Other parts of this series:
A Future Systems strategy helps insurers quickly scale up innovation throughout their organizations and release value trapped in their technology investments.
Smart carriers are turning to a Future Systems technology strategy to ready themselves for the growing disruption that is set to hit the insurance industry. This approach, as I discussed in my previous blog post, enables insurers to quickly scale up innovation throughout their organizations.
The route insurers should follow to implement a Future Systems strategy will vary according to the unique requirements of each company. The course of the journey will also need to be frequently reviewed to accommodate any shifts in the priorities of the business. However, our research, together with the insights we have gained helping many insurers transform their businesses, have given us a good indication of the direction carriers should take when embarking on a Future Systems strategy. Here are some of the key factors:
- Adopt technology at scale rather than commissioning a stream of proofs of concepts. Proofs of concepts may help organizations learn and initiate change, but they don’t create value. Only the scaling of technology can generate value. Most of the technology that is subjected to a proof of concept can be deployed at scale once it’s integrated into a full transformation plan.
- Nurture talent and deploy new agile ways of working. Traditional “waterfall” approaches will continue to be needed to manage some legacy systems. However, the adoption of new digital technologies at scale and the accompanying agile deployment of talent can often unleash trapped energy among the workforce, motivate staff and attract new skills.
- Get grounded in cloud computing. Moving to the cloud allows companies to seamlessly leverage a wealth of new capabilities, particularly artificial intelligence and analytics applications. Leaders in the implementation of digital technology treat cloud services as a catalyst for innovation. Our research shows that 95 percent of these leaders have adopted sophisticated cloud services such as serverless computing. Only 30 percent of the companies we rank as laggards are using such services. These companies, which have been slow to adopt digital technology, tend to see cloud services as a cost-effective “data center.”
- Recognize data as both an asset and a liability. Of the 28 technologies we questioned companies about, during a comprehensive global survey, “technologies associated with real-time data capture and analysis” were identified as most important in transforming and improving business processes. Again, digital technology leaders are ahead of their peers in their commitment to investing in the quality and security of data. They’re also more committed to building ethically responsible frameworks for managing data and artificial intelligence resources.
We found that companies that adopt a Future Systems strategy generate better returns on their investments in technology and move much quicker than their competitors to implement new digital innovations. These companies have also taken the lead in deploying microservices and application programmable interfaces (APIs) to decouple their data and applications from their legacy infrastructure.
Most insurers have started to pilot and adopt new technologies such as big data analytics, software-as-a-service and the Internet of Things. However, technology leaders, particularly those that have adopted a Future Systems approach, are well ahead of their peers in their take-up of innovations such as blockchain, digital business technology platforms and artificial intelligence. These innovations are going to be among the most disruptive technologies in the insurance industry during the next five years, according to Gartner and our own research.
Companies well advanced on the Future Systems journey tend to go far beyond simply shoring up their defenses against further industry disruption. They’re using digital technology to extract value trapped in their businesses. This is being achieved by, among other things, transforming the experience they provide to their clients and implementing boundaryless systems that can stretch across applications, business units, even organizations and encourage collaboration and innovation. These systems usually use cloud services, with uniform data, security and governance standards, to link workers, intelligent machines and information resources.
Several insurers have embarked on blockchain partnerships.
Strategic partnerships, within a Future Systems framework, enable insurers to quickly integrate and scale up emerging digital technologies across their organizations. By drawing on the complementary skills or resources of their partners, insurance providers can curb expenditure, cut development times and accelerate the rollout of innovative products and services.
Several insurers are already working with partners to incorporate blockchain technologies, for example, into their organizations. These partnerships have the potential to not only create new business opportunities for insurers but to also transform their organizations and enhance the value of their businesses.
Some impressive blockchain collaborations have been showcased at the Efma-Accenture Innovation in Insurance Awards:
Aon in the US is developing a digital ecosystem, underpinned by blockchain distributed ledger technology, that provides reinsurers and brokers with a secure, auditable, realtime platform for the exchange of quotes. Aon is working with Accenture and The Institutes’ RiskStream Collaborative consortium to build the insurance ecosystem.
The Hong Kong Federation of Insurers, together with local fintech firm CryptoBLK, has used blockchain distributed ledger technology to build an extensive motor vehicle authentication system. The Midas system allows insurers, policyholders, law-enforcement agencies and government departments to authenticate motor vehicle ownership without sharing or revealing any identifiable personal information.
AIG UK has collaborated with Standard Chartered Bank to build a payments network for a global logistics company. The network was built using TradeIX’s TIX open-source blockchain platform and a trade-receivables-funding solution, Global Finance Manager, developed by Aronova.
In my next blog post, I’ll discuss how three big insurers are transforming their businesses to become industry disruptors. Until then, have a look the links below. I’m sure you’ll find them useful. Alternatively, send me an email. I’d like to hear from you.