This latest article is by Richard Stewart,CEO and co-founder of Untangl, and it looks at the slow pace of transformation within the insurance sector. The companies that are likely to survive, and thrive,in the long term are the ones which embrace digital tech. No excuses, no delays.
Many agree that survival in this industry hinges on how fast businesses can adopt new technologies and overhaul legacy systems. The next five to 10 years will determine who got it done, and who dug their heels in. Yet, for all the warnings, there isn’t much movement.
The sluggishness around digital transformation is perhaps to be expected. After all, it’s culturally ingrained: this is an inherently risk-averse industry. But, mostly it’s because we’ve enjoyed decades of operating in a sector where change didn’t seem particularly critical, and where healthy margins probably papered over any tech or process deficiencies.
As such we’ve developed a collective disdain for change. And it’s both unhealthy and irrational.
A prime example is GDPR – a really sensible framework for managing data in the new world with clear guidance and operational support – but I’m yet to hear a positive word about it from any in the insurance industry.
Any seemingly robust arguments as to why your organisation shouldn’t be the earliest-adopters of new tech fall down when you consider that someone has to be – and it might just be your arch rival. Those in the cloud are best placed to test out the latest disruptive solutions that might just give them the competitive advantage.
According to Deloitte’s 2019 insurance industry outlook report, the cloud-computing versus on-premises debate is over for many, with seven in 10 insurers using cloud in their business today. But that’s still close to a third that are not.
Cloud services – including an increasing range of insurtech products and services – are maturing, delivering robust scalability, speed and security. Many, like ours, are aimed at helping insurers with legacy business processing issues, but it’s very hard to exploit these if internal strategy and capabilities are behind where they need to be.
It’s a binary issue: the cloud is delivering massive competitive gains to users, and you’re either in the room or not.
Research on the life insurance and annuities industry by McKinsey in 2018 found a significant number of activities across each step of the insurance value chain – up to 70 or 80% in some areas – could be automated. And access to the cloud is crucial to harnessing automation.
As reported by Insurance Edge last month, just 17% of U.K. businesses have a fully implemented artificial intelligence (AI) strategy, and the majority of U.K. business leaders (70%) acknowledge that failing to get on-board with AI now will cost their organisation for the next decade.
Insurers need to view automation as a strategic opportunity and embrace the challenge. To do this, they will need a cultural change where decisions can be executed swiftly and projects evaluated using a more agile approach.
Research by McKinsey’s Organization Practice suggests agile operating models can result in significant productivity boosts – for example, 90% faster time to market for new product innovation and a 30% increase in frontline productivity. They also have better organisational health, specifically a 70% chance of being in the top quartile of organisational health, employee engagement, and customer satisfaction, which all enable faster growth.
The overall approach will depend on what suits each company – that might be to appoint a board level innovation director, create an internal innovation team, or invest in insurtechs and accelerators – but stagnation is now an existential threat.
That’s why this is truly a fascinating time to be working in insurance. For those willing to take advantage of what’s out there, digital transformation will create healthier businesses, a superior customer experience, increased profitability, and more engaged employees.