Many companies are transitioning to customer-centric business models, a move which provides the foundation for investments in broad-based technology with high ROI impact. The replacement of core engines with cloud-based systems for distribution, underwriting, product development, and claims will allow companies to decrease operational costs, improve access to data, and boost speed to market.
[ More on industry predictions for 2014: 2014 Insurance Industry Outlook: 5 Predictions. ]
“Straight-through processing can strengthen the value proposition with agents, and mobile technology can reach and service markets that increasingly demand convenience and a flexible interface,” states the report. An improved customer experience, the importance of agents as digital customers, and the popularity of mobile all demand changes in existing technology.
Customer-centric businesses are leveraging technology to create products that address risks and insurance needs created by new and disruptive technologies. As stated in the report: “In many cases, these risks have a legislative or legal foundation for defining risk and coverage needs, thereby increasing awareness and focusing demand.” Cyber insurance, catastrophe insurance, and workers’ compensation are three areas requiring broader risk protection in the coming year.
Insurers should also rethink their approach to data and information systems, as legacy data may be unreliable. The report recommends investing in “enterprise data excellence,” which contains five levels of data management and implementation:
- Enterprise intelligence: Integrated systems are developed alongside business priorities to simplify and improve the company infrastructure and meet changing requirements.
- Enhanced analytics: This turns data into information that can help with decision-making.
- Predictive analytics: These tools should be implemented throughout the business value chain to optimize risk analysis.
- Data governance: A strong governance structure supports data policies and procedures for the usage, storage and disposal of information.
- Data security: This is necessary to protect company information from domestic and international cyberattacks.
Going into 2014, EY also recommends that insurers exploit segment differences for targeted growth strategies, become aware of emerging investment challenges, and prepare for increases in governance and accountability.
"Successful companies are in various stages of implementing a customer-centric business model that integrates internal technology to reach consumers," said David Hollander, principal, Ernst & Young LLP, and EY Global Insurance Advisory leader, in a statement. "As closer alignment of technology with commercial objectives becomes a strategic imperative, insurers have an opportunity to invest in cost-effective systems for distribution, underwriting, product development and claims."