Knowing where to allocate limited IT budgets and resources with seemingly unlimited technology options will be an ongoing challenge for all stakeholders.
Insurers have changed in the last decade, slowly transforming outdated business practices to bring more flexibility and agility to operations and customers.
The initial challenge wasn’t so much an aversion to new technology as it was about skepticism and resistance towards disrupting proven business models that have been in place for years. The famous book “The Innovator’s Dilemma,” by Clayton Christensen, described this kind of predicament. Does a company serve its customer base with incremental improvements or bring disruptive solutions to market that potentially alienate their existing customers?
In the past, insurance policyholders were content with the traditional insurance products and experience, and their loyalty could be counted on as a bulwark against startups and new technologies. That’s no longer the case.
Today, insurers are awash in transformative technologies and data, and their customers are not only more receptive to change, they are demanding it. But insurers face new dilemmas such as:
- Securing a better means of managing;
- Searching the crowded InsurTech landscape to meet constantly evolving business needs; and
- Finding partners that can help them quickly and cost-effectively implement the changes enables by InsurTech tools.
At the same time, insurers are also reacting to shifts outside of their industry that makes the onus of innovation less about staying ahead of the competition and more about immediate survival. Chief among these shifts is the growing reach and economic power of the digital ecosystems that their customers are increasingly relying on to achieve their personal and business goals.
The process of understanding and partnering with the companies shaping these ecosystems is critical to defining and executing against innovation goals that can keep pace with the depth, breadth and speed of modern businesses.
COVID-19, global warming, changing demographics and social justice movements are all changing the way insurers assess risk and interact with customers, accelerating innovation needs by 5 to 10 years while making it more difficult to accomplish. In-person events, work teams and startup accelerators are largely on hold due to the pandemic, making it harder to bring people, ideas and resources together.
Below are the challenges every industry incumbent faces in securing innovation needed to better keep up with our changing world.
An overwhelming array of choices
There are over 1,500 InsurTech startups globally, according to research by the Milken Institute, making it difficult for insurance carriers to know where they should focus their innovation resources. Furthermore, established technology vendors want to build partnerships with these newer entrants to help consolidate the amount of choices insurers must make to innovate.
Consider the tough choices insurance executives make every day about tech adoption. Should they focus efforts and dollars on emerging technologies, such as AI and machine learning, or become more adept with cloud and core systems in policy administration, billing and claims?
They must also account for nuances across lines of business, each with its own regulations and market dynamics. Knowing where to allocate limited IT budgets and resources with seemingly unlimited technology options will be an ongoing challenge for all stakeholders.
Finding & vetting innovation
The wealth of alternatives is a double-edged sword. It makes finding the right solutions a slow process and hinders innovation efforts. Cloud computing, big data and AI are becoming rapidly commoditized and increasingly easy for companies to harness. Innovation we only expected from Silicon Valley years ago is being created and brought to market regularly by companies around the world. No-code/lo-code, digital platforms, APIs and microservices have all dramatically reduced the time and the cost of bringing products to market. The cloud enables solutions to be developed and adopted almost instantly on a global scale.
Insurers need to easily navigate the insurance technology landscape in a simpler way and access resources including whitepapers, proof-of-concepts, ongoing projects, APIs in a unified online community. Being able to search and categorize InsurTechs to determine what innovations support goals across business lines is critical to reducing inefficiencies.
Insurers focus on speed-to-market with technology deployments themselves, but the sluggish process of engaging with tech vendors and startups that precedes this often gets overlooked. In-person industry trade shows and meet-ups have been crucial but put on hold indefinitely in the New Normal. There must be a persistent, always-on digital platform for managing and discovering innovation in its place.
COVID-19 shifted priorities
COVID-19 has thrust insurance into an “act now” mindset with boards of directors, CEOs and other C-suite executives accelerating their own digital capabilities like their company’s success depends on it. That includes becoming an integral part of the open ecosystems that create value for customers. To survive, insurers must find partners that can help them address customer’s needs and compete against fast-moving startups and the big tech firms.
In fact, Capgemini’s World Insurtech Report 2020 found policyholders’ interest in purchasing insurance from big tech companies increased by 8% from January to April 2020, 36% to 44%, respectively. Combating this trend means more effectively engaging customers, delivering new products and services (i.e. usage-based insurance), and operating with the efficiencies afforded by digitally native systems, processes, and architectures.
Apart from customer behavior changes, COVID-19 has also shifted IT priorities as companies transitioned to remote work and limited in-person collaboration, all while dealing with tightening budgets. Previously, Novarica’s 2020 IT Budgets and Projects report found more than 50% of insurers were planning for new systems or major enhancements in portals, business intelligence, and predictive analytics.
More recently, Celent’s “Property/Casualty Insurers Weigh in on Emerging Technologies” report showed that insurers are accelerating their deployment of digital technologies to survive the pandemic, including collaboration tools (40%) and video communication (23%). Insurers clearly understand they require more efficient collaboration with partners to keep up with these major shifts.
Innovation is happening faster than ever before, and the tools the insurance industry utilizes to discover, access, connect and collaborate with other industry players must be refined. While the core challenges in the original “Innovator’s Dilemma” still exist, insurers face a new dilemma in navigating and managing the complex and fragmented innovation market to more efficiently drive change in their organizations. Innovation has become a full-time job, with the word “innovation” in over 5 million titles on LinkedIn.
It’s time to adjust innovation discovery practices and transcend broad concepts into something more tangible and real that demands efficiency.
Source: Insurance Journal
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