Insurers want to make the necessary technology investments to grow their businesses, but remain hampered by legacy issues within their IT departments and corporate cultures, according to State Street's latest Vision paper, "Platforms for Growth: Technological Innovation in the Insurance Industry."
The 321 insurance executives who responded to the survey understand the pressing need for innovation, but only 28% say their technology strategy is "completely aligned" with their business priorities. The major barrier, according to the group, is legacy systems: 86% cited that as a challenge to innovation.
Ian Cohen, group CIO of the insurance broker Jardine Lloyd Thompson, told State Street that insurers "have fixated about integration and have forgotten the virtues of interoperability… It’s easier and more cost-effective now to exchange information between, or extract information from, disparate systems than to fix back-office legacy systems in the vain hope of trying to integrate them with something else.”
And while insurers are making heavy investments in data-driven customer interaction technologies, they currently rate their expertise with these platforms as average. Fifty-four percent say they are "somewhat effective at turning multiple data sources into actionable [sic] insight." That comes as more than 50% of insurers say they are planning to invest in one or more of CRM systems, social media tools, or technologies to capture new customer insights, like telematics.
The issue may be cultural, State Street found. Non-technology staff consistently rated the IT departments lower than self-assessments for flexibility, innovation, and strategic alignment. To that end, State Street recommends the following steps for insurers to achieve technological leadership:
- Recruiting CIOs and other senior technology managers from outside the insurance industry (especially from "previously disrupted" sectors), to bring in new ideas and help to accelerate cultural change
- Hiring data specialists in from other industries, to provide new ways of analyzing insurance data and generating insight
- Prioritizing data visualization because, when it comes to analytics, visualization is almost as important as the analysis itself
- Striving for interoperability rather than integration of systems to ease legacy modernization pains
- Exploring the cloud and investment in new businesses as other means of innovating outside of the core legacy systems
- Leveraging external data to help to overcome data silos within the company
- Increasing the coordination of technology strategy between the asset management and customer-facing sides of the business
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Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, distribution, core systems, customer interaction, and risk ... View Full Bio