Nearly 20 insurance executives convened on May 23rd for an opportunity to hear from Novarica, and from each other, on a wide range of high priority topics as we approach 2019’s mid-point. This included a broad discussion of business and technology trends, focusing on innovation, digital strategies, analytics, core systems modernization approaches, and security. The opportunities to explore how other technology leaders in a range of business lines are addressing comparable issues is one of the great values produced by these Regional Roundtable events.
Newer, advanced technologies, such as machine learning, robotic process automation, IOT, driverless cars, and blockchain were topics of interest. Lively discussions ensued relative to each of these topics, including items as wide ranging as IOT connected toothbrushes, dashcams, and machine monitoring. The group discussed a changing world where driverless cars and texting weren’t risks 15 years ago, but now have created new and unplanned risk elements that need to be factored into pricing models. One of the themes that emerged was the effective “arms race” that exists around some key areas such as business intelligence and analytics; carriers need to be aware of and engaged in the right types of innovation and investments, so they aren’t left behind.
Another area of discussion circulated around blockchain as a technology searching for a problem to solve. Much press excitement has been generated around the subject, but the reality remains that the industry lacks compelling use cases for blockchain, suggesting that most insurance companies should focus on other priorities. Another interesting observation that emerged was that given advancements in monitoring and machine learning, there could be more of a shift from property insurance as we’ve known it in the past to warranty coverages included in product pricing. The idea of insurance being a component in another product is already being tested by auto manufacturers such as Tesla and Volvo.
Insurance companies needing to stay current and advance their products to keep pace with changes in consumer preferences (e.g., offering on demand insurance that leverages telematics and big data to meet the policyholders’ needs, including episodic coverages) was also topical as carriers consider the future-state market. Considering the future is also critical for carriers as they look at the implications of an aging workforce and their continued dependence in many lines of business on legacy applications that may be older than the people working on them.
Demographics are now coming into clear focus for both internal and external considerations. Projections are that millennials represent about 50% of the workforce next year, a figure that will grow to 75% by 2025. Approaches to addressing the skills gaps for the complex legacy system tasks ahead, as well as approaches for de-risking these portfolios, generated lively discussions focused on practical solutions (e.g., BPO solutions coupled with block analysis efforts for long-tail liability products) that carriers can execute on now. Tied in with these concerns is an emerging reality that new requirements, such as the California Consumer Privacy Act, are likely to force important investments during the current planning horizon. Using these new regulatory requirements may be a leverage point for IT organizations looking to address a range of issues, including technical debt and retirement of old platforms.
One final major area of discussion focused on core systems, and a brief visit with the question of whether it remains better to buy solutions versus building them. The consensus in this group, consistent with Novarica’s other research, is that buying is almost always the better approach, since vended options are now so strong and the resulting core system capabilities are not themselves going to create competitive differentiation in the marketplace. Carriers would be well advised to focus their own development efforts on true differentiating opportunities, which generally translate into efforts around systems of engagement rather than systems of record.
While the decision to buy core systems is, itself, straightforward, there are several elements that carriers should focus on when initiating these efforts. This includes careful selection of both the software vendor and an associated system integrator. An effective vendor management approach includes factoring in new realities (e.g., cloud-based deployments) that may not be well understood in many carrier purchasing organizations and governance models that effectively limit customization to reduce both implementation and maintenance costs.
Overall, the session highlighted many of the organizational, cultural, financial, and technological issues facing carrier IT organizations as they begin planning for the back-half of 2019. The planning and budgeting efforts which will begin soon will clearly need to consider these issues, particularly given the significant demographic and customer preference changes which are now coming into clearer focus.
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