Canadian property and casualty insurance outlook 2014
Digital technology and big data
With the low interest rates over the last few years, insurers have tried to focus their investments internally in technology and improving operating capabilities. With these longawaited investments, insurers can transform their applications into an engine that is fully integrated with all their key activities, as legacy systems were not flexible enough to provide the kind of business and regulatory information required for strategic, operational and compliance purposes.
A complete solution that would include cloud-based systems for distribution, underwriting, product development and claims management would go a long way to setting insurers on the right path. Making such investments would decrease operating costs and increase access to data and information across the whole organization, instead of in individual silos operating on their own.
For insurers to make the most of these investments, they’ll need to have a customer-centric model instead of the traditional product-centric model. Digital technology is one of the greatest potential opportunities for insurers today, as it can help enhance the customer experience. Mobile technologies, including ever-improving smartphones and tablets, allow for flexible interfaces that can strengthen the value proposition with customers and agents.
A recent EY survey of global insurance executives in North America, Insurance and digital: the time is now, highlighted both the progress and continuing challenges that insurers have faced in the digital world. All insurers acknowledge a lack of digital sophistication and a need to take action, with 57% of respondents expressing their intention to develop a business case for transforming their organizational structure to support digital strategies, and 78% anticipating this development within the next three years. But while respondents had high expectations of rapid change, they noted that legacy technology and cultural constraints would hinder the transformation. It is not surprising that 79% acknowledged spending less than 10% of their business and IT development budgets on digital initiatives. Nonetheless, almost 40% indicated they have senior management support to transform their technology, as well as a digital sponsor within the executive C-suite. However, having a sponsor and intent is just not enough — insurers need to commit to action to get things done.
The need to improve the customer experience and the growing importance of intermediaries and agents have fundamentally changed the insurance landscape. Communication mediums need to be constantly reviewed as the customer experience changes with mobile devices and social media. Once the customer is placed as the center of focus, aligning the right technology and advanced analytics will allow insurers to make huge strides toward improvement in customer satisfaction and even customer profitability.
Digital technology is here to stay. Other industries have been quick to adapt and are now competing on a different level. Insurers in Canada are behind, and many are not prepared to take action to catch up. Those that make the necessary investments and follow through with them will be ahead of the rest in the near term and beyond.