In my last three blogs, we discussed what it means to be a digital insurer and how digital preparedness looks much like a fusion reactor — accomplishing something we called Digital Fusion. For a recap, you can begin with the blogs here. In the November 2017 issue of Canadian Underwriter, I also discussed why Digital Fusion is necessary and what it takes to become a digital insurer. We gave some specifics regarding how digital preparedness meets insurer needs throughout the insurance process. Today, we’ll look at how insurers will benefit from Digital Fusion, but we will home in on growth as a primary benefit — because digital strategies should never lose sight of their focus on growth. Digital Fusion enables growth.
Platform Shifts at the Core of Digital Growth (Systems)
No matter what lines of business an insurance company sells, it is going to want to accept new technologies and data sources into its unique ecosystems. Legacy core systems currently stand in the way. These systems have proven their capability to run traditional business models (Insurance 1.0), and they are mission-critical transactional systems that ensure continuing operations and compliance. However, over time, these systems have generally been cobbled together through expensive, high-level and limited integration points. These ecosystem solutions are often originated at different enterprises with different architecture, technology and even data models. Out of necessity, they were “integrated” for positioning as attachments to the primary core system. This may have sufficed to address short-term needs, but the approach falls short in providing differentiated customer experience and deep engagement because the solution will simply be the façade painted over the top of the insurer’s transactional systems.
See also: How Sharing Economy Can Fuel Growth
Rather than a retrofit architecture, the next generation of core is a complete architecture redesign that fuses common capabilities across transaction processing, insights and engagement needs with a strong “find and bind” integration architecture to tap into an ecosystem of innovative data and solutions. It is open to non-native components, supports rapid change to adapt to shifting industry needs and allows for continuous innovation. It can generate analytics and calibrate the customer-centric solution without losing speed or increasing total cost of ownership. That positions the insurer for market adaptability, innovation and, most importantly, continued growth.
Speed-to-Market Growth — Evidence for Agile Digital Connectedness (Innovations)
Part of the fascination of Digital Fusion is an acknowledgment that the sky is the limit and that digital thinking will provide growth through speed.
Let’s look at an example from auto insurance. Vehicles are able to tell us more and more every day. We started with telematics being able to communicate miles driven. Then we added capabilities such as speed, acceleration and braking habits. Carried to the limit, however, automobiles are mobile data nets. They can know where traffic is, where most accidents occur, how closely cars are following each other and even the temperature outside, including if ice is building on the roadways. Most have sensors that know when impact has happened. Consider all of the data that can be fused into these products and their analysis to provide real-time value as well as operational value. The P&C insurer that can apply all forms of digital content (social media usage, localization, IoT, mobile usage while driving) and also have access to relevant transportation data will be far more liable to be able to price competitively. Add another layer: digital feedback. How can the insurer rewrite daily driving scenarios with simple communications back to the insured to reduce risk or to provide value-added services? Insurers in all lines of business will be dramatically improving their use of real-time feedback in the coming years.
But that capability is only the tip of the product iceberg. What if the insurer could take that information and roll it into a new usage-based product in a matter of months across all geographies because it is employing a cloud “find and bind” architecture, allowing it to freely use innovations without massive integration work? That is the promise of Digital Fusion. Traditional platforms can’t keep up with innovation growth. "Find and bind" architectures facilitate growth through innovations.
This isn’t just a vision of the future. Majesco is currently working with companies that have already implemented frameworks where it is taking “months not years” from product idea to market launch. To view some of those examples, consult the recent Majesco white paper on cloud business platforms.
Big Growth in Smaller Packages (Products and Experiences)
Digital insurance 2.0 represents a new age of insurance that requires a new way of understanding how digital platforms will affect insurance growth — that much growth will come through segmentation. What does this look like?
- Higher volumes of lower transaction values.
- Personalized service down to the individual level, even if the insurance is sold to groups.
- Micro-duration insurance priced and sold “on demand.”
- Insurance that is so personalized in use that it must use AI to consolidate data, analytics, pricing and underwriting.
- Low-touch operations with a high-touch feel using cognitive communications.
- Much of this is accomplished with a micro-services approach, instead of a core system administration approach.
- Digitally capable systems, without the distractions of infrastructure and operations
- The ability to plug in innovations
- A framework for creating a broader range of products with improved user experiences
- A steady stream of valuable insights that will perpetually provide relationship-building ideas for engagement.
- More profit with a better process
- Lower risk at lower cost while building a future-ready insurance operation
