Why the industry needs to move forward now on integrating a digital platform
by Denise GarthMs. Garth is Senior Vice President of Strategic Marketing with Majesco, a leader in providing insurance platform software solutions and consulting services for the insurance industry across lines of business – Life, Annuity, Health, Pensions, and Group & Voluntary Benefits insurance and Property & Casualty (General Insurance). Visit www.majesco.com.
Insurance companies are widely varied in their responses to change and disruption. On one end of the spectrum are organizations that are blazing new trails to the future with their incubators, hackathons and InsurTech investments and partnerships. On the other end are companies that are watching and wondering, “What’s the rush? We’ll save money and time if we jump in after they have paved the way.” And, there are the many organizations that lie in between, most of them trying to roust up enough resources to add some digital capabilities to their lineup without reinventing an entirely new business model.
Does it matter when, where and how you choose a path to digital innovation?
Fortunately, there ARE some insurers that are paving the way. They are moving the industry forward and they are building their future with new products, services, business models, digital capabilities and ecosystems that will sustain them as the future rapidly unfolds with new competitors, new customers and new market opportunities.
Unfortunately, the path they are paving can’t be followed. It captures new markets as it exposes their opportunities. The fast followers may have some benefits, but not all. They will still have to forge their own paths to compete or find new markets. The laggards face something even more daunting because the myth that they will save time and resources through waiting has now been exposed. They will find themselves hacking away, like jungle explorers, trying to find an alternate way around. And, like some explorers, they may never be heard from again!
According to Boston Consulting Group data, late responders may spend more than double what similar-sized companies will spend if they wait until a disruption has long-passed to invest in innovation.[i] Early responders spend less, and they spend far more evenly year to year, while at the same time reaping the rewards of first market access.
If it were easy to hide how little a company is investing in innovation, this might be easier to manage. But insurers are now facing new levels of scrutiny from investors and regulatory organizations. Investors want to see and know that insurance company leadership is taking the customer pulse and acting accordingly. Regulators are now acknowledging that innovation is so important to company health that it needs its own measurement criteria.
Reading the Signs — Waking Up to Reality
There may be autonomous vehicles, but companies can’t run on autopilot. To inject innovation into a culture and a company, insurance leaders must be alert and watching for the signs of industry change. This fits the current formula for business success that incorporates:
- Knowing — a quick thorough understanding of the industry and competitive pressures and the foresight to see its impact.
- Planning — the solidification behind a plan to respond…not just a vague idea.
- Doing — the responsive actions that follow through on the plan.
At this phase, insurers should be asking some crucial questions. Are we prepared to meet the signs with relevant investments that will not just save, but power our future? Are we thinking out ahead to meet the changing and often unmet needs and expectations of customers? Are we ready for a new level of commitment and responsiveness that will reinvent our way?
Insurers who can unify their organization behind a motivational manifesto for growth and innovation will help employees to be fearless in reinventing the business … even things that aren’t broken…and understand that survival requires innovation and action. Companies who are awake to the signs will understand that they must quickly choose a business strategy and a path to implement it.
Following the Signs — Choosing a Path to the Future
This is where priorities can go awry. There are too many choices. How do we solidify our plans for those moves that we know we need to make? If we can’t crystalize our priorities into well-baked plans, then we will waste resources in development and marginalize our competitive potential. Is there a surefire way to think properly about the future?
Every organization will arrive at their future differently, but there is one path that is fraught with danger and may yield total failure. It is camouflaged with the cloak of innovation, but it is really just a patchwork solution. This is the path companies take when they refuse to truly disrupt themselves and make innovation a top priority. If this were rare, it wouldn’t be a concern. A recent A.M. Best survey (September 2018), however, found that 90 percent of insurers think that innovation can help them, yet “only 25 percent of insurers said they were willing to significantly disrupt their current processes for new innovation initiatives.”[ii]
When priorities don’t match strategies and action, insurers will find that they heighten the risk of being lost in the ensuing market struggle. This is why choosing the right path is mandatory. Lukewarm priorities end in mediocre results, at best.
Arriving at the Path — Visionary Leaders Prioritize Visionary Paths
Industry flux and competitive pressures won’t abate. Once we have chosen our path, the world will continue to change. Channels will continue to shift. Customers will continue to modify their behaviors and expectations. Technologies will emerge and be adopted. Data sources will grow. The right path to the future of insurance is built to flex in order to accept these changes and capitalize on them with responsiveness. That is the Digital Insurance 2.0 business model.
These models will place the carrier in the position of the Leader. The Leader only gets disrupted by forging itself into a disruptor and capably blazing forward ahead of coming trends.
An example may help to understand how this works. Let’s consider drones. According to a recent Majesco survey in our soon-to-be-released Strategic Priorities report, insurers aren’t paying very close attention to drone technologies, in spite of the fact that drone use is on the rise and commercial drone use will grow steadily for years to come. As of 2017, commercial drones were the fastest-growing part of the drone market. There are already 122,000 licensed commercial drone pilots in the U.S. and two million drones in use.
The visionary leader sees this kind of technological trend as a many-fold opportunity for insurance — preparing to use drone data, produce drone insurance products and possibly even own or partner with a drone fleet. The right development path, utilizing a robust microservices, open API, cloud-based platform and digital ecosystem will allow this organization to stay out ahead of the trend.
Acknowledging Your Company’s Position on the Map
Insurers are choosing paths without even knowing it. Many have started down a path by modernizing their existing business. Others are now leveraging digital and data capabilities to optimize their existing business, heading down a different path. And still others are creating a new business model as their path. And for the lucky ones … they recognize that they need to travel all three paths so that they nurture and protect their current business, while they disrupt it by building the future one. There are those, however, who are ignoring the signs. They are waking up to the real threat of extinction by choosing to not begin the journey at all or to limit the journey to only modernizing and optimizing their business.
For the last four years, Majesco has been gauging insurer temperatures of concern and sorting out their priorities in an effort to understand insurer motivations to move their businesses into the future. We wanted to know how they seem to be applying their strategic priorities to fit the paths they have – or have not – chosen. And we wanted to find corresponding links between industry mindsets and real action, in order to engage those insurers who may find themselves lagging behind.
Next week, we’ll take a close look at the Strategic Priorities 2019 report and we will look at insurer modernization activities from a high level. Can we see trends within their levels of responsiveness to change? Are there certain technologies that interest them and others that aren’t even on their radar? Which path is your organization on? Where do you fit on the map? Is your company prioritizing to arrive at the right destination? Are you a leader, a fast follower or laggard?
Time is of the essence because the future of insurance is picking up speed. Leadership matters. And yes, speed matters.
We invite you to take a closer look and compare your experiences with those companies we have surveyed with a preview via our latest webcast, Strategic Priorities for 2019: Securing a Spot in the Future of Insurance.
[i] Farley, Foldesy, Wick, and Demyttenaere, Facing Disruption? The Need to Reinvent? Better Move Fast., Boston Consulting Group, December 4, 2018
[ii] Carrier Management, Cautious Carriers Often Pursue Innovation Warily: A.M. Best, September 28, 2019