Other parts of this series:
Driving technology value is an ongoing process
As I’ve explained in the earlier posts in this series, investment in new technology should be the final step in an insurance carrier’s path to innovation. First, we recommend that they set in motion the process of eliminating technical debt, then they should collaborate with their ecosystem partners to embrace new technologies quickly and productively. Most of all, insurers should operate in the knowledge that their investment in and maintenance of technology is an ongoing process, in which all systems and platforms are interrogated to ascertain whether they are delivering maximum value. This enables the freeing up of funds to spend on innovation that will grow and transform the enterprise.
Insurance leaders can take the following steps to ensure that their technology serves them the way it should.
- Relentlessly manage technology unit cost to serve
Companies need to identify opportunities to reduce unit costs for core/commodity services. This means they will need to develop the ability to identify true cost to serve. This goes beyond just project expense or run expense and expands to the total spend associated with a service over its lifetime.
- Adopt a zero-based mindset (ZBx)
It is important for companies to discern the difference between what they think they should be spending on technology and what they actually need. A ZBx is a practical way of identifying non-working money that can be freed up and re-invested in strategic growth areas.
- Set an agreed required level of service
Taking this step ensures that services function at a predetermined level, as opposed to delivering the highest possible level of service—which invariably comes at a high cost.
- Interrogate additional devices
Insurance carriers should examine additional technology in the office such as multiple computing devices, white-glove service desks, company-provided cell phones and high-end video conferencing that are often misinterpreted as requirements and are not part of any overarching long-term tech strategy.
- Watch out and plan for hidden costs
There may be some unintended consequences as companies move out of technical debt and shift towards pay-as-you-go external services. Executives may see costs shift more heavily from capital towards operating expense. In addition, short-term project costs associated with recovering from technical debt may be incurred, as well as the potentially higher cost of maintaining services. For this reason it’s important that companies budget for the potential financial impact of the shift, looking to initiatives such as unit service cost reductions or waste elimination to fund their value-enhancement journey.
How insurers can meet the challenge
As I have discussed in this series, insurers can align their technology to deliver more value by reducing technical debt, collaborating with ecosystem partners for speed and financial leverage, and managing unit cost to serve to fund growth. With these steps in place, they will be poised to compete head-on with insurtech disruptors.
To discuss how your firm can derive the most value from its tech spend, get in touch here.