Last week, we discussed trends shaping the future of insurance into a digital business. The pace of change and innovation is accelerating and it is worth keeping in mind that, just 10 years ago, Twitter, WhatsApp and Instagram did not exist. As recently as six years ago, most people used their mobile phones primary to make calls and send messages, rather than to surf the Internet and navigate by GPS.
We reviewed the impact of the digital-physical blur, of the move to crowdsourcing, and of the emergence of the data supply chain in insurers' approach to everything from risk assessment and distribution to operations and claims. There are three additional trends that we see as having a major impact on the future of insurance:
Hardware is back, although it would be more accurate to say that it never really went away. After more than a decade of innovation in software, the hardware world is now a hotbed of new development. Demand for bigger, faster and more efficient data centers is soaring, and companies are seeing the benefits of "hyperscale" on their data centers, particularly in the form of cost reduction.
Wearable computers, onboard computers in automobiles, sensors in homes and factories, and other edge devices are multiplying at an unprecedented rate in consumer and enterprise markets alike. Data generated by such devices – in addition to data generated from social media, from third parties such as credit information providers, and from insurers' own digital channels and contact centers – threatens to swamp insurers' legacy IT systems.
The systems insurers will require to store and analyze this data at speed will need to be sized at a scale that was unimaginable just a few years ago. This is the world of hyperscale computing, with super-sized, super-scalable, and highly resilient systems designed to crunch through vast volumes, variety, and velocity of data at great speed and with great efficiency. Insurers striving to deliver connected services to always-on customers will need to think about how to tap into flexible computing power to meet the needs of their business at the lowest possible cost. Over the next five years, every large IT department will face the choice between leveraging external clouds or building big-data oriented computing infrastructure in-house.
Business of Applications
Reflecting the shift in the consumer world, enterprises are moving rapidly from applications to apps. As organizations seek greater operational agility, there is a major shift toward simpler, more modular and analytics-enabled apps.
Insurers once relied up on big, monolithic systems to run their businesses, but they have turned increasingly towards componentized applications for CRM, agency, claims, agency, rating and policy administration. These are typically extremely agile, highly configurable and able to run on commodity hardware. Upgrading a claims or policy platform was once a multimillion dollar project that could take two years or more, but today such a project can be broken into smaller chunks so that value can be delivered in milestones measured in weeks or months, rather than years.
The next wave of software innovation allows insurers to deploy lighter, simpler, more modular and analytics-enabled apps to end-users within their organizations, as well as to their customers and business partners. Insurers with the ability to rapidly develop – or to partner and to create and launch new applications in today's volatile markets – will be best positioned to innovate, collaborate, improve customer experiences, and enrich personal interactions. This has been demonstrated in enterprise mobility, where insurers have improved productivity and reduced costs in areas such as claims processing and settlement.
In the digital era, businesses are expected to support the nonstop demands that their employees and stakeholders place on business processes, services and systems. Today's IT leaders must ensure that their systems – and, to some extent, those of their key business partners – are designed for resilience against failure rather than designed to spec.
With insurers needing to gather and operationalize big data; interact with customers 24 hours a day through a range of digital channels; and provide uninterrupted service to their partner ecosystems, business continuity and systems availability matter more now than ever before. Insurers need to consider how they will architect their IT infrastructures to support nonstop business processes, services and applications.
This is not a simple task. More business processes are interconnected and automated across the insurance value chain, multiplying the potential points of failure. More systems are being integrated and continuous improvement is becoming the IT norm. CIOs must employ a business-driven strategy to manage risk across the enterprise, understanding which assets are critical and then prioritizing resiliency, active analytics and defense measures accordingly.
Some of these technology trends are still in their early stages, but forward-looking insurers are examining their implications. Most insurers have adopted technologies such as digital distribution channels, but they have grafted their digital strategies onto legacy systems, business processes and business models. Industry leaders now have to define where their companies stand in the digital world.
This may mean redefining their relationships with their customers, partners, and the internet community at large; erasing organizational barriers blocking collaboration and data sharing; and lowering the barriers barring their entry into other industries with high growth potential. Insurers lacking the flexibility and imagination to re-invent themselves may lose market share and competitive advantage to more agile and innovative players.
About the author: John M. Cusano is global managing director of Accenture’s Insurance industry practice