Article Synopsis :
Insurance is undergoing massive change. The industry is being forced to adopt technology not simply to modernise, but in order to survive.
Incumbents are also coming under pressure from new entrants, many of which are not even insurance companies, such as internet giants Google and Amazon.
Then there is the risk from new platforms that have developed highly efficient, targeted and digitally focused products for a growing consumer base, largely in Asia.
What makes these disruptors special, offers incumbents hope that they will be able to incorporate artificial intelligence (AI), machine learning and the internet of things (IoT), into a new generation of products.
Technology allows policies to be tailored more to the individual, and can incorporate risk data from cars and wearable technology, while IoT sensors mitigate loss through monitoring environmental conditions like humidity and temperature.
To effectively leverage the new technology, insurance companies must review their relationship with the existing value chain across all products, distribution methods and service models.
They must have three chief objectives if digital engineering is to succeed.
- Gain first-mover advantage – insurance companies need to be first to market and must anticipate the needs of their customers before they are even requested. Tools, processes and infrastructure must not only be in place, but appealing in order to convert customer insights into products.
- Reduce legacy IT costs to fund innovation – jettisoning the old school approach to data storage and maintenance of legacy-platforms will release resources for developing new products.
- Grow revenue by differentiating the customer journey – people want their insurance companies to make life easier for them. They will win over customers by issuing policies and paying claims within minutes rather than weeks and by making offers that are relevant and tailored to their specific needs.
To achieve this, insurers must compete with these nontraditional market entrants by putting insurtech to work profitably and identify opportunities from this new environment.
This Cognizant paper says insurers must identify their own comparative advantage, be it a product, experience or distribution channel and exploit.
This must be done through modernising existing applications through new interfaces or by improving new updates and reducing costs by moving to the cloud.
By using AI, IoT, RPA and machine learning insurers must build new customer journey thorough new microservices.
And by using exchanges, aggregators and marketplaces, insurers can reduce their time-to-market and allow the creation of an internal distribution channel, if required.
All this must be compatible with existing technologies and processes. This will require new skills, but the development team must also remain aware of the needs of legacy applications.
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Digital Insurer's CommentsThat insurers need to meet their disruptors head on is not a new narrative – we cover it monthly within the library and through our other pages.
The focus is clearly on new technology and processes, but this paper reminds us that legacy must not be left behind – unless it is truly being left behind.
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