(Image credit: Dollar Photo Club.)
Novarica’s U.S. INSURER IT BUDGETS AND PROJECTS study 2016 affirms that insurers are estimated to be spending as much on data and digital initiatives as core systems (Novarica Survey Suggests Insurance IT Spending Nearing Digital Tipping Point). However, as Novarica’s president and CEO Matthew Josefowicz noted to us in a recent exchange, data/digital and core systems investments are complementary rather than competitive. We asked Josefowicz to talk about what the latest findings say about the status of insurers’ digital journey, and we share that exchange below.
Insurance Innovation Reporter: In the report you say that the industry is “slowly but surely moving itself forward”; forward towards what? Are we seeing the shift to the digital enterprise?
Matthew Josefowicz, President/CEO, Novarica: Yes. As insurers embrace analytics and digital channels, the technology enables them to truly become focused on customer experience and creating customer value.
IIR: Would you agree that, while core system replacement is important, and we’ll continue to see carriers investing in foundational processing capabilities in this regard, the shift in spending suggests a shift to a more data-centered insurance IT architecture in the future?
MJ: Part of the drive to modernize core systems is to make them less of an inhibitor to digital innovation. As they become more flexible and configurable, they actually become less “core.” But they need to have data and process models that are extendable to be able to support new products and practices.
IIR: Do you think the shift in spending signals that insurers have a strong sense of the possibilities of technology, or merely that they are aware that they have to do something?
MJ: I think the industry is dangerously under-invested in technology. Technology capabilities have changed dramatically in the last five years, transforming industry after industry, but insurers have stuck doggedly to their 3-5% of premium spending cap, as if that was a good thing in and of itself.
IIR: We tend to think of the importance of digitalization for customer and distributor experience; how important is it for attracting and retaining talent?
MJ: Digitization needs to be considered in the context of stakeholder experience. Customers and distributors are key stakeholders that need easy, flexible, responsive information access. But so are underwriters, claims handlers, product designers, marketers, service representatives, and, oh yeah, investors. Digital experience crosses all stakeholders.
IIR: Bearing in mind the results of your study, how would you characterize insurers’ understanding of the economic value of the cloud and readiness to incorporate it into their IT environment?
MJ: I think the adoption of Cloud/SaaS is less about economics and more about speed and simplicity.