Industry Evolutions

The Future Of Insurance

Majesco’s convention, Convergence 2019, captures pictures of a changing industry

by Denise Garth

Ms. Garth is senior vice-president of marketing for Majesco, industry consultants with over two decades of experience in providing technology solutions, products and services for the insurance industry across lines of business – Property & Casualty (General Insurance), Life, Annuity, Health, Pensions, and Group & Worksite Benefits insurance. Reprinted with permission. Visit here

Several weeks ago, the world was treated to a scientific mega-discovery — an image of a black hole at the center of a galaxy named M87, 55 million light years away. This is so far from Earth that it wouldn’t even register as a “blip” within the imagining capabilities of the Hubble Telescope. A new sort of telescope had to be created, as large as the Earth itself.

This virtual telescope synchronized data from 8 different radio telescopes across the globe, then applied algorithms to create a composite picture. The result was stunning.

At Convergence 2019, Majesco brought together dozens of industry analysts, customers, industry influencers, leaders and experts — all in an effort to paint another type of picture — a holistic image of the future of insurance through multiple perspectives. Our results were also stunning! The Digital Age is reinventing and reshaping insurance, putting the customer in control. Insurers can use their systems, networks, data and innovations to capture these customers with the products and services they need, now and in the future.

What is driving insurance to modernize, optimize and create new business models?

The increasingly rapid shifting of customer needs and expectations, pace of InsurTech growth and investment, adoption of new technologies and growth of new startups and greenfields, are all creating a continuous era of change and disruption. As a result, the digital age shift is top of mind for every leadership team and board that is focused on growth and innovation.

The demands of agility, speed and innovation are dramatically different today than in the past. There is an increasing urgency to modernize and optimize today’s business – but also to create the innovative new business of the future to capture a new generation of customers with significantly different needs and expectations. In Majesco’s recent consumer webinar and SMB webinar, we highlighted that Millennials in the “life stage sweet spot” age range of 30-60 will overtake Gen X and Boomers in the next 2-3 years, followed by Gen Z in the next 6-7 years, reflecting a window of opportunity to become a market leader for a new era of insurance. Adding to this, companies like A.M. Best are reviewing their methodology to consider including innovation explicitly in the rating process.[i]

To navigate successfully to the future of insurance, there are three paths insurers can follow:

  • Modernize the Existing Business – Replace legacy systems in a private or public cloud to keep and grow today’s business.
  • Optimize the Business Today – Create new digital capabilities to protect and grow today’s customer base.
  • Create a New Business for Tomorrow – Build new business models for a new generation of customers and products.
  • Convergence experts weigh in on modernizing, optimizing and creating new business models

Convergence 2019 had a number of sessions and panels of “future makers” and industry influencers who shared their perspectives on how to travel each of these paths quickly and successfully. Here are some of their insights.

Modernize both the framework and the organization

What are the foundational things insurers must be doing to modernize, before they can do the “cool stuff?” Core insurance systems lie at the heart of every insurance operation. Many of these, even new modern systems that replaced pre-digital-age legacy systems, likely were implemented on-premise, around the traditional Insurance business model, and with pre-digital age technology architecture. Implementation was designed around an internal view of the insurance value chain rather than an external customer view.

In a new era of insurance, insurers are redefining their strategies around digital, integration, technical architecture, data and cloud strategies to be based on “next gen” platforms that support a new era of insurance. These strategies lay a new foundation of infrastructure, data and applications that can be extended to optimize the business. These “next gen” platforms are different architecturally than what we traditionally called “modern” solutions. Why? Because we have a shift in technology like we saw in the early 2000’s when we moved from monolithic to component suites based on JAVA and other technologies. “Next gen” platforms are technically and architecturally different. They must be cloud, open API, microservices, data, AI and ecosystem enabled solutions.

As one Convergence panel discussed, these new strategies and technologies demand organizational changes as well as new roles, culture and governance. With a significant number of insurance professionals retiring over the next 10 years and heightened competition for technical talent across industries for developers, data scientists and more, insurers will need to be innovative in attracting and retaining top talent. Partnerships with colleges and technology/service partners are some of the ideas discussed to overcome these challenges. But the strategic need for these organizational changes cannot be overstated … because they will be critical to succeed in optimizing the business and creating new paths to the future.

Optimize both channels and processes for maximum engagement

With a “next gen” foundation in place, insurers need to focus on optimizing their business. This includes optimizing the internal organization for workflows, business processes, and customer journey mapping. At the same time, an external focus on digital, data and distribution capabilities is critical. With existing customers increasingly demanding digital experiences, meeting these expectations is critical to retaining them. Furthermore, as these and future customers increasingly embrace a multi-channel world, expanding and optimizing these distribution channels, including traditional agent / broker channels, will be critical to the business today and in the future.

The days of a single policy, billing or claims solution are coming to a rapid end. While necessary in a legacy on-premise world, single solutions are obsoleted in a new cloud platform world focused on minimal viable products (MVP), pay as you grow technology options and the need for “test and learn” environments that allow rapid launch and change...

The painful and expensive business modernization projects over the last decade, coupled with the layers of portals and complex integrations to these core systems to improve agent and customer experience, likely do not align with new market dynamics in the digital era of insurance. This approach of building portals on top of back-end systems provided a quick-fix digital engagement solution, but fundamentally it does not digitize insurance products, operations and services. Furthermore, these portals are often a “one size fits all” approach, require significant implementation and maintenance costs and do not adapt easily to rapid market changes and increasing customer expectations. A comprehensive approach will align all optimizations to present the best opportunities for customer engagement.

Create an entrepreneurial business with innovative products, next gen platforms and new market strategies
Starting “from scratch” has its advantages. With over 1,093% growth in InsurTech investment since 2012, including investments in new startups – full stack insurers and MGAs – a number of panelists discussed how this investment has influenced and accelerated insurers’ focus on innovation via new business models, new products, and new services.

This era of innovation is different in that traditional insurers are increasingly standing up separate businesses and technologies to innovate. The days of a single policy, billing or claims solution are coming to a rapid end. While necessary in a legacy on-premise world, single solutions are obsoleted in a new cloud platform world focused on minimal viable products (MVP), pay as you grow technology options and the need for “test and learn” environments that allow rapid launch and change.

The “create a new business” focus uses a “next gen” technology platform that leverages broad ecosystems and technology innovations such as cloud computing, artificial intelligence, machine learning, and new data sources to create a greatly personalized and enhanced customer experience and focus on unmet or under-met market segments. These platforms enable insurers to be competitive, improve cost structures, create customer-focused solutions and, most importantly in today’s fast-paced world, address the need for speed.

Many see the broad array of new models and products emerging, particularly in the personal, small-medium commercial, workers comp, and traditional term life and voluntary benefits insurance. Many of these new models and products are redefining the insurance process from quote through claims – often collapsing the traditional value chain or completely redefining it in the customer’s terms, rather than the insurer. Many of these are still in their early stages of market growth, but hold great promise, particularly given that they can rapidly adapt to market and financial results – such as adapting underwriting based on claims results in days, rather than months. One area of keen interest is how some of these companies are also redefining the application process and policy language – making them easy to read, understand and use.

The Future – The Next Decade of Change

inally, one topic kept coming up across a number of panels and panelists: What will the next 2-3 years, and the next 5-10 years bring for the insurance industry? Overall, everyone was optimistic about the future of insurance and the opportunities for those who can quickly adapt to the market changes. In addition, most do not see major changes in the line-up of the top insurers, but they do see growth in new market players, either as new startups or as a greenfield within an incumbent – reflecting the mantra by Brian Solis’ keynote: “Disrupt your business before you are disrupted.”

There was healthy discussion about new competitors from InsurTech and other startups that are embracing a platform model. Lemonade, Slice, Root, Ladder, Trov and ZhongAn were highlighted as the first generation of platform insurance companies who have embraced platform technologies and broad ecosystems to expand reach and influence, just like big tech platform companies such as Apple, Amazon, Netflix.

This generated further discussion on how the big-tech companies will influence the future. As noted in Majesco’s Strategic Priorities 2019 research, insurers are quite certain that a number of the big-tech companies like Amazon and Google are likely to fully enter the insurance market within the next 2-3 years. Majesco’s consumer and SMB research also found that customers would consider buying insurance from Amazon, Google, Apple, and Netflix, with Uber/Lyft and Airbnb slightly behind. These results reflect the strong brand loyalty and experience customers have with these companies. They represent an opportunity and a challenge for the insurance industry with this new generation of insurance buyers.

As we noted in last week’s blog, Leaders are pioneering the shift to a new era of insurance – one based on “next gen” platforms that rapidly create, innovate, and implement new business models and products that reach new markets. Cloud-based business platforms are part of a new era of innovative impact and industry upheaval. They will align and match the reality and requirements of the business environment with nimbleness and speed.

The future of insurance will require a shift from empowering IT to enabling the business – the difference between the past and the future. And as Brian Solis stated in his opening keynote, how the industry responds will define their extinction or survival — a “Darwinian moment.”

 

[i] Insurers Agree Innovation Is Critical for Future Success, A.M. Best Company, Inc., September 24, 2018