The current issue of Frontiers in Finance addresses the various challenges facing senior executives at financial services companies worldwide. It is always interesting for me, as an insurance person, to observe how topics such as big data, cyber security and out-sourcing are common to other industries, and then to see how insurers might learn from the experiences of first movers from other industries.
In this connection, I recommend the article on how investment managers need to develop data architecture strategies that are flexible enough to cope with new types of demands from management and regulators. The emergence of a new breed of nimble, technology-savvy competitors is threatening the dominance of large firms, with a 2013 poll suggesting that 20-30 percent of today’s asset management industry will disappear in the next decade. Perhaps barriers to entry are higher in insurance and even higher in Switzerland, but nevertheless the threat to traditional insurers is very real.
In the insurance sector, more progressive management teams are thinking about how advanced data analytics tools, data management systems and digitalized processes can help them in every aspect of the business chain, and our article focuses on one key process, claims management – often the poor relation to underwriting and sales when it comes to digital initiatives. Faced with increasing pressures – from rising customer expectations and operating costs, to mounting insurance fraud and catastrophe losses – insurers realize that emerging claims technology could revolutionize the traditional claims process.
Innovation varies greatly by product class, but the article highlights some claims-handling innovations that could radically change the insurance customer experience, contain losses, and improve efficiency.
- Keeping close to customers: the claims process includes critical ‘moments of truth’ in the customer journey that can build customer loyalty – or have the opposite effect. Technology could better engage the customer during claims reporting. For example, some insurers are now striving to reduce customer stress by empowering individuals to make their loss notifications by their preferred channel, such as telephone, web, text or smart phone.
- Increasing the speed of claims: in the UK, select insurers are piloting programs by which clients email claim photos or videos and receive a rapid mobile payment, rather than a traditional cheque or fund transfer.
- Reducing fraud: among the main avenues to improve fraud detection: data analytics of structured data to improve fraud scoring, text and voice analytics of unstructured data from client interviews, and external source and social media analytics.
Another article of massive relevance to Swiss insurers is our feature on legacy IT systems. All insurers appreciate the critical role of technology in their future success – and they have considerable internal and external resources at their disposal – but why do many legacy system renewal projects achieve mixed results or fail to start at all? Why have insurers patched up and bolted together IT platforms in a non-strategic way, and avoided radical transformation? It seems that all too often IT and the rest of the business have failed to communicate effectively, thereby not seeing that persevering with legacy systems presents a risk to the strategy of the organisation.
So, here are some best practice strategies:
- Build a richer business case: the basis for the business case must be robust data. An IT landscape that allows for agile application development is essential in a world where business models have to change quickly – legacy systems may well be a barrier to that.
- Big picture plan, but with manageable complexity: set out the broad strategy and chunk up the project into manageable work streams.
- Board-driven for continuity: IT transformation is a business issue not just an IT issue.
- Appoint a guru: find someone spanning the business and IT worlds and supporting innovation.
- Ensure adequate resourcing: identify dedicated resource, not part-timers
- Instil disciplined program governance: be ruthlessly self-critical, establish a governance system with real authority.
Using these strategies companies have a better chance of getting projects off the drawing board and then being successful.