Why Transforming Core Operations is a Critical Imperative for the Insurance Industry
What would happen if Google decided to enter the insurance market? Would the established players be nimble enough to compete? Or, more likely, would aging and disparate IT systems slow their attempts to respond to the market’s desire for more customer-centric experiences? That question was discussed during the recent webinar Core Transformation: A Critical Imperative for the Insurance Industry, presented by Charles Juniper, principal of insurance technology at Ovum, and Marc Kamphausen, global head of insurance solutions for SAP.
Established insurers could be at a disadvantage
Technology is one of the major root causes of disruption in the insurance industry in recent years, so technology is going to have to be part of the solution, Kamphausen and Juniper pointed out during the session. However, established insurers’ lack of modernization in their core operations systems could be a significant disadvantage when customers increasingly view insurance as a commodity. That means insurers must create an omnichannel experience that incorporates mobile technology, social media, and emerging technologies to create a satisfying and unique customer experience.
Change is coming to the insurance sector, but slowly
The good news is that carriers are making strong attempts to align their IT initiatives with their business priorities, according to a recent wide-ranging study by Ovum. In a shift from studies conducted only two or three years ago, fewer companies listed the containment of IT costs as a top business priority. Now enterprises are more concerned with creating a customer-centric experience and gaining insight into business intelligence.
However, many companies may be more than two years away from achieving modernized core operations systems.
The majority of established carriers continue to operate on multiple, disparate platforms. Ovum’s research shows that 28% of carriers operate on 11-20 core platforms, and 31% operate on 6-10 core platforms. In addition, more than 40% of insurers continue to run a mix of in-house software and commercial, off-the-shelf systems.
Customer experience matters more than ever
While there were some regional differences, the majority of carriers that participated in Ovum’s research study listed the following as among the top five benefits that they hope to achieve with core operational modernization efforts:
- 1. Improved customer experience
- 2. Better response to new market opportunities
- 3. Improved customer retention
- 4. Better ability to rapidly launch new products
- 5. Reduced IT costs
The Ovum study also showed that increasing integrated channel functionality is a key goal for 42% of insurers. Those insurers were attempting to implement core processing architectures that integrate communication channels and core processing functionality within a single platform.
Technology is an easier sell
Juniper and Kamphausen pointed out that CIOs and IT groups are doing a better job of justifying technical expenses in a way that demonstrates the business benefits. Plus, as IT becomes more integral to the core business of insurance, business groups inside insurance enterprises have a better understanding of the need for the technology. Finally, Kamphausen advised that carriers should remain aware of changes in social media if they want to provide a truly customer-centric omnichannel experience and be prepared for potential new competition.
To learn more about the state of core operations modernization in insurance, download the complimentary white paper, Core Operations Modernization in the Global Insurance Industry.
Also, check out the Ovum Global Infographic.