With the reality that we are in a new business cycle, insurers and brokers are finally beginning to invest in multi-year transformation programs. But there has to be a few quick wins along the journey and the user experience must be a priority to realise some benefits.
After several years of talk about transformation, at ECMS we're suddenly starting to see a lot of action from our insurance and broker clients. Four of them are currently undergoing hugely ambitious digital transformation journeys and the outlook is looking strong.
This includes the high-profile Future at Lloyd's digital strategy, which continues its journey of migrating its core applications off mainframe and onto the cloud, despite inevitable hiccups along the way. It's a move the corporation hopes will ultimately save insurers and brokers an estimated £800m in operating costs by reducing bureaucracy and increasing automation, bringing the 337-year-old market into the 21st Century.
There's no escaping from the challenges of the past few years, which helped accelerate some of the change taking place in the industry, but also left many organisations frozen and unwilling to commit. But we have now emerged from the haze and uncertainty of the pandemic. And despite ongoing uncertain economic and geopolitical headwinds, there is an acceptance that the business cycles must move forward and now is as good a time as any to transform.
With commercial insurance and reinsurance rates hardening, the focus on extracting value from data is accelerating. Rate increases were generally in the region of 35% at the recent 1 January renewals, and while the impact of inflation and volatile equity markets are still being felt, interest rate rises offer the promise of favourable investment returns ahead, despite reserving pressure.
CISOs and CROs know that in this environment they have to empower their underwriters and claims professionals to make the best, most fruitful decisions they can. Access to better data and analytics ultimately means these professionals can earn (or save) the business money by using available insights to their best advantage. Adopting these tactics also provides more resilience when it comes to regulatory pressure.
If they can make better, quicker and more precise risk-based decisions, the boost in premiums and competitive edge will almost certainly support the major investment that is needed for multi-year transformation projects.
What can you deliver now?
Among the priorities for those focused on achieving greater efficiencies and finding the edge when it comes to data are cloud-based computing platforms, event-driven architectures, artificial intelligence (AI) and machine learning, and self-service capabilities.
Major multi-year transformation projects inevitably take time and commitment, especially for major organisations that are bringing together multiple businesses and systems.
We often see this in the broking sector given the consolidation of the past two decades. Among the 100 independent UK brokers ranked as the largest in 2010, almost two thirds have been merged into a larger rival.
These ambitious consolidators are typically dealing with multiple legacy systems, different licenses and platforms which can be so unwieldy that a straightforward integration is impossible. Instead, it calls for a ten-year strategy to completely reengineer the core operating model.
The investment and commitment to such projects needs to be protected, but there is inevitably significant cost scrutiny and pressure to deliver tangible value in the near term.
This is where micro services are a good option, helping businesses to scale up by bringing in other applications and removing over reliance on one platform or system.
De-scoping change programs and dividing them into slightly smaller projects - selecting the use of micro services to compliment - is a good way of delivering value at each of these stages, while also maintaining buy-in from major stakeholders, including board-level sponsors.
Prioritise the user and the rest will fall into place
A staggering 70% of transformation projects fail. There are many and varied reasons for this - including cultural resistance to change or staff changes, with new project leaders derailing often slow projects that are only half complete.
Too often, it also comes down to the fact the user experience has not been a priority, often due to a lack of time given to achieving the desired outcome, and in the insurance business this can really hinder how readily, and enthusiastically new technology is adopted.
If staff are unable to walk into any office, anywhere in the world, and have the same experience, transformation endeavours will also fall flat. The kit needs to work, especially when you consider that Lloyd's and London market is ageing, with the proportion of underwriters and brokers over 50 increasing from 16% to 26% since 2014.
The design and architecture of new business platforms therefore must make it as easy as possible for underwriters to be taken on a seamless journey, as their systems automate. They need to be taken through a series of steps - with the ability to access useful insights to help them assess the risk at each stage - before they arrive at the right decision and/or price.We have access to so much data but ensuring this is accessed at each stage is complex.
Surprisingly, too many expensive multi-year transformation projects fail to rewire the company and prioritise the user. The risk being that at the end of it all, you've paid for something far better and perhaps more glamorous than the end point.