante. Customers want to be able to go online and personalize the insurance products they purchase, much like they would do in purchasing a pair of sneakers, by choosing color combinations, etc.
The new customer-centric model presents opportunity for insurers of all types, not just the majors, she says. "Right now we have a market that's dominated by big companies. But in the next 10 years, I could see a reversal of that, where companies that aren't as large make major gains because their brand delivers the personalized approach consumers want in purchasing insurance products."
Mobility already is emerging as a key element of the customer-centric model. Consumers increasingly are demanding access to mobile solutions for conducting business with insurers, Fitzgerald observes.
Strategic Thinking
Success with the customer-centric business model will hinge on an insurer's ability to align business and IT strategies at the highest level, says Harris-Ferrante. That means stretching the scope and horizon of IT strategizing beyond 12 months or three years. "You are going to have to build multi-year strategies around multi-year [systems] investments." Such an approach will put a premium on agility and business process management.
It also will put a premium on strong, visionary leadership, according to Harris-Ferrante. To keep pace on the technology front, organizational leaders — CEOs, CIOs, CFOs and the like — must be ready to embrace new processes, new systems, new staffing models, new leadership tactics and new thinking, perhaps by bringing in people from outside the insurance industry to gain a different perspective. They also will need to identify and use the most effective change-management metrics in evaluating their tech investments, emphasizing metrics that most accurately measure the total cost of ownership for the systems they're using or considering implementing.
The same goes for the leaders of IT departments, who need to consider new ways to bring value to their organizations, whether through strategic partnerships, creative and more efficient use of off-premises resources (outsourcing) and other tactics, according to Harris-Ferrante.
Amid the ever-changing tech landscape, prioritizing projects and resources will persist as a huge challenge, particularly for IT leaders seeking buy-in from above to carry out their vision, adds Fitzgerald. "You have to choose your spots to influence leaders of the company who maybe aren't accustomed to making big technology bets."
Something for Everyone
These are just some of the front-burner issues the three analysts are apt to discuss during their Thursday session.
Regardless of the size of your company, and regardless of how far advanced your organization is on the technology curve, the panel is sure to provide eye-opening moments — and valuable strategic and tactical take-aways, says Harris-Ferrante. "We will be discussing issues that apply to all companies, not just the biggest ones. These are issues that matter to the entire industry."
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