By Marisa Ruscitto is Head of Americas Technology Sales, Insurance Consulting and Technology at Willis Towers Watson
Disparate systems designed for specialised jobs in insurers’ departments also contribute to duplication. System integration bridges these disparate platforms so they are better connected and seamless.
Why integration is now so important
Capital and risk need to be matched faster and more effectively. Insurers must now know their customers better and pay more attention to speed to market and cost efficiency. Market forces such as the growth of digital platforms, buying trends of younger generations, the proliferation of broker portals and the rise of InsurTech businesses are making this necessary.
Realistically, no single-purpose insurance system or platform is able to deliver all of the needs of every company. This means that companies need to connect and pool internal and external resources and systems, and effectively harness data.
The availability of good data is fundamental in defining differentiated customer experiences, underwriting, pricing and, to a growing extent, claims. Rich data enable you to employ better predictive analytics, evaluate and price individual risks more effectively, and settle claims more quickly. Our own research of personal lines and commercial insurers’ use of advanced analytics shows that most companies are planning to harvest additional data sources in the next two years, many of them quite complex and unstructured.
Systems integration can enable a business to “plug and play” additional capabilities and address system gaps in order to enhance customer service, rate deployment, and address a myriad of other current and future ambitions, rather than ripping everything apart at a huge cost and disruption to the business.
Speed and simplicity
Companies are looking to simplify the quote process and deliver more precise pricing. Integrating third-party data — such as vehicle details, property characteristics and commercial building occupants — help them to do that.
Research suggests that millennials only want to answer a very small number of questions to get a quote. Their focus is on speed and simplicity, seeming less concerned with well-known brands or a company’s ability to pay in the event of a claim.
Systems integration also makes a big operational difference behind the scenes, moving data efficiently around to various parts of the business where the information is best used, thereby saving massive amounts of time and manual effort, as well as reducing margin for error.
The legacy challenge
Legacy systems present the biggest challenge, as they were typically not built to be linked to other platforms or external solutions.
Therefore, an integration layer can be leveraged to enable the legacy platforms to be more easily integrated and connected to other more modern platforms, solutions and services.
With the ability to more easily bolt on modern services and solutions, companies are now able to extend the life of their core legacy systems, which often still adequately provide basic services like billing and policy issuance. The idea of modularisation is more economical as it continues to capitalise on the initial core investment and minimises business disruption.
One hurdle we have come across is that some primary stakeholders of systems continue to have the “if it isn’t broken, don’t fix it” mindset. They think the easiest way forward is to duct tape multiple systems together and continue to deal with the issues of poor or non-existent systems integration and manual reporting or data entry. The idea that you can achieve some of the benefits I’ve been talking about, without scrapping everything you’ve already got and moving to an entirely new system, seems alien to them.
Another thing that can get in the way of progress is the buy versus build debate: Is the up-front cost of buying a systems integration solution worth it? This challenge or risk aside, when weighing your options it’s important to realise it is not a one-time investment. Companies also need to consider the cost of maintaining whatever they build and whatever integration route they take. Insurers must factor in future budget implications and consider whether they have the in-house talent required to continue to develop and improve their systems to meet market demands and continuous technological advancements.
What best-in-class will look like in 10 years
What these systems effectively deliver — speed, flexibility, agility, value and service excellence — is key and will determine some of a future system’s likely features.
These include software applications that optimise the use of technical resources and help move data efficiently around the business, more of which will be available on an on-demand basis as software-as-a-service. And rather than companies continuing to invest in costly and potentially limiting hardware environments, we expect more insurance systems to operate in the cloud.
More personal lines insurers are realising benefits, but a number of commercial insurers are also beginning to derive a competitive advantage. Progress has often been linked to the availability of data in a form that insurers can use, but the right software and analytics techniques can now substantially overcome this obstacle. And pricing in a number of insurance markets remains soft, so companies need to drive efficiencies and reduce their expense ratio. Better systems integrations and more streamlined workflows will help with both.
Finally, it would be one thing if established insurers were only matching their systems integration capabilities against each other, but they aren’t. The growth in InsurTech businesses means that some early-stage companies are starting from a clean slate, without a web of legacy systems, so it is easier to implement state-of-the-art technology. Insurers have the opportunity to buy into or partner with these early-stage businesses. This can often lead to significant leaps forward in systems connectivity and what it can make possible — not good news if that’s your competitor.
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