The insurance industry has adopted a “wait and see” strategy in connection to the necessary transition to new technologies. Most companies are afraid to be the first to make a serious, strategic change in their huge, old, existing IT infrastructure.
This of course is understandable. As a decision maker in a company from this field once said “We don’t want to be dependent on our IT solutions, it is scary when our entire operations are dependent on the software suits we are using, but inevitable that’s what it is”. And that’s how a lot of specialists in the industry feel. Why? Because they see technology not as an enabler, but rather as a limiting circumstance they have to take into account when they are trying to introduce a smaller or bigger change into the status quo from a business perspective.
Here is a small story that illustrates this: a marketing director from another (big) insurance company once shared that he was very enthusiastic about driving sales higher after he first got the job. He carried out a successful and diligent research on customer behaviour and found out that a very small change in colors and format of the issued quotes can drive a positive raise of the actual contracts signed. Imagine his immense frustration when he soon after realized that all his research and enthusiasm were pointless. He learned it would take 9 months and the interference of 7 outside integrator teams, if this small change of color and format of a single layout is to happen. So he gave up the plan. He lost a lot of the enthusiasm. After this instance, before even thinking about a new idea he first asked about the technology limitations he would be facing. That’s a real story.
While the mood towards their current software solutions is such of distrust, various level of nervousness and even fear in some cases, how are decision makers suppose to take responsibility and make a strategic, necessary and important step into the unknown world of next-generation technology? Because even if the current solutions pose all these limitations, using them is considered a safe choice. Simply because everybody else is using them too. So in the worst scenario you are as slow and uninnovative as your entire competition. And in that status quo, the game is based on other things – e.g. brand strength.
So they continue playing the “waiting game” reassuring themselves that when an established competitor introduces a new type of system, they will simply follow and the game will continue to be about those other factors. They won’t fall behind.
But the world has changed. Dramatically. And so the traditionally considered high entry barriers on the insurance market are not so high any more. Not because of less regulation, but because of a paradigm change. Insurers still believe their purely insurance-related, technical know-how is the most important thing that sets them apart, in other words, actuarial calculations, mortality tables etc. And so they are only looking for new competitors among their own people, companies and entities with a similar background. The truth is that technical insurance know-how can be bought and large, successful companies from completely unrelated fields, companies that are customer-centric by nature can and will enter the insurance market by adopting next-generation technologies and using them to run their new insurance business with less employees (you can easily divide the “standard” number by ten and more), smarter distribution, operations and a service-based added value to the end customer. And as of brands – insurers do have an advantage compared to new insurance startup companies. However, think about which brand you like more – your insurer’s or e.g your favourite energy drink’s or your favourite sport apparel’s?
Just like technology stopped being a separate sector and became a layer in every aspect of our life, so will insurance evolve into an all-penetrating or better said all-enwrapping “sheet”. The industry will grow hugely and your new preferred providers might be brands that you traditionally do not associate with insurance at all. These developments are already underway, it’s not about the future of insurance anymore, it’s about the present.
The waiting game might not be a successful approach after all.