Top technologies with the greatest impact for the South African insurance industry in 2013 and beyond

A number of new and emerging technologies will positively and negatively affect the insurance industry during 2013 and beyond. For insurers, the key will be to identify which of these technologies will be fundamental in driving new business models.

Rhys Collins, Head of African Operations for general insurance technology provider SSP, believes insurers will need to take a multi-year approach to technology innovation as embracing all the various technologies will require substantial investment and implementation time which few local insurers can afford.

“Determining the positive and negative impacts expected from these technologies, the speed of those impacts, and the preferred actions to mediate risks or seize opportunities emerging from these technological changes will be deciding factors on which to implement first,” says Collins.

Leading international research group, Gartner, highlights the top 10 technologies which will be "game-changing" for insurers over the next five years. These include: modern core business solutions; underwriting workstations; analytics and location intelligence; predictive modelling tools; advanced fraud detection solutions; social networking technology; product configurators; telematics; portals and mobile device technologies.

Of these 10 technologies Collins highlights six he sees having a significant impact and that will challenge existing business processes, support the emergence of new business models and enable companies to successfully differentiate to drive revenue growth. He also highlights those which warrant a close watching brief as they develop in other markets.

On the issue of modern core business solutions, there have been a number of enhancements over the past 12 months and all of these enhancements will drive greater adoption of modern core business applications over the next few years and significantly provide advantages to those who deploy these applications over peers that are continuing to run their business on legacy systems. “The modern architected solutions will give companies far greater agility and flexibility than their competitors allowing them to achieve real price and service differentiation,” says Collins.

Insurers' operating legacy systems will face imminent challenges. Changing product rules or adding a new product is generally a time-consuming project, with heavy IT involvement. To combat this problem, vendors have introduced product configuration solutions which shift development to the business users helping improve the entire product life-cycle. Collins says during the past year, many large insurers have begun to remove complexities from their products. Initiatives have started that are targeted at product rationalization in which products are assembled as a chassis across countries and regions, with a focus on creating standard products. Product configurations can be the basis for maintaining and assembling a product chassis.

Product configuration tools will help drive down product development costs, but more importantly, will enable insurers to get products to market faster than peers that continue to rely on legacy systems.

Another key trend is how to drive both underwriting profitability and improved underwriter productivity through new tools which help to manage the process; support collaboration for complex decisions; improve the data management requirements; provide more transparency in underwriting outcomes and establish a platform for improved underwriting analytics.

“Using these tools will significantly help underwriting teams improve precision and the accuracy of outcomes, helping improve underwriting profitability as well as productivity,” says Collins.

Fraud continues to be a serious problem for most insurers, and one that is often overlooked. While new solutions have emerged to help insurers have better and earlier means to detect fraud, adoption still lags.

“Advanced fraud detection tools analyse data in order to identify fraudulent claims in real time at the point of data entry. These tools assist insurers in reducing losses will allow those that implement these tools successfully to reduce their premiums and steal a march on their competitors.”

In the present digital age it would be remiss to underestimate the growing reach and power of social networking technology and this is one of the key trends to look out for over the next five years.

Social networking continues to be a major threat and a major opportunity to the insurance sector and its impact on the business is still misunderstood by many clients according to the Gartner report. Gartner notes that while social networking may have a disruptive impact on the industry as it increasingly becomes a trusted source of advice for consumers there are still many benefits to be derived.

Collins agrees, stating that social media can be very beneficial in gaining knowledge regarding consumer behaviours and opinions; improving competitive intelligence, generating leads and building communities in which messages are sent in real time. Used effectively it can strengthen the brand with a younger generations of consumers, attract younger agents and employees; be an effective tool in marketing to prospects, responding to catastrophes, investigating fraud, understanding customer complaints, and responding to problems.

Closely linked to the growth of social media is the impact of mobile devices / technologies. Insurers are now being confronted with a growing need to offer more services to agents and consumers through mobile devices — and that demand will intensify during the next five years, particularly amongst the younger generations.

Internet portals have become a core component of operations for personal and commercial lines insurers, allowing them to interact with agents, consumers and policyholders. The use of portal technologies for agents and policyholders is critical as a means to offer access to sales and customer service systems, claims systems and data. Companies must ensure that these portals support full transaction capabilities and meet user needs.

Using portals for self-service and third-party agents will enable companies to drive down costs when there is adequate user adoption, while empowering users to conduct transactions themselves. “Portals will be a key delivery mechanism and a central component of digitalization during the next five years,” notes Collins.

One international trend Collins recommends careful observation of is telematics. Over the last 24 months interest in Telematics-based insurance products, or usage-based insurance, has skyrocketed, particularly amongst insurers in Europe, North America and Asia/Pacific. During this time, more large insurers have launched pilots and deployments of usage-base auto insurance policies. He notes however in South Africa, interest has not been as great and implementation is still too costly at this stage. Collins says once a business has completed a full assessment of these technologies on its business it should use these impact evaluations to drive its investment strategy.

The Gartner report stresses the importance of building in technology impact discussions as a part of year-end IT budget discussions, including the competitive impact if you fail to adopt the technologies. Discretionary spending should include not only projects with short-term ROI, but also investment in technologies that are likely to be disruptive to the industry or that will radically change operational models.

In conclusion Collins says it all boils down to aligning business strategies with industry changes, such as consumerisation and digitalisation; focusing on meeting shifting customer demands while embracing new ways of trading which will help businesses stay competitive during the next five years.