The Digital Age has forced many changes in how organizations do business; essentially, they must adapt to survive and thrive. For example, the rise of mobile device use means consumers now demand anytime, anywhere access to what they need, and a personalized experience that makes them feel empowered and important. On the business side, organizations must be able to take advantage of all the benefits that the cloud offers — cost savings, flexibility and scalability, in particular.
The property and casualty (P&C) insurance industry is no exception. P&C insurance companies understand that in order to respond to and take advantage of opportunities in a fast-changing market, they must ensure their core systems are agile enough to enable such gymnastics. Unfortunately, legacy systems can’t support modern business demands. They were designed to support financial processing and record-keeping without being sophisticated with regard to work flow. So, for today’s P&C insurers to survive and thrive, they must consider deploying core processing technology that supports all that the Digital Age has to offer. Ideally, claims, billing, policy administration, and underwriting technology will employ predictive analytics, data management capabilities, and support for digital sales and service.
But, however enticing the possibilities of a platform like this are, its upfront financial requirements can be daunting. Plugging hardware and software line items into an IT budget — nevermind the man hours spent integrating, deploying and learning a new system — brings the scary reality of costs into sharp focus.
Can the Benefits Be Quantified?
Although you can’t monetize it, a new system’s value is actually found in how it helps the company be what it wants to be, enabling it to take advantage of opportunities and create its own differentiators.
Indeed, often, the increase in profitability — those costs set against the hard-to-quantify growth opportunity that was previously deemed unattainable — isn’t always considered. The financial benefits of increasing a market share of the “right” business simply by doing things like tailoring your products and services to better align with your customers’ needs and expectations, and simplifying your products to make them easier to sell don’t show up in an IT budget.
Responding to the market in the way customers want you to respond and being able to make product and system changes quickly (or even make them at all) — these don’t show up in an IT budget either, but do show up in overall success metrics. Reaping these business benefits is well worth the cost of a new core system, and may in fact be your primary justification for the change.
Know Thy Product: Product Rationalization and the Modern System
Modern systems also allow for better product rationalization and underwriting. (By product rationalization we mean the process of reducing the number of products sold in order to decrease management effort.) Product rationalization is essentially continuously refining your offerings based on a better understanding of your products, what can be done with them, and which markets are the most profitable for specific products (i.e. a specific segment or region). Historically, products evolved over time, with insurers using every bit of data available (often in Excel spreadsheets) to refine and rerelease. Modern systems, however, can greatly impact product management, making use of internal and external data and predictive analytics to more strategically refine products. As a result, insurers become more mindful of what their target market is looking for, and how to differentiate and be distinctive, while also identifying where the opportunities exist. With a modern system, insurers have the technology to bring all their data together, analyze it, and apply it to a strategic plan for greater profitability and competitive advantage.
Similarly, modern systems affect product management in that they enable insurers to meet the market need for new ways to sell products in the Digital Age; namely, market-specific, on demand and online. Selling online, for example, requires a simplified product that is more easily comprehensible and processed for everybody involved — agents and consumers must comprehend what’s being offered and be able to put the right product in place with minimal effort; underwriters must understand the product and be able to evaluate the risk efficiently, often in a highly automated way, in order to select and price it appropriately.
Obviously, the market is changing, reflecting a new world with new expectations. Morphing and changing along with it enables a greater positive impact on your business. While the upfront investment to enable such an evolution seems intimidating at first glance, the long-term, overall benefits far outweigh initial sticker shock. Bottom line is that insurance companies can actually have it all — technology to create an agile, responsive, evolving and profitable business while also containing costs in the long run — if they’re willing to make the right investments from the beginning.