Speed and Flexibility: The New Mantra For the Insurance Industry
The ability to react quickly and cost effectively to consumer needs and market demands continue to define success in the insurance industry, particularly when it comes to product agility.
However, while product speed to market and flexibility may be the top priorities for all insurers, only a small proportion is actually getting it right. In a recent report from The Economist Intelligence Unit focused on changes to the Insurance Industry, when asked whether disruption was more
likely to occur in distribution, service or products, at least 30% of respondents saw the potential for disruption in each of the three areas. However, less than half (46%) believe their companies are “well prepared” for change, while nearly one in four see the industry as “well prepared” for pending disruption.
And the rate of change isn’t going to slow down any time soon. Indeed, an SAP survey of 200 insurance executives conducted earlier this
year at the IASA Annual Conference pinpointed three major factors driving this need for speed, namely:
- Rising consumer expectations
- Heightened regulatory demands
- Availability of new technology
These days, consumers don’t set their expectations on what is a great customer experience by sizing up what your competitors are doing. They set their expectations on the very best experiences online. And more often than not, these exceptional experiences are delivered by customer-centric companies such as Amazon or Apple. To even get close to delivering this kind of experience, a 360-degree view of both the customer and your products is critical.
Insurers must increasingly address more complex and converging regulatory issues which have created significant compliance and governance burdens. These new requirements call for actionable information from integrated, real time transactional information analytics.
Operational data that is trapped in legacy core systems needs to be accessible alongside financial information that is currently layered deep in data warehouses.
Technology is critical to success. Insurance companies must effectively use technology to give customers more of what they want. Major opportunities will arise for insurers that embrace the Internet of Things to create more compelling customer offers. Those that don’t will face significant risks, as customers jump ship and find products that are better suited to their needs and lifestyles.
Innovation is key
Of course, to embrace a customer-centric way of business, to adapt to the regulatory framework and to embrace new technology, innovation is critical. More often than not, taking a legacy approach will simply constrain your ability for speed and flexibility. One innovative way to propel your organization forward is to use technology as an enabler to product flexibility. You take a building block approach to product construction where reuse is a central tenant. By developing a comprehensive view of product functionality, you separate product from policy, billing, and claims systems. This gives you the freedom to focus on the configuration of reusable components by the business, as opposed to programming by more expensive, backlogged developers.
Business transformation is essential
Many of our customers have scrutinized legacy product development cycles and have discovered that the elapsed time prior to engaging the IT department in product development can be as long as the actual implementation cycle in IT. When speed is of the essence, it’s clear that this approach is not going to drive business success.
However, with a realigned workflow centered on a holistic view of product lifecycles, you are better able to document and refine process metrics. A single source of the product truth for product development, compliance, sales, finance, operations and IT is a critical step in the alignment of people, processes, and technology to enable change.
Embracing innovation and business transformation, I’m happy to say that SAP customers have experienced a 30 – 60% improvement in product speed to market with both product introduction and change. Some of our customers have benefited from implementing an agile, iterative product approach to new market offerings. While others have orchestrated product agility as a key to their legacy modernization framework, showing early and repetitive wins.
Either way, SAP customers have been able to focus strategies on product agility, leveraging technology innovation to drive simplicity in process – and positive organizational change.
Strategic competitive advantage
While these organizations have employed these approaches to successfully convert the speed-to-market constraint into strategic competitive advantage, the business and technical architectural foundation is not one that can be developed overnight.
At SAP we have been crafting a focused product agility module for insurance carriers through two releases a year over the last 10 years. Through this, customers on multiple continents, are experiencing agility in all lines of business including P&C (Personal and Commercial), Health and Life products have experienced improved speed and quality.
Our experience has shown that the way to gain this competitive advantage is to identify the challenge and focus on it as part of your near- and long-term plans; choose a partner that has successfully demonstrated success in the industry; lead with technology and then execute, execute, and execute.
Find out more about what SAP is doing to turn insurance industry challenges into competitive advantage for our customers.