Insurance Inhibitors That Needs To Be Overcome In Driving Digital Innovation
Established insurance carriers are under pressure from new disruptive market entrants that are using new technologies to become digital native providers.
These ‘insurtechs’ are shaking up the traditional risk-averse industry presenting new and uncharted territory that insurers have to navigate.
With this shift, come three main digital priorities that insurers have to focus on to stay relevant and compete with insurtechs: product innovation, customer experience, and operational efficiency.
Insurers know that they need to transform their existing products and processes for new digital channels, technologies and customer expectations.
But knowing you need to go digital is only half the battle, especially in an industry bogged down by legacy systems, process limitations, security challenges, cultural barriers and resource limitations.
These are the top inhibitors insurers must overcome to drive digital innovation, grow revenue and differentiate themselves in an increasingly crowded market.
Insurers are more steeped in legacy technology than any other industry.
Insurance companies want to develop new solutions that integrate with core and legacy systems easily, but renovating their core has been an area of challenge for many insurance companies and is a long, time-consuming and expensive process.
Organisations can’t put a halt on innovation, operational efficiency, and product development opportunities until they have completed renovating the core.
Customers will not wait until the core is renovated to find the intuitive digital experiences they are seeking.
Instead, to begin the process of innovation and to test out ideas, quick fixes for integration can be the best option to prove the success and then bring those successful products into the core systems.
Security and cloud strategy
The digital world brings the challenge of security to the insurance industry.
Many insurance companies are unsure and uncomfortable with using cloud deployment, which leads them to use up time, resources and money for on-premises deployment.
One insurance company had to invest thousands for on-premises infrastructure and wait three months just to provision the environment. If you have to pay that much and wait that long just to test an idea, you will kill innovation.
If your organization is reluctant to go all-in on cloud, start with getting clearance from your security officer to do development and testing in the public cloud.
You will minimize time to market and the cost of failure. Another approach is the CIA (confidentiality, integrity, and availability) model for determining cloud usage based on the data within a specific application.
For instance, at one financial services organization, if the app scores high in one of the three areas, it’s deployed on-premises; otherwise it’s deployed in the cloud.
Lack of resources, a shortage of appropriate resources, or an implicit inability or unwillingness to reallocate resources is one of the biggest challenges when it comes to insurance product delivery and operational efficiency.
As mentioned before, insurers are often investing in a large-scale technology refresh to core systems.
This means getting time on the agenda of the IT department is difficult, if not impossible due to competing priorities.
To keep the core systems operating while also delivering new, innovative and efficient products, it is important to allocate resources to both initiatives.
Allocate a specific, cross-functional team dedicated to product creation and innovation.
Culture is one of the key areas limiting insurers from innovative product delivery because innovation often means embracing uncertain areas, with unknown outcomes, which is hard for the conventional insurance organization to accept.
To overcome the cultural barrier, your organization needs to have the right teams, structure, people and a willingness to change the overarching governance model to alleviate bottlenecks.
The role of change agents is very important to create a cultural shift, including; investment from the c-suite, involvement from IT leaders to implement a new style of IT, and product owners from the business who are empowered to make decisions.
Part of the challenge of product innovation and operational efficiency is the mindset it requires.
One of the biggest barriers to making greater use of digital is the business attitude toward risk, which requires a deep overhaul.
For the organization to become an efficient digital insurer, it will mean creating entirely new services and business models.
As these ideas represent the new and uncharted territory, turning them into value-driving products requires frequent iteration and close collaboration between developers and the business.
To adopt a process of development that allows for this rapid, low-cost experimentation, companies need to approach these projects with a willingness to fail often — to figure out how to succeed sooner.
In fostering an environment for rapid experimentation, insurers need to use visual, model-driven development to create a common language between business and IT, and to be able to experiment rapidly at low cost.