Guest Posting by Norman Black, Industry Director for Insurance Solutions, SAP
Emerging from recent economic upheaval, companies need a solid digital platform to be effective in the future
The economy might be getting a little rosier, but it’s still pretty tough out there for insurers. On the non-life side, hefty competition goes hand-in-hand with any potential for profit, while on the life side, many European insurers have got a classic asset liability mismatch between low returns and future guarantees that have to be met – an invidious situation for anyone, but it’s a long-term business.
The temptation for insurers is not to invest in new systems but to spend money on new short-term product initiatives or cosmetic improvements to their systems. To do so, however, would be a huge mistake. Customer expectations are changing drastically. The whole technology disruption around mobile, social, big data and cloud cannot be ignored. Companies need to think very carefully about their capabilities going forward.
So how does one become a digital insurer? The first trick is to realize there’s lots more to it than simply bolting on a new channel and letting the customer experience fend for itself. The change required is much more fundamental. So rather than sticking on a new front end, companies need a platform based on agility: differentiation on the outside and standardization on the inside.
We have a pretty clear view of what a successful digital platform should look like. It should be an industrialized, standard platform underpinned by digital technologies, particularly mobile, able to understand and act on insight gleaned from big data, and be capable of being deployed on premise or in the cloud. The problem is, it doesn’t take many fingers to count the I.T. providers who can actually do that.
The line between ‘applications’ and ‘technology’ is becoming increasingly blurred – indeed this is the new integration front line for insurance IT departments. Even five years ago you’d talk about a basic claims ‘application’. Now though, companies expect the claims process to be mobile throughout, for all participants and agents. They also need to be able to add real-time fraud detection to find the 70% of fraud that isn’t detected at the moment. Plus in a catastrophe situation they need to be able to predict where they greatest hit will happen so that a supply chain of support can be deployed efficiently and swiftly, using cloud to communicate.
Insurers able to get their heads around digitialisation will also be well placed to make practical use of the huge volumes of data that they can aggregate from usage-based insurance and telematics. They will enable a move from annual renewal in car insurance to monthly billing and a whole new model of regular communication and the ability to make multiple offers, which puts the insurer back in control of the relationship as they offer policies based on customer behavior.
I’m not sure insurance companies will suddenly discover a new profitable product, but they will discover a newly profitable way to do business. Google and others are already looking at this. It involves changing both business model and platform to create a proactive, agile big data system – which is why you need to be able to talk to someone who can understand big data. If you don’t, you’re paying a lot of money to be a player, and not reaping the benefits of technologies that have been commonplace for the last five years.
- Norman Black, Industry Director for Insurance Solutions, SAP
What do you think about the issues discussed here? Continue the conversation in the comments below and on Twitter @SAPforInsurance