It’s time for our annual attempt to read tea leaves for the coming year. We’ve picked a few of the major developing areas. We also see a larger trend which may begin to manifest itself in 2014.
We’d like your thoughts on our prognostications and we welcome your forward-looking thoughts. Have a read and let us know what you think.
Core Systems Replacement Continues, with a Fiscal Twist
Let’s start with the easy stuff: Converting legacy administration systems to modern technology will continue. These are big projects, usually driven by necessity (the aging technology simply can’t serve the business any longer). Once initiated, these are difficult to stop. The adage ‘in for a penny, in for a pound’ comes to mind.
Two recent surveys – the first by systems developer Insurance Global Operations, the second from consultant/analyst firm SMA – suggest that someplace between 25% and 30% of P&C insurers in the US have embarked on conversion from legacy to modern administration systems. Research from analyst firm Novarica concludes that 2014 insurer IT budgets will continue investment in these projects as a priority area.
However, there is increased fiscal discipline being applied to maintain a tight scope. Novarica’s Matt Josefowicz says, “most insurers are primarily investing to get up to the bar, not over it.”
The Clouds Beckon
Business needs for flexibility and scalability, and increased focus on customer centricity, will continue driving insurers (and some brokers) to cloud based solutions for sales, marketing, and even core business systems.
Last November, we wrote on the success of SalesForce.com in championing the cloud model and leveraging success in its core focus (CRM) into larger arenas of business administration systems. Other suppliers are coming to the table with the cloud song on their lips.
William Hanby, CIO of mid-west US carrier, Rockford Mutual, recently described his company’s journey to Insurance & Technology. Hanby’s requirements for a system to replace the legacy administration systems, included:
a modern technology architecture,
a rules based systems to provide flexibility to adapt to changing market needs,
scalability to support the company’s aggressive growth plans.
These requirements meant one thing for Hanby: A cloud-based system. Hanby also noted that the cloud solution would save the organization money in maintaining the physical infrastructure.
Telematics/UBI and Analytics – Marketing in the Driver’s Seat?
There has been a lot of discussion about two related topics this year: Big Data Analytics and Telematics/Usage Based Insurance (UBI). Perhaps more discussion than documented implementation. However, we see that quiet work behind the scenes will lead to action in 2014.
And we see much of the the lead coming from Marketing, supported by IT. In a recent overview of tech trends, Gartner said:
“Organizations have struggled dealing with big data on both fronts: IT needs to manage it effectively and the business side needs to know how to use it. This tends to leave big data static.
“However, big data is a problem that only gets worse the longer you ignore it.”
In 2013, we noted that, as insurers shift from product focus to customer focus, Marketing is being given increasing scope and responsibility, encompassing areas that previously rested with IT (see, e.g., Can Marketers Drive a New Business Model for Insurance?).
We see Telematics/UBI and Analytics being two of these. IT will likely maintain control at the infrastructure level, including security. But the days of IT having sole control over tools, applications, and access to third party data are numbered.
Zen and the Art of Infrastructure Maintenance: The Total Interconnectedness of it All
Finally, we see an emerging trend for Insurance/IT that could redefine the role of IT as it disrupts other areas of the insurance enterprise, including product development, marketing, service delivery, and claims.
This trend is based on ‘The Internet of Things’, or ‘IoT’, for short. We see some very interesting scenarios possibly playing out in the Canadian insurance community. We will have a separate post on IoT in the near future.
What do you think?
We’ve given you a sample of some of the major trends we see for 2014. These will be showcased at the 2014 Insurance-Canada.ca Technology Conference in March. You can see our agenda in progress and get additional information through the 2014ICTC Overview Page.
We’d also like your view of trends for 2014. Put on your Future Goggles (or is that Googles?) and leave a comment below.