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Since the sixties, the technology of the P&C insurance industry has cycled through a couple of eras, and we’re at the dawn of the third. As the pace of technology change accelerates in the coming years, what technology is required to make sure P&C insurers can succeed? We can answer this by taking an in-depth look at the different eras of P&C insurance technology.
The Evolution of InsurTech
Insurance has been around a long time. King Hammurabi of Babylon’s Hammurabi Code outlined the first insurance policy in history. It offered basic coverage to debtors if some catastrophe prevented the repayment of a loan. A few thousand years later, P&C insurance has certainly evolved. One of the most notable differences is the use of technology. The mid-’60s marked the beginning of the first “InsurTech” era, the “transaction era.” Up until about 1995, the era’s system design focused on capturing financial data, policy limits, claim reserves and so on. Mainframe systems were highly efficient, reducing paperwork and providing adequate processing performance. But their inflexible design made it difficult to cater to the needs of end users.
Next, in the “process era,” systems were designed to help insurers enforce standard processes and management control across the insurance life cycle. The era was characterized by web-based systems, modular core systems, systemized business rules and straight-through processing. This phase occurred from the mid-’90s until just recently, when a new era emerged.
Today, we’re at the dawn of the “engagement era,” which will persist for years to come. The systems of this era are designed to meet the needs and expectations of users on their own terms. They provide the experiences and journeys that they want based on who they are and what they want to do. In the engagement era, systems are designed with all users in mind—including policyholders and potential customers, as well as agents and insurance workers.
Engagement era systems’ characteristics include support for core operations and for data and analytics. Digital engagement must be provided in a cohesive, orchestrated manner. The user experience must be consumer-grade, and the technology must support an omnichannel experience.
P&C Insurers: Why Should You Care?
The aforementioned characteristics reflect our new world, shaped by the Digital Revolution. Today, social media, mobile devices, and emerging technologies like Internet of Things and telematics all influence business success in every industry, including P&C insurance. Investing in technology that supports these trends can ensure continued competitive advantage. In fact, a September 2016 McKinsey survey found that insurers in the top quartile of technology investment are growing twice as fast as their less advanced peers. Concurrently, they’re delivering better profitability—a combined ratio 6 percent less than their peers. Operationally, investment in engagement-era technology clearly delivers compelling results.
Perhaps equally compelling is how technology investment drives user engagement. Leading brands like Amazon and Apple are using technology to foster new expectations for convenience, ease of use and personalization. These expectations are spilling over into other industries, including insurance. Today’s users demand self-service options for internal users and customers, personalized product recommendations, an intuitive mobile experience, and fast claims settlement. By virtue of a unified core, data and digital platform, omnichannel support, predictive process, and consumer-grade user interface, engagement-era systems can support these demands and elevate user engagement, ultimately driving customer loyalty and employee/agent productivity.
With the engagement era now upon us, the case for deploying engagement-era systems is clear-cut. P&C insurers must recognize that modern trends require modern technology. Continuing to rely on systems and technology from previous eras won’t ensure the desired ultimate results—growth, competitive advantage, loyal customers and productive employees.