Digitalisation will force insurers to become more agile
Leading international research group, Gartner, has identified digitalisation as one of the primary strategic objectives for insurers over the next 2 years.
CIOs face significant pressures to quickly deliver measurable business outcomes from their IT investments, however, the majority of legacy modernisation programs not only present a significant risk of failure, but often lack quick payback delivery potential. Insurance IT managers, therefore, look for options that enable them to mitigate risk and deal with shifting customer expectations and more-complex relationships with intermediaries.
Rhys Collins, Head of African Operations at SSP confirms digitalisation of business processes and models presents a major challenge for IT managers at insurers worldwide and will remain of paramount concern for those seeking to remain competitive in an increasingly dynamic business environment.
“There are two components to digitalisation – one technically oriented and focussed on the transformation of business transactions, and the other targeting the generation of new value propositions for customers or intermediaries,” says Collins. “Both present significant challenges.”
Collins recommends that CIOs and other insurance IT decision makers begin by analysing digitisation requirements and aim to implement them before end 2015.
One of the major challenges of legacy modernisation projects is the long project cycles. The initial deployment of a new policy administration system, for example, typically requires 12 to 18 months, with follow-on deployments over another year or two, until the full implementation is complete. Many insurance CIOs are, therefore, looking for vendor services and deliverables that can speed up implementation, which require vendors to have strong project management skills and quality assurance systems.
“Vendors are under pressure to improve the maturity of their implementation models and other legacy migration techniques, such as re-platforming/re-hosting and system upgrades,” comments Collins. “Alternative deployment scenarios, such as application service provisioning and cloud computing, should also be considered. These options offer usage-based pricing schemes and metrics, which allow smaller insurers or organisations with significant IT budget constraints to launch legacy modernisation initiatives.”
“To assist in the smooth implementation, develop a vendor ecosystem approach with joint objectives for solution providers and system integrators. Also consider risk-reward mechanisms for licensing and service contracts, to reduce upfront costs and increase the buy-in of service providers. Use quantifiable and unambiguous metrics that can serve as the basis for such agreements,” he says.
A number of life and short term insurers are investing considerable funds in core system replacement, which is putting strain on many vendors’ resources and their ability to deliver on these implementations. This climate has caused vendors to be more selective when asked to participate in RFIs and RFPs. “We expect that by 2015, 30% of RFPs sent to vendors will not receive a response,” adds Collins.
The vendor selection process should therefore be streamlined and more targeted as it becomes more important to pre-screen and exclude vendors that are a poor match to your organisation’s needs. “Create a sense of urgency around the selection process, and be prepared to be flexible with deadlines and communication to avoid excluding vendors that may have the best solution but are under time and staffing constraints,” says Collins.
On a final note Collins cautions insurers to ensure that digitalization strategies are not entirely focused on operational efficiencies and cost reductions. “Blending customer strategies with digitalisation will be a critical success factor and a core requirement for market success in the coming years. The need for customer centricity is further amplified by the changing consumer trends around mobility, social networking and behaviour, and assessing these changes is essential in building the right business and IT strategies during the next five to 10 years,” he concludes.