The advent of the digital world is revolutionising technology, in turn creating disruptive trends such as social, mobile, analytics and cloud (SMAC), says Saraswati Pramudi, principal consultant at Wipro BAS Architecture Practice.
A new category of consumer is emerging in the wake of this – always connected, highly social and adept at digital technologies, and looking for an “always on” kind of relationship with businesses, friends and colleagues from anywhere, anytime and on any device.
In order to remain competitive in this world, insurers need to embark upon digital transformation across their value chain, enabling them to offer personalised insurance products and a seamless customer experience across channels. The digital world has a significant impact on insurers existing business models and the IT landscape, requiring them to develop comprehensive digital strategies to remain competitive and profitable.
As consumers have become more digitally driven, the number of channels of communication and data streams has increased significantly, changing the way insurers interact with and gather information on their customers.
In addition, emerging technologies like wearable devices and telematics have changed the game, providing new data on health metrics, driving patterns and more. Integrating this data into underwriting processes enables insurers to more efficiently assess risk, which in turn enables them to offer a more personalised service to customers. Premiums for car insurance, for example, can be reduced based on good driving, while health insurance providers can offer value-added services as incentive to maintain high levels of health.
These technologies have the potential to dramatically change insurance business models. However, in order to leverage the benefits of disruptive technologies, insurers must first begin the digital journey by transforming their foundation IT architecture. This is key to remaining competitive and efficient in a changing digital world. Foundation IT architecture initiatives include the replacement of legacy administration platforms, increasing digitisation of inbound and outbound communication, business process automation, process and product standardisation and more. Digital architecture, which is gaining traction today, will be the extension of foundation IT architecture. This will address business and IT strategies for SMAC, telematics, wearable devices and so on. From a business perspective, insurers will need to define their next generation product portfolio, risk and pricing models, fraud detection algorithms and amend their underwriting standards and guidelines for emerging technologies.
Disruptive technologies will impact the insurance business and their IT landscape in several ways. Social media platforms can deliver a number of benefits. Data from social media channels can be used for sentiment analysis, cross selling, up selling, fraud detection and more. Insurers can use natural language processing (NLP) and text analytics tools on social data as well as speech analytics on call centre conversations to improve customer service. Text and speech analytics in a near real time environment can help insurers find new opportunities for cross selling and up selling.
Mobile apps are another example of technology changing the insurance market. Consumers are increasingly demanding life, health and auto insurance mobile apps on various devices to enable an “always on” relationship with insurers. While basic mobile apps for this purpose are emerging, the real value lies in enabling the entire insurance value chain for life, health and auto on various devices to penetrate this segment and increase profitability. There are various mobile application architectures available, however the mobile architecture strategy will differ for each insurer based on their needs, criteria and budget for the program.
When it comes to telematics and wearable technology, it is possible to gather real-time information on driving behaviours, health metrics and more. Underwriters can use this data to reassess current risks and recalculate premiums for current risks at regular intervals. However, these devices generate vast data sets, which include structured, semi structured and unstructured data. Analytics is essential to unlocking its value, which will require big data analytics solutions in order to derive insight. In addition, insurers are increasingly looking toward private cloud and shared services solutions to drive down the cost of deploying new technology, once again disrupting existing business models.
Even though disruptive technologies impact insurer’s existing business models, they provide an opportunity for significant benefit. Harnessing these technologies enables insurers to better understand their customers and personalise products, thereby increasing customer loyalty and retention. In addition, disruptive technologies ensure that insurers are always connected with their customers. Ultimately, legacy IT architecture is becoming a liability, negatively impacting insurers’ agility and ability to respond quickly to changing market demands. Digital transformation is essential, and should follow a three-pronged strategy: transforming the foundation IT architecture, defining the digital architecture and defining the next generation product portfolios, risks and pricing models.