Specialty insurance companies: Transform or perish

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Our society is going through a period of digital disruption. Well established business processes are increasingly insufficient to ensure business success, and need to be transformed. This disruption offers many benefits, but it is also an existential threat to companies that fail to transform their processes in the face of a rapidly changing economic climate.

No industry is immune, but in this piece I’m going to focus on the specialty insurance sector. Specialty insurance encompasses anything non-standard in the insurance world – examples would be malpractice, professional liability, or even an entertainment superstar’s vocal cords. These types of insurance historically have required far more specialized, “hands on” treatment than basic policies such as automotive and home coverage. Those types of more basic policies increasingly require no human interaction to quote and underwrite, and that’s where specialty policies will soon be going.

Many consumers have already used some kind of digital channel to secure insurance, and the use of digital channels will only become more prevalent going forward. But think about the last time your IT infrastructure was updated. Are you prepared for this fundamental shift in how consumers interact with your organization?

Here are six major trends you should be evaluating as part of your strategic planning:

Artificial intelligence (AI) is real and will potentially streamline underwriting for all insurance

Consumers can get an online quote in minutes, without even identifying themselves. No human interaction is required.

Years ago, buying an insurance policy required a consumer to actually talk to someone. Today that is no longer the case, and AI and Big Data analyses are quickly automating all facets of insurance. Personal home and auto were at the front of the wave, and that wave is inevitable and picking up steam.

It’s very feasible that in 5-10 years all personal insurance policies will be processed this way. The insurance startup Lemonade only sells insurance online, via an application which features a bot called Maya that assists consumers with coverage options. This one option may not be the right fit for all consumers today, but research shows this is the process preferred by the Millennial generation.

Analytics is going to be a crucial aspect to every single business unit’s efforts to remain competitive

Without good analytics, it’s impossible to drive efficiencies or know which activities are the most or least profitable. Take for example a broker – how much time on average should a service call take, or a renewal? These types of metrics must be tracked and understood. Insight from these numbers will instruct firms how to constantly improve.

Move from legacy infrastructure to the cloud

Decades old technology is dragging down many insurance companies. No company today has the time or expertise to run massive IT back ends. Companies need to do a thorough IT audit and identify what is slowing them down, and then outsource it. Cloud environments are more agile and secure than current legacy infrastructure. Cloud is usually a prerequisite for developing the kind of mobile and web services Millennials have grown to expect.

A thorough IT audit can also uncover precise IT costs. A tipping point for many organizations comes when they discover they are spending as much or more internally than they would outsourcing their IT infrastructure – without getting any of the best practice expertise, constant updating and future proofing that comes with a proven IT partner.

Speed to market is crucial

Without IT transformation, insurance companies can’t create new programs or identify new markets. Trying to do so with legacy systems is too costly and unwieldy. Even worse, current systems don’t provide enough visibility to predict the profitability of new products or ventures, and this lack of awareness can paralyze the company strategically.

Take for example the potential market for cyber liability. Insurance professionals know it’s a major opportunity, but they don’t have the tools to clearly evaluate what’s needed. This leaves companies stuck in neutral, unable to react to existing opportunities or predict where new markets will emerge.

Automation of workflows will increase efficiencies and reduce costs

High volume, highly repetitive work processes are low-lying fruit for many industries when it comes to automation. But many insurance companies have resisted this trend to date. In too many cases there are still armies of worker bees, filling out forms and emailing them back and forth rather than accessing a single automated solution. Automating these processes would deliver a better customer experience with a leaner (and probably more engaged) workforce.

Security in the age of the large-scale data breach

 How confident are you in your security protocols? Do you really have top-level internal expertise in disaster recovery, and how do you ensure redundancy or the move from signature-based virus protection to advanced threat protection? With the nature of cyber threats evolving so quickly, the question isn’t why outsource, it becomes why wouldn’t you?

Swiss Re is an example of an insurance company that expanded its business through IT transformation. Several mergers had left Swiss Re with an extremely fragmented IT landscape. The company chose DXC as the partner for streamlining processes for essential insurance business tasks such as underwriting, claims and technical accounting.

“Our growth really depends on the success of the IT transformation work that we are doing with DXC,” says Samrat Dua, managing director of IT at Swiss Re Corporate Solutions. “They’re very client-focused. They listen to us, and they have always been very open and transparent.”

Specialty insurance as an industry is at a crossroads. Without a transformation of their IT infrastructure and business processes, companies cannot adapt to digital disruption and will perish. The good news is a proven roadmap for digital transformation exists, and the companies that avail themselves of it will be tomorrow’s insurance market leaders.


Tom Anderson is an Industry Sales Executive at DXC.

RELATED LINKS

Transforming to a digital enterprise

Influencing the future of the London Insurance Market

Why insurance board members play an important role in the digital journey

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