Change and become relevant
May you live in interesting times is an English expression purported to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is always used ironically, with the clear implication that uninteresting times of peace and tranquillity are more life-enhancing than interesting ones.
While this may be true in a personal sense, often companies experience great growth in interesting times, times that test the mettle of the organisation.
In terms of the financial services industry, we are possibly living in the most interesting of times since the global financial crisis. Technology is having a major impact on the industry and companies have to balance technological adoption with finding new business in tough economic conditions.
Streamline your business
According to the 2016 Capgemini Efma World Insurance Report, there are very specific steps that companies can take in order to embrace technology.
According to the report, existing operations should be upgraded to their fullest capacity. Product lines should be simplified with the goal of improving operational efficiencies, reducing expenses and increasing profitability. Successful streamlining is essential not only for improved operational efficiency, but also for a better customer experience.
Insurers have numerous tools at their disposal to help in these efforts. Primary among them are digital technologies such as online capabilities for purchasing policies, managing accounts and tracking claims.
Another tool is cost restructuring which offers the opportunity to convert costs from fixed to variable. Such restructurings are now achievable in a number of ways including by subscribing to cloud services or by sourcing non-core activities, such as customer service, to a third party provider (binder) that can offer greater scalability.
Explore growth
The report also urges insurers and brokers to explore opportunities for strategic growth.
Insurers need to prepare for growth, both strategically and geographically. Numerous opportunities exist within the expanding insurance technology market to make acquisitions or create partnerships that would lay the groundwork for moving into new markets or business models.
The report suggests that insurers should consider having global expansion as a goal. As regulatory standards become more uniform between Europe, North America and now South Africa, it will become increasingly advantageous for insurers to either expand globally or strengthen existing global operations.
Insurers and brokers can consider exploring fast growing emerging markets to complement slow growing matured markets. Consolidating systems and operations on a global basis can lead to high effective synergies and reduced costs while also preparing the firm for further expansion.
Data mining capabilities
In the coming era of connected technologies, client data will become even more valuable to core business functions. This makes the ability to manage and leverage data a top level strategic priority.
Insurers must have the skill and capacity to handle both external and internal data sets. For most firms a phased approach toward a more data centric business model will be an appropriate path. Gaining optimal proficiency in data management requires certain basic steps such as identifying and scrubbing data sources, clarifying profitability and performance indicators, and identifying reports for decision making.
Once these basics are in place, firms can move on to improving their expertise in customer data analysis and segmentation with the aim of creating more personalised insurance products. This type of detailed customer knowledge is also useful in detecting and mitigating fraud.
The danger of social media
Social media is an example of technology that insurers and brokers are struggling to come to terms with. They simply do not know the future role it will play in the industry.
While we have heard that insurers and brokers need to be visible on social media, they can also use social media to negate fraud and protect their business.
In a report by Independent Online, Maria Philippides, Head of Financial Institutions and Insurance at Norton Rose Fulbright, says short term and long term insurers use increasingly turning to technology and social media in their investigations.
She pointed out that she recently did a presentation for insurers and one of the questions that came up was: If a person claimed for disability from an accident but they’ve posted pictures on Facebook of them skiing or running a marathon, can we use that information and reject the claim? The answer is yes. If the information is on social media for everyone to see - it’s publicly available - then of course you may, provided it’s reliable, current and appropriate information.
However, Philippedes added that insurers can’t go around trying to friend people on Facebook to get information - that’s entrapment - but if its information that’s publicly available, you can.
Editor’s Thoughts:
This is a classic case of Irresistible Force Paradox where you have an irresistible force (technology) coming up against a unmovable object (insurers). Technology is taking over the industry, and the more insurers and brokers resist it, the more irrelevant they become to clients. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
