When we ask our IT colleagues how they are, the most frequent response is “Too Busy.” When we ask our Finance colleagues how things are going, a common reply is that “IT projects are costing a lot.”
These aren’t necessarily new revelations, but we’re wondering if these symptoms indicate bigger changes coming. We’re going to be talking about this in August, and we would like to know what you think.
The customer is driving … Hard
Earlier this year, we posted about a report by Forrester which concluded that US consumers found that the majority of insurers were solidly ‘OK’ when it came to the ease and effectiveness of doing business, and overall enjoyment of the experience. A few insurers made it to ‘Good’; none were ‘Excellent.’
Every marketer knows that, in the consumer experience world, ‘OK’ is not OK, ‘Good’ is table stakes, and ‘Excellent’ is becoming the benchmark. And digital technologies are critical components of the consumer experience for virtually all segments.
Delivering a new experience is not cheap…
A recent report from Celent focused on worldwide IT spending in insurance over the next few years. In North America, Celent identifies 3 top trends:
- Digitalization, including Mobility, OmniChannel, and Straight Through Processing (STP)
- Analytics, including Telematics, primarily to support underwriting effectiveness and pricing precision
- Legacy/Ecosystem Transformation, including core systems replacement, primarily supporting new product development and new market segment (e.g., group)/distribution channel penetration.
Celent points out that core systems replacements will continue “over the next few years or even decades.” Further, these new investments will represent 40% of the IT spend. The other 60% is on-going maintenance.
But there are financing alternatives….
To reduce fixed costs, Celent “predicts that BPO (Business Process Outsourcing) and SaaS (Software as a Service/Cloud) will continue to see activity in 2015 because both services help insurers fundamentally change cost structures and improve market agility.”
These strategies allow flexibility, but become recurring costs with annual adjustments. Celent notes that half of the IT spend is allocated to internal IT staff. There is pressure to contain this spend with the adoption of BPO and SaaS.
Our experience is that outsourcing and managed services are effective, but do require internal staff management and close liaison to ensure success.
What does all this mean?
Since the introduction of technology into insurance, the mantra has been ‘technology must serve the needs of the business’. Sometimes we talked about being business partners, but we were junior partners at the best of times.
We think the consumerization of technology shifts some of the control outside the enterprise. There are a lot of changes that are required inside the insurance company with the management of technology operations and costing.
What do you think?
We know you’re busy, and don’t have the budget you need, but can you share your thoughts here? Are today’s pressures on IT / Finance something that will be resolved when the new systems are in place, or are we looking at a secular change?
Drop a note below and plan to attend the 2015 Insurance-Canada.ca Executive Forum, August 31, 2015 (#ICXF2015). These and other issues will be on the table.