When we think about digitising something we tend to think of beautiful interfaces, brilliant feature sets and beguiling tools. What we don’t think about is what’s behind the curtain.
Like any product or service, the thing that you consume is very different to the processes and operations that bring it to life… and whilst, as consumers we all want things that are bright and shiny, as businesses we all want the bright and shiny things to be underpinned by a lower cost-to-serve through operational efficiencies.
In our last blog, we spoke specifically about where large insurers could learn from the hyper consumer focused start-ups in the space. In this blog, we want to talk about the beating heart of insurance businesses… about digitising insurance from the inside, out.
Many large insurers will have had a boom in their customer growth during the late nineties and early 2000’s when telephony or postal applications were the largest driver of new acquisition.
The operations, systems and software that underpinned that mode of acquisition were built for a telephony business and may have manual data input, manual checking processes, manual underwriter delivery and may have required customer wait times of 24-48 hours.
Now whilst you may think that these companies will have rebuilt their backend systems during the advent of ubiquitous internet use, price comparison website growth and changing consumer preferences, you may well be wrong. A lot of these insurers whilst addressing changes in the acquisition modality have done little to modernise the operational infrastructure that underpins it with some legacy systems being 30-40 years old.
What you get is a modern front end mapped to a legacy back end, which can create very complicated IT environments.
As a customer, you just need to know your reference number and the claims process.
But the insurer needs to think about so much more… sales, underwriting, policy processing, risk commoditisation, claims assessments, payment scheduling, customer renewals and so, so much more.
In some modern toolkits, the IT infrastructure that supports these activities will be unified, flexible, integrated and simple (by comparison to previous incarnations). However, in a large organisation hampered by legacy systems, there may need to be a scheduled digital transformation programme that looks to refine, digitise and digitalise over time towards a desired end state. It by no means is a direct migration.
Starting the process is half the battle. Reduce the batch size, focus on incremental and iterative improvements and you will soon find that your velocity and the impact starts to scale significantly.
According to a Novarica study in 2018 “a digitisation programme can deliver up to 65% in cost reduction…and reduce turnaround times on key processes by 90%”.
By automating simple, repetitive tasks insurers are not only reducing the risk of human error but also the delays inherent in a system managed by employees rather than software and algorithms, which can free up your key resource to deliver more creative, human-oriented tasks that need addressed.
The beauty of building infrastructure which has an automated component is that it has scale that legacy systems just couldn’t manage. Capacity is a huge consideration when you are dealing with the aforementioned complicated IT environments that patch together legacy back ends to new digital front ends, whereas new off-the-shelf policy administration systems will have been stress tested to see where their thresholds lie, which will likely be way outside of the demand that could ever be generated, meaning that there is full and flexible scalability.
If you are embarking on a digitisation or digitalisation project, we would love to hear from you. Our industry experts are well versed in the challenges facing large enterprises in the financial services sector. We have worked with banks, insurers, wealth management companies and a range of other visionary financial services clients. Our team would love to hear from you.