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Steering the innovation ship through foggy waters

02 February 2016Jonathan Faurie

How does one survive in a technologically driven world? One of the aspects which has become glaringly apparent is that you cannot rest on your laurels and expect the world to change according to a specific formula. Technology is dynamic, and the change that comes with it is never static.

This has been one of the areas of focus within the insurance industry for a while now; how to incorporate the dynamic changing nature of technology into an industry that has been doing business in the same way for many years.

Searching the horizon

The one thing that insurers cannot do is ignore the challenge technology presents to the industry. In a release to the media by technology company In2IT Technologies, Managing Director Saurabh Kumar said that without effective IT, organisations can no longer compete as they will be unable to meet evolving customer needs, enter new markets or deliver superior service levels.

He added that, while IT is essential, it also adds layers of complexity, and many organisations simply do not have the skills or budget to manage in-house. Outsourcing various elements within IT services and solutions has therefore become a popular option.

Trust the experts

The challenge here is that outsourcing contracts are typically based on hours worked and not services delivered. This means that many organisations have failed to leverage full value from their outsourced services.

An alternative model of outcomes-based outsourcing contracts has emerged in light of this, delivering greater value by linking outsourcing objectives to outcomes instead of man-hours.

Whereas traditional outsourcing contracts can end up being costly and time consuming, outcomes-based contracts deliver value on all fronts.

User-based, user-focused

One of the most pertinent concerns making inroads into the insurance industry is the fact that brokers and companies need to sell insurance products to a whole new generation of client. This client is unlike any client they have dealt with before and interact with their world in a way brokers and insurers are not used to.

According to a report released in the US, personalised insurance is the trend of the future. Customers want more control over their policies. Not only that, they want more direct control of how things are done when processing claims.

The report adds that the millennial and do it yourself (DIY) generation has forced insurance companies not only to alter their transparency and website navigations, but also overhaul on how they do business with their customers directly.

Refine Big Data

While Big Data has already been having an impact on the South African insurance industry, many companies are faced with the challenge of where to find this data and how to interpret it. Analysis Paralysis is a legitimate fear for companies and may have a significant impact on their operations.

The American report pointed out that there is policyholder data everywhere.Simply going through someone’s Facebook page – within the confines of the Protection of Private Information Act - can reap an incredible amount of information.

But, even though insurers aren’t likely to sift through anyone’s wall posts, there is a benefit to having a large amount of data stored on any given customer. When partnered with telematics and mobile technologies, this data can help sharpen actuarial models by analysing people’s actions.

On the road

The final trend highlighted by the report is the adoption of self-driving cars.

Tesla has already started offering automated driving systems in its cars, such as immediate brakes and driverless lane changing. Google’s cars can analyse red lights, speed limit signs and have sensors in every part of the vehicle to detect a potential collision.

The question is: how will insurers design products to cater for this growing trend?

Editor’s Thoughts:
It’s not a question if we are ready for a technology driven world; the question is whether we can adapt quick enough to this world to remain relevant. Do South African insurers have the capacity and appetite to do so? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Fergus, 02 Feb 2016
While many are embracing technology (despite some being opposed to it), there are some who are opposed and will not accept this form of change. I accept that within technology remain certain fears.

Technology is not everyone's "cup of tea" and not all want to do business in this manner. A recent encounter with a business partner underlined the fact that there are those who do not trust technology.

As Arnold (in comments) correctly concluded, there is no single solution, but that there are now multiple channels of doing business. It is important that business provides solutions for all partners in their value chain, including those who may not be on top of the latest technology.

Final thought on this subject, no amount of technological innovation has yet done away with old-school underwriting who can interpret risk. Although data can provide some useful insight to the world of risk and insurance, if there is no intervention and/or moderation by skilled and experienced underwriter/s, you'll be insuring the assets of fireworks manufacturers for 0.050%. Fair enough, that is a ridiculous example, but it could just slip through the net one day.
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Added by Arnold van derf Linde, 02 Feb 2016
Good article showing how technical insurance delivery is today. The level of which can be seen in the high degree of outsourcing in insurance today. Some insurers outsource the running of almost half of their personal line books to binder holders. Each specializing in their highly technical and unique value offer. Leading insurers know that the complexities cannot always be done in-house. Long gone are the days of simple "vanilla" or "one fits all" insurance.
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