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New Customers, New Insurance products, Same PAS?

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Looking at the current state of some insurers’ core systems in the P&C  insurance world suggests that certain IT managers and project sponsors would do well to spend a  bit of time meditating  on one of Thomas Pynchon’s proverbs for paranoids:

“If they can get you asking the wrong queIMG_0431stions, they don’t have to worry about answers.”

Background

I recently ran across a theoretical case study published in 2014 about ‘Dave,’ a new CEO in a Small- to Mid-sized (SMB) insurance company who was mandated to drive new revenue, increase customer count, introduce business/IT process optimization, and build out his senior management team.

Dave’s challenges came down to his company’s current IT ecosystem, which included delayed IT/business projects, inflexible legacy systems, little to no vendor support, archaic interfaces for employees and broker, and challenges to fund new initiatives.

Dave did enough research to discover that only 30% of core systems projects (the majority of which were in the SMB category) were successful.  In other words:  Dave had better get it right.

What should Dave do?

Back in 2014, the answer was relatively simple. Carefully select a consultant to guide a Policy Admin System (PAS) acquisition/implementation process.  Establish governance structures, utilize modern development/delivery methods, set and monitor a realistic budget, and so on.

And, of course, book a restaurant for the closing celebration.

There’s just one problem

What if, as your IT transformation project was underway, your  customers, staff, internal processes, product offerings, distribution channel, and business plan were pressured to undertake their own separate transformation?

According to IBM, this could well be the case with digital transformation.  In a recent white paper, “Designing a sustainable digital insurer,” Dr. Indranil Nath, IBM VP and Executive Partner, Insurance, Industry Solution & Sales, IOT Europe, writes:

With changes in risk appetite, evolving customer service expectations and the challenges of a less-loyal market, insurers are facing unparalleled external challenges. Additionally, internal pressures include concerns about product profitability.

Digital looks externally

While digital will impact a wide range of activities,  Nath pays particular attention to the end consumer, who will have greater opportunities from a variety of existing and emerging entities.  He writes:

The success of digital initiatives is threatened by a lack of focus on the customer experience. How successful the insurance providers can be in growing market share in this environment will depend on having clear strategic direction and an accepted and funded plan to acquire and retain the target audience.   (Emphasis added.)

Enterprise PAS’ are expanding their functionality externally, but will not substitute for other changes that are required by insurers with their exiting relationships (brokers, agents) and internal training for dealing directly with the clients.  Nath writes:

Successful companies have an institutional awareness of every customer interaction. Insurance providers that are serious about getting closer to their customers focus on high-quality interactions. They understand who the customer is (the insured, not the distributor) and work to build trust with that customer.

So what can Dave do now?

Whether or not Dave jumped into a core systems initiative, he needs to take digital seriously.

Digital will impact more than distribution.  Underwriting, Claims, Marketing, Actuarial and the insurance product itself will be impacted by digital technologies.

There is an increasing body of information (including the IBM report) focused on digital opportunities, and possible paths to success.  And consultants/analyts are available.

We will focus on Digital at our 4th Annual Insurance-Canada.ca Executive Forum in Toronto on August 30, 2016.  Stay tuned for more details.

Regardless, digital insurance needs to become a standing item on the senior executive agenda.

There is an alternative, of course….

If you truly believe that you can stay out of the way of the digital transformation, there is another of Pynchon’s proverbs that might help:

You hide, They seek.

I’d be interested in how this works out for you.

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