Insurance From the Outside In
The technology world is changing, and fast. Today, many consumers carry more advanced technology in their pockets and briefcases than most enterprise users have at their desks. Many important innovations that deliver new value are now developed outside the walls of the enterprise. More and more, enterprises need to look outside for sources of competitive advantage -- leveraging partners, service providers, and open communities.
This "outside-in" shift matters because the insurance industry is at a point of transformation. As the IT world has changed over the past 10 to 15 years - delivering social media, mobile technology, big data and analytics, cloud computing and other new, disruptive technologies - so too have the expectations of insurance customers. They now expect carriers to not only provide policies, but also continually add value. And, as a new generation of consumers grows up with advanced consumer technology, they're using that technology to express their new demands, requirements and needs. These changes, both cultural and technological, shift power to the insurance customer.
These new developments are fundamentally altering the economics of the insurance business, and not just from the perspective of customer expectations. Most all insurers are operating under compressed margins - making the agility, cost savings and speed these innovations can provide too valuable to ignore. Insurers may face serious new challenges, but there are also serious new opportunities for competitive advantage, efficiency gains, customer satisfaction and business growth.
Insurance, however, has not yet felt the full brunt of the new digital economy. It's not only a conservative business but also a highly regulated one that revolves around personal and proprietary information. Together, these factors have somewhat delayed the impact of the changes affecting other commercial sectors.
But that's all changing quickly. Many insurers now find themselves on the brink of significant change. New consumer demands and competitive pressures are pushing insurers to dramatically improve their customers' overall experience. This, in turn, is forcing insurers to change their internal IT architectures and the ways in which they interact with both policyholders and agents.
Insurance in Transition
Despite this gathering of new forces, most insurers still operate as inside-out businesses. This means they're big consumers of IT systems developed in-house, often with large, capital-intensive efforts. Similarly, the role of the typical insurance CIO has remained unchanged from what it was 10, 15 even 20 years ago. Just as they did back then, insurance CIOs today still design and build IT systems, run them and support internal customers. These insurance CIOs expect - even demand - an application-development staff and supporting budget large enough to create "roll your own" systems and applications for the entire enterprise.
Unfortunately, in today's fast-changing business and technology environment, this tradition-bound approach to IT management is creating issues for insurers' front and back offices alike. In the back office, carriers are struggling with high degrees of redundancy and duplication in their data centers, the result of the insurance industry's many mergers, acquisitions and consolidations. Their back offices are also weighed down by large and growing inventories of legacy systems. That's in part due to the fact that it's often easier to implement new systems to support the requirements of new insurance products, and leave the old systems in place.
In the front office, meanwhile, both carriers and agents are reacting to the consumerization of IT. As such, they're under growing pressure from customers to offer new kinds of access. This can mean delivering an omnichannel approach that includes online, mobile and social media in addition to the traditional call center and in-person experience; offering do-it-yourself (DIY) services that enable customers to research offerings and carriers before they meet with an agent; participating on social media, where customers share advice, ratings and reviews; or offering self-service claims, often facilitated with mobile and online applications.
For many insurers, solutions to these front- and back-office challenges are the new table stakes. Those that succeed will attract today's (and tomorrow's) connected consumers. Those that fall short may quickly fall behind and find they're losing customers to the competition.
A New Approach
To create these new industry solutions, insurers will need to accept and adopt innovation in ways that blur the traditional boundary lines of the enterprise. This new dynamic is becoming a key driver of 21st century competition not only in insurance, but in virtually every industry. Throughout the economy, managers must cope with several new dynamics, including customer-centricity, community content, real-time analytics, ecosystem innovation, open collaboration, cloud-based IT services, digital leadership, crowdsourcing, co-creation, and collaborative commerce. Taken together, these new dynamics are transforming the role of the customer. Insurance customers of the past were passive buyers; but today, they're active participants. They rate and review insurance products online and through their social networks . They offer product support and self-help to others. And they demand new levels of access via mobile devices, DIY websites or social media.
This shift in customer power also requires a shift from insurers. The old company-centric way of doing business is becoming less effective. A new view is emerging, one that requires insurers to rethink their relationship with the customer and how they engage with them.. Insurers also need to develop and adopt new agile operating models that will prepare them for whatever new opportunities and challenges emerge in the future. In the outside-in economy, you never know what's coming next.
New IT systems and approaches will be vital, too, as insurers adopt new customer-centric ways of doing business. Of course, several well-known technologies - including cloud computing, social media, mobility, big data and location-based systems - will be important. But insurers should also consider:
- Modernization: Legacy enterprise applications are showing their age, and the talent pool available to support them is shrinking rapidly. They're also locking up valuable data and constraining agility. Modernizing these applications, which may include moving them to the cloud, is the new mandate.
- Small data: Sensors in everything from automobiles to household kitchens, along with an increasingly popular array of wearable technologies, can gather information and make it available for analysis. Insurers can then use this data to offer policy discounts, incentives and other innovative products and services.
- Cybersecurity: With the shift to Outside-In, insurers need to rethink how they secure their enterprise data, applications and systems. Leveraging external services while ensuring customers' privacy and security and complying with data-transfer and privacy regulations around the world is all possible but introduces new risk/benefit considerations
The Outside-In Opportunity
The option to source more innovative services from outside the enterprise gives insurance CIOs the opportunity to stop, take stock and consider their future strategy.
By adopting an outside-in approach, insurers can offer a richer degree of customer engagement; meet customer demand for greater relevance and value; and deliver innovative products and services that offer convenience and value not just at the time of a sale or claim, but on a continual basis. Insurers who look beyond their own operations and data sources can also do a better job of segmenting their markets, pricing risk and offering the lowest premiums to the lowest-risk customers. They also can create powerful customer ecosystems - similar to those developed by Amazon, Google and others - to foster and nurture rich, meaningful relationships with their policyholders.
However, the best approach is one that depends exclusively on neither in-house IT nor third-party services providers. Instead, the best approaches blend both. Insurers can continue to utilize their in-house expertise and staff. But now they can augment and integrate that expertise and staffing, where appropriate, with capabilities and services from third parties.
The new outside-in approach sounds good in theory. But how will it look in practice? Consider these examples of future offerings, all possible now with today's technologies and partners:
Auto insurance: Until now, when drivers got into road accidents, they had to go through a complicated and tedious claims process. This could include multiple phone calls, meetings with claims adjusters at auto-body shops, and far too much paperwork. But today, insurers can instead let drivers use their personal smartphones to photograph accidents, then use a mobile app to contact the carrier, get an online adjuster, arrange a car rental and more. The result: a positive experience with the insurer, in real time. Looking to the future, the automobile itself could leverage its own telematics to detect an accident event and automatically trigger that FNOL interaction, including the potential dispatch of EMS or rescue services.
Life insurance: Historically, this type of insurance was a "buy it and forget it" product. Instead, life (and health) insurers could offer wearable sensors, heart monitors and other devices that collect data on policyholders' vital signs, activity levels or sleep patterns. Many insurers are already launching a variety of opt-in programs that promote feedback and reward mutually beneficial behavior. Alternatively, an insurer could create an emergency ecosystem for policyholders identified as being at risk for heart attacks. In the event of an attack, the wearable device could detect the problem and trigger emergency services, improving the customer's chances for recovery or even saving his or her life.
Home insurance: While customers want claims to be quick and easy, many homeowners today lack adequate proof of their possessions, and many are also underinsured. Instead, property insurers could offer products and services that help homeowners photograph and videotape their possessions. Then, in the event of a fire, flood or theft, this photographic inventory could be used as a proof of ownership. In this way, the insurance policy becomes more than just a cost; instead, it actually delivers value. As our homes become more automated and connected, insurers could offer monitoring services that might detect fire, flood, or break-ins early and reduce or mitigate losses to both the carrier and the insured.
The CSC Advantage
CSC provides insurers with end-to-end business process support, giving us firsthand insight into the industry's steepest challenges and biggest opportunities. In many ways, CSC is making the same journey that insurers are, modernizing the application portfolio, consolidating data centers, and moving data and applications to the cloud.
CSC is also making huge investments in its partner ecosystem, relying on an outside-in perspective to accelerate innovation and bring industry leading solutions to market quickly. Next generation infrastructure, software defined networks, hybrid public/private cloud orchestration, big data PaaS, application modernization factories, and state of the art cybersecurity monitoring are just a few examples of where CSC is working with partners like Amazon, AT&T, VMware, Microsoft, HCL, and of course the open development communities to bring innovation to insurers around the globe.
When it comes to understanding the shift to an outside-in perspective, CSC is the thought leader. The firm's Leading Edge Forum, a global research and thought-leadership community, was among the first to identify this new trend. LEF has contributed to the outside-in perspective with position papers, blog posts, videos, self-assessments and executive forums.
"This is a brand-new world, one that's changing the value chain from the traditional high-margin providers of services to a software-based economy," noted Dan Hushon, CSC's global chief technology officer, during his keynote address to a recent conference in Asia. "It's a meritocracy driven by open standards, open collaboration and innovation that's not necessarily happening only inside your firm."