As 2012 begins, time for reflection has arrived. After a year that no-one might have predicted, I turn to summarize three defining trends that developed this past year and give my own prediction concerning the way forward for insurance once we begin your way of 2021.
1. COVID-19 compelling the requirement for agility
Falling equity markets. Historically low interest. Shrinking new-business volumes. Reductions in consumer spending. The outcome of COVID-19 inside the insurance industry has been pronounced.
Insurers face a cacophony of challenges: new rivals, increased customer expectations, stalling transformation projects – the likes of that have been detailed extensively by market analysts.
However, the outcome of COVID-19 wasn't in bringing these challenges into being but to cast them into the light: accelerating their impact and forcing insurers to re-prioritize their set goals in unfavorable market conditions.
And, while many have articulated the way we came and why the difficulties happened, not many are commenting on which happens next, and also the road to pre-COVID rates of growth for the industry as a whole.
Insurers face a transformation crisis. Many long-term digital projects are stalling. Even though it is impractical to undertake a capital-expense-heavy enter in the era of COVID-19, the interest in digital services continues to grow.
Insurers, therefore, are confronted with a contradictory impasse. The solution? Reframing digital transformation as an iterative process as opposed to a one-off wholesale solution.
By undertaking small and agile projects, having a quick time-to-value and low cost, insurers can obtain the short-term benefits that drive growth and deliver agility with low risk.
Using this methodology, insurers could innovate, digitize and build capabilities in applications, cloud or low-code solutions, whilst not over-committing to the specific long-term objective that may carry high-risk due to the volatility of the market.
2. The continuing Rise of Customer Experience
Customer experience isn't a new concern. The adage, “the customer is definitely right,” is a ubiquitous element of the company lexicon since the times during the Harold Selfridge during the early 1900s.
But, today, customers demand services which are personalized to their every need and prioritize simplicity and gratifaction, so the need for customer experience is continuing to grow. The realization that policy admin systems are not the most valuable systems insurers possess is beginning arrive at the fore.
In years past, the industry was built around policy. If you were traveling on holiday, you're considering an insurance policy that best satisfied your requirements. If you purchased a home, you're considering a policy that provided the amount of cover you desired. If you drove an automobile, you chose an insurance policy that matched your driving experience. And so on and so on. The policy was at the center of the equation, and policy admin systems are intended to keep this status quo.
Fast-forward to the present day. Now the customer is king, and customers want their individual needs satisfied immediately, clearly, just in time, with a personalized service, and they want to pay only for that cover they require. That is a world away from selling a standard policy millions of times over to people who might (or may not) need it, in both its entirety or all of the time.
In reaction to this shift, insurers are trying to change the focus of the industry and equipment it toward customers, but attempting to do that having a policy admin product is the same as attempting to fit square pegs in round holes: It simply does not work.
Insurers, today, must equip themselves using the right tools to supply an exemplary service. Policy admin systems that are focused on the creation of policy remain invaluable tools but only when used appropriately.
Instead of using a back-end system to supply a front-end service, insurers are realizing that they must focus on implementing two-speed architecture; the rear end focused on policy, the front end focused on the customer and every designed to contact the other within an open-looped system.
Through this design, policy admin systems they fit to use doing what they do best, while a more strategic, adaptable, omnichannel and personalized customer relationship management system can run in the foreground, delivering customers the content and experiences they want and driving up insurers’ satisfaction rates as a result.
3. The Unrelenting Pressure of Digital Disruption
“Disruption” and “innovation” are terms often used interchangeably, but the truth is that they have completely different meanings.
Innovation, bakes an existing approach better, whereas disruption transforms an existing approach into new things.
For the insurance coverage industry, digital has rapidly moved to the disruption category.
Digital disruption – or digitization – has such a pronounced impact on the insurance industry that it's radically changing the essence of the items this means to be insured.
Traditionally, in case the worst happened, insurance would reimburse you to definitely the need for the wrong you experienced, at a price to the insurer. It was a cause-and-effect relationship.
However, via the procedure for embedding new technologies to their everyday operations, insurers are moving the needle away from reactionary tactics.
Using AI-driven technology and large data instantly to more closely monitor insurance products and predict and manage claims events before they can happen, insurers are no longer merely responding to when something goes wrong; they're helping their clients avoid it.
This disruption has a pronounced impact on the as a whole – like a growing quantity of consumers demand this protection and insurance package.
Today, insurers understand that technology supports the answer to delivering this differentiated value to their customers. But acknowledging technology and implementing new technologies are very different propositions.
While digitization is really a foregone conclusion for insurers wishing to compete in the realm of tomorrow, understanding how to deploy the right technology for the right purpose is no small feat. And those really willing to compete in this new dynamic must be prepared for significant change to the systems, processes and individuals within their business.
A Complex Equation
It is, perhaps, underwhelming to describe 2021 as memorable. The word era-defining might yet serve a far more accurate purpose. For insurers, the entire year was unpredictable at best and unmanageable at worst; a string of disruptive and unforeseen events combining to create a pressure cooker of complexity.
Today, insurance stands around the precipice of profound change, and this piece has articulated a handful of the defining trends that brought us here. But as we glance to the way forward for the industry, my prediction is that customer experience will become the only greatest definer of success, and people insurers that best discover the balance between policy and customer will reap the rewards.
