May 07, 2014

The insurance industry, never known for rapid change, is somewhere in the middle of the pack when it comes to digital transformation. Despite regulatory obstacles and organizational cultures that reinforce conservatism, however, insurers still have time and opportunity to get moving in the right direction. Many insurers have deep resources, strong balance sheets, enormous scale, vast quantities of data and rigorous process discipline – all assets that can help them connect with customers in a new digital environment.

The 2014 edition of the Accenture Technology Vision highlighted six IT trends that will have a transformative effect on businesses over the next three to five years. For insurers, these trends will mean that business models must evolve at high speed, even while adaptation of new technologies is in process. Today, we'll discuss the first three:

John Cusano, Accenture
John Cusano, Accenture

Digital-physical blur

The "real world" is coming online as smart objects, devices and machines increase our insight into – and control over – the physical world. This is more than just the "Internet of Things" — it is a new layer of connected intelligence that supports employees, automates processes, and incorporates machines into our lives.

[Why Accenture thinks $400 billion in insurance premium is up for grabs in 2014]

Intelligent interfaces such as wearable computing, home sensors, and vehicle telematics are blurring the physical and the digital. These technologies – expanding rapidly in number and dropping rapidly in price – take advantage of the cloud to share data with other "edge" devices. They can sense environmental variables and feed analytics engines and visualizations so that organizations can make smarter decisions in real time.

Over the next five years, intelligent edge devices will bring massive disruption to the insurance industry. Digital-physical blur promises to transform the industry by giving insurers usage and contextual data they can use to refine risk, redefine products and transform customer relationships. Insurers are not only integrating existing trends such as vehicle telematics into their business models, but they are considering what the next wave of disruption – dramatically illustrated by the emergence of the driverless car – will mean for their businesses. Carriers that started off with pay-per-use insurance offerings are moving toward mobile, contextual and behavioral-based products.

From Workforce to Crowdsource

The future workforce will extend beyond employees to any user connected to the Internet. Cloud, social and collaboration tools and technologies now allow insurers to tap into vast pools of human resources around the world.

Digital collaboration technologies are no longer just about enabling insurers to collaborate more effectively within the boundaries of their own enterprise; they now involve connecting insurers to smart, enthusiastic people in the outside world who have the interest, motivation, time and expertise to work with insurers to solve some of their most daunting business challenges. Few insurers, however, have grasped the idea of accessing a truly liquid workforce – pools of premier talent gathered in virtual communities and coalescing around specific business problems. This expanded workforce offers expertise that may not be available in-house, and it offers scale that can be leveraged to solve problems that may be too large or expensive to solve internally.

An insurer's workforce today needn't be restricted to the people on its payroll or limited by its culture. Thanks to digital platforms such as Kaggle, InnoCentive, Elance and oDesk, insurers can tap into online resources for tasks ranging from designing a new logo to helping create the breakthrough products and services of tomorrow.

Data Supply Chain

To unlock the value of their data, insurers must start treating data more as a supply chain, enabling it to be accessed and then to flow easily and usefully through the entire organization. Eventually, the data should flow to the insurer's ecosystem of partners, as well.

Many insurers see data of the lifeblood of their organization; that is why they are implementing the newest big-data tools, investing in advanced analytics applications, and purchasing the latest data visualization software. Yet few insurance companies have mastered the concepts at the foundation of modern data management – the mobility and portability of data, its structure and velocity, and data as a "saleable" product to be monetized.

High-performing insurers will liberate their data, generate value from it, and operationalize insights to improve strategic decision-making throughout the organization. To do this, they will manage their data, like any other core product, in the context of a supply chain.

The supply chain begins when data is created, harvested, imported, or combined with other data. The data then moves, flows, and transforms through the supply chain, incrementally acquiring value. The supply chain ends with valuable insight as its output. Guiding this movement is a federated data services platform, which unifies data from multiple systems into a single view and enables business users to interact with the data in a standardized way.

In Part II, we will discuss three more trends shaping the future of insurance:

• Harnessing hyperscale: Hardware is back (and never really went away) • Business of applications: Software as a core competency in the digital world • Architecting resilience: Built to survive failure

About the author: John M. Cusano is global managing director of Accenture’s Insurance industry practice