Tian Horn, Hyland Account Manager, Southern Africa.
It takes a different mindset to compete in today’s rapidly evolving insurance industry. The next generation of insurers has emerged, disrupting traditional business models and shedding the constraints of legacy systems.
This new generation of insurers has a different approach to business. Instead of looking in the rear-view mirror to see how things have been done in the past, they look to the future – breaking down core elements of insurance and reinventing them.
Shedding the constraints of legacy systems that inhibit real innovation, these challenger brands are building future-proofed business systems that will adapt to changing industry dynamics. The biggest innovation they are displaying is the ability to identify, and supply, products and services that resonate with today’s digital consumer.
These innovators have learned the importance of customer experience and taken note of the speed of service consumers receive from their tech suppliers; now, those consumers are expecting the same from insurers. Today’s tech-savvy customers have the power of choice, and they wield it in the knowledge that the application of technology and information can define success or failure in today’s digital world.
Traditional insurers need to adapt to this disruption or risk being completely displaced from the marketplace. However, this shift can be easier said than done and traditional insurers face legacy roadblocks to next-generation success. These systems were designed for success in an earlier era, but now hinder their ability to adapt to the digital age.
Adapting should include a mindset reset, and consideration of ‘first principles rather than legacy thinking. When traditional insurers create insurance solutions, they take something that was historically designed and add to it year after year or even generations later. The end result may do the job but is often inefficient and expensive to maintain. When insurers build solutions using analogies, iteration is often confused with innovation. However, a ‘first principles’ approach reworks the problem from the ground up, resulting in the development of new products and solutions unencumbered by what was built in the past. For insurers, this approach starts by asking questions such as, “What business problem am I trying to solve?” or, “Why are we still performing underwriting and claims processing in the same way?” Reinventing a highly regulated industry is a monumental task that is unlikely to occur any time soon. Still, some companies are disrupting certain components of the industry by throwing out the old rule book.
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Traditional insurers need to prioritise the following strategies if they are to compete with today’s disruptive innovators.
Prepare for the hyper-connected customer.
Today’s insurance customer is hyper-connected and engaged in an omnichannel, always-online experience via mobile phones, desktops/laptops, wearable devices, connected cars, cloud-based voice services and social media. They expect, and get, immediate gratification. Many insurers mistakenly believe that simply delivering a mobile app will address this need for innovation. But placing a new veneer on top of an antiquated set of business applications is not going to meet the demands of today’s digital customer.
Extend the value proposition.
Insurance customers are no longer satisfied with the organic products and services delivered by their suppliers. Today’s customers are asking “yes, you insure my home and car, but what else are you doing for me?” They demand more value and a diverse one-stop shop of offerings, many of which are not core competencies for insurers. Insurance customers want additional products and services that run adjacent to their insurance needs and augment their personal lives. They want guidance, advice and access to products and services that enhance their overall financial well-being with offerings shifting as their life goals evolve over time. Next-generation insurers are modernising their infrastructure with platforms that quickly integrate with third-party programming interfaces. This is the only way insurers can deliver the digital agility required to adapt to the needs of the customer and respond to competitive pressures.
If pricing and products are virtually the same across the industry, how can insurers compete for market share and wallet share?
This is an easy one – exceptional customer experiences, at the speed of digital and to a global standard.
Next-generation insurers deal with the inevitable proliferation of content and data repositories across organisations. They embrace the disparity of data and content across their businesses and have learned to leverage information where it lives.
Insurance companies struggle to keep their core systems relevant and as such are unable to respond to pressures from a changing industry. Many core systems are well over 20 years old and were never designed to be flexible. However, next-generation insurers leverage systems assembled from individual functional services. This Lego-like approach provides them with an expedited way of modifying existing applications, as well as quickly assembling new ones as and when needed. Applications built on services exposed through standardised programming interfaces allow innovative insurers to effectively ‘future-proof’ their business applications by replacing obsolete services with minimal impact to the overall system, and far less disruption to the business.