Insurance Needs Better Technology: Enter Digital Transformation
There is no doubt that we are in the wake of the biggest wealth transfer in the history of the world. As trillions of money change hands every day around the world, we’re seeing a commensurate increase in demand for financial planning advice. Today’s clients are looking for financial guidance and product recommendations that account for their entire financial lives. Unfortunately, because of legacy technology in place, most insurance advisors can’t credibly weigh in on the whole picture.
Insurers who envision their advisors stepping into the coveted financial quarterback role need to go through an enterprise-level technology upgrade or digital transformation. Insurance advisors are counting on their employers to equip them with a platform that offers a complete view into their clients' financial lives so they can give holistic and informed advice. To do that, insurance companies need better technology.
Digital transformation in insurance is just getting started. There is a new wave of solutions emerging, but these choices bring complexity and difficulties when implemented.
As a result, insurance companies find themselves rummaging through an assortment of technology and fintech solutions “parts” in an attempt to catch up with competitors.
Think of it like buying a car versus being in the business of assembling one. You need a car. Unless you have a passion for tinkering, do you want to get in the car parts business and put one together? Wouldn’t you rather buy a car built on a solid chassis that unites the engine and transmission and other components for a perfectly assembled driving experience?
Similarly, if your core business is insurance, can you hire and retain the technology talent you need to continue with integrations and relentless upgrades, and changing interfaces and data feeds?
While it’s theoretically possible that a platform consisting of disparate tech ”parts” cobbled together from a variety of vendors can work — these cases are the exceptions. As a rule, the overwhelming majority of insurers cannot afford the opportunity cost of delays in other strategic initiatives while trying to assemble best-of-breed software and legacy technology into an enterprise-level, seamless, usable, and modern platform.
Bottom line: in the race to secure the coveted financial quarterback position, the insurance companies that come out ahead will not have a sideline parts business.
The marketplace of fintech tools and technology
It’s not hard to understand how insurers have ended up on the back foot when it comes to digital transformation and is unsure of their next step in the technology and fintech parts market.
For starters, big firms have massive amounts of existing technology-enabled assets and operations to consider. There are monolithic technology systems in place — for things like the actuarial stack, managing an underlying corporate investment portfolio, and connecting with custodians and clearing firms that hold client assets and execute trades. There is also a range of other plug-and-play platforms that supplement traditional investment holdings, insurance, or credit exchanges.
Then there’s the advisor stack. This includes the tools that enable advisor-client engagement, including the CRM, portfolio management, financial planning, trade, and rebalancing tools. And don’t forget about the back office keeping it all together.
What’s held the insurance industry back for so long in its efforts to provide holistic and comprehensive wealth management is that the data from these sources exist in silos. There’s been no deep integration of the data into one seamless platform.
Consider the following. Though advisors may have plenty of detail on the insurance products offered by their employer, today they have few details on products offered by others. The details that do exist about the non-proprietary offerings live in a separate technology platform.
Offerings like annuities and long-term care may be business priorities, but the insurance advisor must jump through additional technology “hoops” on different applications and systems to access them.
And to make matters more complicated, clients’ pending policies are housed in a different platform, awaiting input required from highly regulated third parties to close. The elongated sales cycle puts insurance advisors at a disadvantage with others offering holistic wealth management.
Enter vertical integration
Though the insurance industry has gotten by so far without true digital transformation, insurers are realizing that today’s off-the-shelf solutions simply are not equipped for an industry where one size doesn’t fit all.
Insurers need their technology partners to fully grasp the granular aspects of holistic wealth management. It is the only way to deploy cross-functional, company-wide technology that leverages data from across their platform to give advisors a much better way of harnessing meaningful insights about their clients.
There is only one way to do this correctly, and that is to vertically integrate the data, layer by layer.
This integration starts with unraveling the legacy of tools, applications, and data sources to then weave together a single foundation or base layer of clean data.
This ability to take data from proprietary and open-source products, the CRM, and other investment products and synthesize it all into one interface is a complicated lift but it is attainable. It requires technology that will dive into the data across a wide range of sources. If the company’s technology solution doesn’t go deep, the advisor won’t have access to or be able to account for, critical data points that can inform their recommendations.
Think about the advisor hoping to offer annuities and long-term care solutions as part of a holistic wealth management plan. Can they reasonably be expected to advise their client appropriately without complete and easy-to-access information on what’s available?
Technology needs to enable insurance companies to streamline workflow at the enterprise level, increase advisor efficiency and improve the customer experience. It is the only way for insurance companies to compete as wealth managers. But without deep integration of data, getting to the place of true digital transformation will never take place.
Inmediate is an insurtech startup from Singapore that is using the latest technology such as Artificial intelligence, Distributed Ledger, and NLP, making insurance processing and underwriting fast, cheap, and flexible. That gives for better processes, lower costs, improved time to market, and new revenue opportunities.