December 08, 2011

To read Part II of this article click here.

Insurance companies typically think of technology as an enabler -- a tool to respond to the challenges and opportunities they face. In recent years, however, as the business agenda and the IT agenda become nearly interchangeable, technology has become a driving force for insurers interacting with customers who are increasingly impatient and demanding. These customers' own familiarity with technology creates new expectations. Customers now expect to be able to manage transactions how, when and where they want.

Each year, Accenture's insurance team looks at major technology trends and their impact on P&C and Life insurers. In 2011, we see eight trends shaping insurance industry thinking, and pointing the direction for industry IT spending in 2012 and beyond. We will cover the first four in this article and the remaining four in Part II of the series.

1. Data as a platform, distributed wherever it is needed. Insurance is already a data intensive Industry, but the amount of data will grow exponentially, from an increasingly diverse range of sources. Insurers need to master the huge volumes of data that they have -- both from internal and external sources -- in order to improve all their processes, enhance customer service, create products around the customer and meet emerging regulatory needs such as Solvency II.

Data is distributed across geographies, business silos and many different internal and external databases. It is both structured and unstructured. It is produced in huge volumes by new channels such as aggregators that in some markets, such as U.K. auto, can account for nearly half of all new business. Since data is not always available where and when it would be most valuable, it needs to be effectively distributed -- possibly in the Cloud where security and data privacy permit -- to maximize the gains in productivity that could be achieved by providing fingertip access to data to all that need it, on whatever device they are using.

2. Analytics at the heart of achieving enhanced customer insight and more efficient business processes. The insights that predictive analytics can yield are particularly important to address changing customer behavior but are more powerful still when they are integrated with business processes. Analytics can improve marketing and distribution activities by helping to identify the right products for the right customers at the right time, shortening the sales cycle, boosting cross-selling and improving conversion rates. Product innovation is also more effective and faster when analytics are in the mix. Predictive and behavioral analytic tools can assess the likely take-up of a particular product. They can model the impact of price changes and different features and create real-time insights, helping fine-tune products to meet evolving customer needs.

Applied to claims processes, analytics can help reduce fraud by spotting the elements of a claim that indicate a higher propensity for fraud In the US, for example, the National Insurance Crime Bureau suggests that 10 percent of all property and casualty claims are fraudulent, yet only 20 percent of those are detected.

3. Cloud computing creating value higher up the business through applications and services. Cloud computing has yet to make the same impact in insurance as it already has in many other industries. That's largely because many insurers are saddled with legacy systems that cannot be easily moved into the Cloud. This is changing, however, as some insurers are beginning to source processing capacity and storage. However, it's likely that some of the biggest gains will arise from the development of applications (software as a service, SaaS, and platform as a service or PaaS) that will enable greater agility and flexibility, allowing them to move at speed and scale to address new opportunities, improve responsiveness and enhance processes such as underwriting.

For example, Pitney Bowes Business Insight has launched a cloud-based service, Underwriter's Location Profiler, which allows P&C insurers to automate location-based risk assessments and integrate them into underwriting processes to achieve faster, more comprehensive and more accurate risk pricing. Cloud will also provide insurers with the capacity to respond faster to new channels, for example allowing scalable and faster quote processing for submissions received from aggregators. Smaller businesses will also be able to use Cloud computing to compete with their larger, Tier-1 counterparts. And Cloud will enable all insurers to 'stretch the walls' of their computing capacities and respond to peak demands more easily and at lower cost.

4. Service-centric rather than server-centric architecture to create flexible, responsive and agile business models and capabilities. Rigid and costly legacy systems form a major barrier that prevents insurers from moving to more agile and responsive systems and business processes. It's a view shared by industry analysts who in an Accenture survey overwhelmingly (91 percent) rated technology as either critical or important to the industry, with more than half suggesting that current technology performance was "poor" and "in need of major improvement." To achieve their business goals, insurers will need to move from architecture based on servers to architecture that is built around service. What that means in practice is effectively decoupling distribution from manufacturing in order to create more flexible and agile systems that can respond faster to business needs.

A more agile and flexible architecture means that product development and launch can be made faster through the creation of product factories adaptable to fast-changing requirements. Life insurers will be able to provide their product management staff with the ability to configure products using a wide range of variable inputs, test them and decide to launch or abandon without the need to constantly refer to a technical team for support. Front office systems can be aggregated and integrated to deliver the seamless channel experiences that customers want.

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Taken together, these trends argue for a comprehensive strategy that blends business concerns with IT imperatives. Four additional trends -- which we will explore in Part II -- encompass security, privacy and the growth of social platforms, with user experience becoming the primary driver of new products, services and marketing.

To read Part II of this article click here.

About the Author: John Del Santo is managing director of Accenture's global insurance practice.