I noticed an article in the Australian press over the New Year that identified that the most popular New Year's resolution for 2008 is to get personal finances in order. This pushed last year's winner ‘losing weight' into second place. This should be of particular interest to the insurance sector as another end of year survey revealed that almost half of Australians have no insurance! Looks like an ideal business opportunity there's a demand and a requirement to fulfill so what are insurers doing about it?
Insurance should be in a growth phase, what with increased floods, hurricanes, fires, and natural disasters not to mention financial market volatility and credit crunches, people are realizing that they can't take their future security for granted. However, the insurance industry is finding it difficult to meet the distribution and product demands of the modern consumer and the unpredictable nature and concentrated losses from natural disasters.
Insurance has typically been characterized as a risk adverse technology investor, preferring to renovate old infrastructure and applications rather than innovate. Years of tactical IT investments has lead to legacy system proliferation and integration complexity. Add this to the merger and acquisition activity of recent years and we find a sector that is dominated by a few big players that are finding it hard to react to the changing market conditions and opportunities, and a public that is disenchanted with low customer service levels and minimal product engagement.
However, things may be about to change. Eight years on from the Y2K spending binge and following recent soft market conditions, we are now entering a transition period where new technology developments like SOA and BPM are offering Insurers the opportunity to start planning the replacement of their ageing legacy systems and move to a process centric architecture that can offer new levels of operational excellence, customer intimacy or product leadership.
The ERP 6 Enhancement Pack 3 delivers a significant set of Insurance related services that contribute to the goal of delivering a modular, service based architecture for insurance that can be enabled via a business process platform. These can be explored via the ESWorkplace. An analysis of research recently conducted by value engineering leads me to believe that the focus for insurance this year will be better financial management; this is due to competitive pressures and the increased cost of capital in financial markets. This will translate to a consolidation of collections and disbursements (billing and payments) processes to deliver a reduction in day's premium outstanding and reduced claims costs.
I'd be interested to hear any other thoughts on insurance business processes that may be changing or require changing over the coming year.
