The insurance industry is facing its very own Kodak moment. Forty years after the once heart-warming 1970s ad slogan became part of popular culture, it now has more inference to the company’s spectacular failure to act in the face of massive industry-wide disruption than it does to capturing special moments. (Think Kodak vs. digital photography). The once-dominant market leader was virtually wiped out by its lack of strategic agility and failure to adapt to changing customer demands. Sound familiar? It should.
Insurance providers aren’t responding fast enough to digital transformation or changing customer behaviors. And the penalties aren’t just inefficiency, higher costs, or poor customer satisfaction, but rather long-term survival. So what’s the problem?
While many providers acknowledge the quagmire of their old best of breed, multiple disparate technologies, many think the quick fix answer lies in implementing a shiny new digital front end. It doesn’t. Front end implementation or a mobile app is no substitute for business-wide digital transformation. The latter requires end-to-end processes from the front end all the way through the business to the back office, enabling a truly data-driven capability and a digital experience for customers, brokers, affiliate partners, internal users, and all parties involved in the end-to-end process. Digital transformation must come from the core with a modern, dedicated digital platform supported by CEO buy-in – or you’ll simply spend a lot of money and time implementing fresh legacy systems and creating even more complexity.
New competitors look very different today. The likes of Google entering the insurance ecosystem – agile “digital natives” without the hindrance of any rusty legacy systems – are already starting to eat into the market share of traditional providers. And the more the market gets disrupted, the more new types of competition emerge. As consumers turn to buying directly from online channels, we’ll see greater competition in the form of peer-to-peer insurance services, for example.
Likewise, today’s customers better understand the dynamics of insurance, and many are seeking out more self-service options. Customization and personalization will become much more important in the near term as customers want to select their own level of coverage to match their life stage, lifestyle, and risk appetite and are not interested in the individual products insurers offer today. In the longer term, the next generation after this one will have its own set of preferences and demands. All of which requires agility.
In my view, there’s still far too much complacency and inertia in the industry – with many “digital” advancements based on an individual’s efforts or low-cost projects within separate departments – to get around the lack of budgeted funds. This has to change.
Insurance providers have a limited runway. Society itself is changing rapidly, and technology is the accelerant. When lifestyles are changing, the market is changing, customer requirements are changing, competitors are changing, and business models are changing, it’s time to embrace the changes. Stop implementing stopgap, piecemeal token gestures at the front end and tactical work-arounds, and start embarking on real transformation, harnessing meaningful, digital insights, better margins, and greater value.
See how other insurance companies are tackling the issues around traditional best of breed vs. digital transformation, join us at the SAP Financial Services Forum on July 4–5, 2017.