The problems faced by the insurance industry can’t be solved by a panel of business and technology experts, but four such individuals gave it their best shot last week at IASA’s Educational Conference and Business Show in Indianapolis.
Moderator Jeff Haner, principal research analyst at Gartner, introduced the session, “Insurance 2024—Emerging Trends & Technologies that Matter to Insurers” and panelists Bill Jenkins, managing partner, Agile Insurance Analytics, Derek Oke, Sr. IT Architect, Travelers Canada, Piyush Singh, SVP, CIO of Great American Insurance Co. and Jonathan Kalman, president, Return on Intelligence.
Kalman opened the session, with 14 predictions (See Sidebar: 14 Insurance Industry Predictions) for the industry. “The problems facing the industry relate to letting the past influence the view of the future,” he said. “We need to stop doing that.”
Kalman’s predictions centered around three main themes:
- keeping pace with the technology and processes that successfully foster customer centricity;
- having the right technology to effectively respond to market volatility and its related increase in industry consolidation;
- and proactively acting on decisions related to the Internet of Things and related digital technologies in such a way as to win and keep new business.
“Insurers don’t to a good job of putting the customer front and center today,” Jenkins said, agreeing with the prediction about customer centricity. “You can’t compete on price too much anymore. You need every means possible to create touch points.” He offered telematics as an example. “Telematics is not just for auto, it’s also a great mechanism for the home (smoke detectors, burglar alarms, etc.), and a great way to keep communication going with the customer, but insurers don’t think about it that way.”
Singh noted that from a customer service standpoint, the insurance industry is being compared with Amazon. “Yet we are stuck in the old tribal ways of our world,” he told the audience. “We spend $50 million on policy administration systems and already have a lot of information about the customer. Your customer doesn’t want to give a lot of information to you. Understand that you can add information as you go, and build that 360-degree view. For most lines of business, we already know the customer’s risk profile, including their business, their health and more, and we are correct 99 percent of the time.”
In addition to a specific focus on the customer, Haner pointed out, insurers are being called to invest in technologies that will be robust and flexible enough to deal with other competitive pressures.
Oke told the audience that, admittedly, “as an industry, we have a ways to go with use of some of the newer technologies. It’s not just about how technology will help us, but how we will adapt to it. How can we use it to better manage risk and improve our pricing?”
Singh asked the audience, “Are you investing in the right technology? Are you considering SOA, big data, enterprise and social networking technologies?” He then played an interactive voice-activated video during which he asked and received answers from a virtual assistant to questions about his company’s written premium and loss ratio stats and CSR data.
“This is the future of internal operations,” Singh told the group. “Today, we are trying to so many things in a disparate way. Do we need 55 different people running reports that don’t make sense? Innovation is really simplicity.”
How insurers formulate their technology strategy and spend centers largely around a long-held culture of caution, noted Jenkins.
“Proper infrastructure planning in important,” he said, “but in the short term, I worry about cultural issues of the leadership in our industry, which is so risk averse. Our industry’s culture will just need to learn how to accept failure.”
Kalman noted that the speed of the pace of change will increase dramatically, and that caution can be a formidable opponent to progress. “We have to anticipate speed regarding how long it takes to get a product launched, and our decisions may not be perfect. You can make adjustments to decisions on the fly.”
From Oke’s perspective, insurance CEOs are paying more close attention to technology issues. “Technology is being asked into the CEOs office,” he said. “If you have legacy system you duct tape together, that’s a short-term solution, and ultimately, your systems become fragile. So we don’t want to choose the wrong plan. Because the wrong path or wrong investment now will result in a higher likelihood of M&A activity later.”
Encouraging the discussion toward some common ground, Haner asked the panelists, “We have been lucky that there has been no disruptive competition [in our industry]. So, are we an apprentice industry? And if so, what will the insurer/customer relationship look like 10 years out?”
Singh offered a statement that spurred lively discussion: “Eventually, insurance will be bought (not sold). We have to simplify the products.”
Kalman responded to Singh saying “Insurers need to clean their books of business, so you don’t get the dregs/leftovers (adverse selection). All that data and information is not being used as much as it could be and will be. Plus you don’t want to be vulnerable to a takeover.”
From Oke’s perspective, it’s about anticipating technology-related change and being ready for it. “People will adapt to technology and will go to someone else if you can’t meet their needs.”
Jenkins agreed, noting that it comes down to building loyalty and trust. “It will be about multi-channel touch points,” he said. Jenkins offered IBM’s Watson supercomputer as an example of using all the data possible about a policyholder’s current state in order to improve outcomes.
“Why can’t IBM’s Watson be the underwriter? That’s coming next,” he said. “Consider touch points that use, among other things, telematics and storm alerts to provide a constant flow of information to the policyholder.”
Kalman responded to Jenkins’ comments with a caveat: “We need to do things in a way that doesn’t become creepy,” he said. “We need to do it in a way that is socially acceptable.”
The bigger picture around attracting and engaging the customer, and then building the business, noted Singh, will hinge on the right mix of strategy, technology and talent. “You want to be the trusted advisor, and get away from the punitive aspect of how insurance is considered.”
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