Article Synopsis :
The next 12 months is clearly going to be a key time for insurance companies adopting insurtech.
This KPMG report looks at the trend towards increasing connectivity, particularly in the property-casualty market.
It says companies will be laying the groundwork for the connected enterprise, but also indicates that budgets will not be very large. The vast majority will commit just 15% of sales or less, and property and casualty insurance will be trading other insurance industries with just 17% investing more than 16% or more of sales within the following year. That’s a deficit of between 7% and 14% against other sectors.
Those that invest will find that more mature companies are more likely to get a return on investment than their counterparts in the property casualty insurance sector (48% against 29%).
All or nothing
Few insurers (only 22%) plan on investing in all eight connected enterprise capabilities. They seem unsure about the distinctions between multi-channel and connected enterprise and could be missing a trick.
Those eight factors or multi-year horizon investments are:
- product pricing and customer strategy;
- experience centricity;
- responsive operations;
- seamless transactions;
- partnerships, alliances and vendor management;
- advanced data and analytics;
- technology architecture and enablement;
- organization alignment and people capability;
New focus required
KPMG research indicates that insurers need to move from a channel focused to interconnection and strategic alignment focus. In trying to do this, they’re going to face particular obstacles, namely:
1) Strategy misalignment – having the board on site is not only desirable, but it’s also absolutely essential to success and 25% of those surveyed indicate firms lack a company-wide strategy for customer management engagement. Even fewer had an executive sponsor to back the connected enterprise project.
2) Business silos – business units are siloed and don’t have integrated customer strategy creating inconsistencies in products and prices across the whole enterprise. There will be a lack of real-time visibility and no insights at the customer and product level. This will continue to present challenges across physical and digital channels. Units must be interconnected and aligned across the organization if this is to succeed. Treating customers holistically rather than standalone product policyholders will increase penetration at the customer and household level.
3) People and process misalignment – there will be problems in defining, designing and managing a customer-centric organization. 26% indicated they will face this problem and almost 28% said they lack cross-functional teams to drive the connected enterprise strategy. This lack of alignment, transparency and effective communications extends into their partner ecosystem.
4) Technology and data silos – multiple and aged core systems. The problem facing many insurers is that for many, it’s been easier to stand up a new core system than to connect and integrate an existing or acquired one. This leads to fragmentation and redundancy, making it almost impossible to integrate data seamlessly. The main concern among insurers is customer data being housed in multiple databases and was cited by a quarter of respondents. Almost the same number (24%) had other related concerns, about a lack of system integration across channels, difficulty in sharing and leveraging analytic insights across the organization.
5) Security and compliance concerns – regulation and compliance are generally the key concerns of an insurance company, particularly when it relates to security and privacy personal data. This is the top 28% of insurers, while 23% highlighted concerns about complying with the regulation.
Keep ahead of the pack
Insurers that want to be seen as great insurers must tackle systems issues, competency and commitment issues, streamline processes, and liberate data.
Those that fall behind this process may find the challenges only get worse and may even become insurmountable.
KPMG says it is time for insurers to get serious about winning, serving and retaining their customers in order to succeed.
Insurance companies must, therefore:
- Prioritize investments based on connected enterprise capability maturity;
- Tackle the limitations of legacy systems with technology architecture strategies;
- Implement connected enterprise metrics that measure short and long-term results
- Educate decision makers to gain buy-in for the necessary connected enterprise investments
- Build up the connected enterprise talent pool
They must switch to a customer first experience and take a holistic approach in dealing with each of the eight critical capabilities outlined.
But investment is only one element. Throwing money at the problem won’t fix it. It requires clear strategic vision on where the organisation is moving to, backed by support from executives.
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Digital Insurer's CommentsThe message isn’t new, but it shows that some are slowly waking up to the need to get digital. However, the pace insurers adopt may determine whether they are the winners or losers when it comes to aligning their business model with their customers.
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