All P&C Insurance carriers, big or small, have digital transformation as a key component in their strategic plans. Beyond the hype, there is good reason for that. However, the approaches companies are following are disparate, depending on their digital starting point as well as their particular outlook on what the future may bring. Both things are, by definition, very specific for each company. Especially the second is very relevant as, no matter how visionary the planners can be, we have to recognize that there is not yet a clear, complete scenario about how digitization will affect Insurance. This inability to predict the future makes it very difficult— if not impossible at all—to design strategic plans in a traditional way.
There are few other industries that will experience such a profound impact short- and medium-term from digitization as Insurance. For Insurance, it is not just that the way business is conducted is going to change—or rather, is already changing; it is that the nature of the insurance business itself is being transformed. We may have the doubt as to when the transformation will happen but two things seem clear, this is not about long term and the coincidence in time of all those changes has a multiplier effect on the combined impact.
"No matter how visionary the planners can be, we have to recognize that there is not yet a clear, complete scenario about how digitization will affect Insurance"
On a positive note, we can remember that, as it is the case in any big transformation phase, the disruption is not only a threat it also brings new great opportunities for those who learn how to take advantage of them. However, tempering our optimism, we also need to realize that the experience so far shows that Digitization tends to erode profit margins and to concentrate value in a reduced number of players in each market.
We can draw indications of how the future will be by looking at how digitization has transformed other industries that were impacted before. However, those lessons—rather impressive in some cases—are only partial. It is a differential factor that insurance, as an industry, is being drastically affected by digitization in every single component of the business.
Of course we see the change in the way we interact with our customers, the rise of internet and mobile self-service channels, the impact of social media and the surge of digital marketing. We all realize the huge increase in the number of connections that this brings and we also share that awkward feeling to see our businesses’ processes completely exposed on a 24x7 basis. No need to mention the growing cybersecurity challenge that all this represents as we frequently have the opportunity to see in the news.
We also notice the shift of our IT landscape through cloud computing and other technologies, for instance, those associated with new models of systems architecture or integration. Though these enhancements are in themselves game-changers, they are now commonplace in most corporate IT plans across industries.
However, three digitization factors are bound to create a much more transformative change in the insurance business:
• The combination of Advanced Analytics and Intelligent Automation, that is transforming basic insurance processes like underwriting or claim management in ways that we cannot fully anticipate yet.
• The transformation in the very nature of insured goods derived from the expansion of Internet of Things and Self-driving Vehicles.
• The potential transformation of the figure of the insurance carrier itself as a result of the impact of forces like the Collaborative Economy or the adoption of Blockchain. This may sound a bit too futuristic, and indeed it will not happen overnight, but we have already witnessed the full meaning of the word “disruption” in other industries.
With these changes already upon us, we are in a challenging situation. For us in the IT departments of P&C Carriers to face it, perhaps the best course of action is to hold onto some old basic principles of our profession, but this time with a very acute sense of urgency:
• A “can-do” attitude: With determination, we can harness the power of these opportunities, but we have to be proactive.
• Teamwork across the enterprise: This transformation is not just about IT, it is a full change of our business, we must align ourselves with the other business areas in our companies to plan and, especially, to execute whatever projects we decide to launch.
• Adaptability: Since the situation is not clear, flexibility needs to be the key attribute of the new systems we deploy.
• A nimble approach: we need to interiorize that speed is key, first to make decisions and, especially, to execute them.
Those four principles can help us take on the big transformation we have in front of us. Problem—we know is that they are much easier said than done, especially when circumstances are so demanding. They require a big change in people’s attitude and organizational culture, a change with a capital “C.”
As IT professionals, we are lucky to be living very interesting times—who said that IT does not matter? The big wave is coming, and we have the need, and the great opportunity, to ride it. Good luck!