Insurance opinion: As the sun sets on 2020

As 2020 comes to an end, the legacy it has left behind has probably changed many things forever. Traditional High Street retailers along with other incumbent players across a range of industries are falling like dominos. The Covid pandemic has blown their safety nets down the street creating a new normal, where consumers are ordering everything from cars and furniture to clothes and food from the comfort of their dining room tables. How many times did we hear “sure you can order a pizza or your groceries but who in their right mind would buy expensive items online?” – well consumers are doing just that right now.

Insurers were stating that consumers favour the convenience of an annual motor policy. Well, that was true until they realised they could pay a premium based on how much they were actually using their cars and frankly that’s not been much this year. InsurTechs such as ByMiles, Cuvva and Root are attracting more attention than ever, and most ‘traditional’ insurers are trying to work out how they get in the race to launch similar propositions. The threat of other InsurTechs, potentially the car manufacturers themselves and other adjacent industry players throwing their hats into the ring is becoming very real.

This paradigm shift in behaviour can no longer be ignored so it comes as no surprise that, whilst the insurance industry has spoken about the need to digitalise for many years, 2020 has changed their strategic priorities in order to remain competitive and in some instances just to be able to survive in the longer term. Most insurers surprised even themselves by how quickly they were able to adapt to the new normal and within days they were running their operations from not just a couple of offices but 1,000’s of locations – their employee’s homes.

If anyone had suggested that remote model even a year ago, we would have all branded them nuts! Maybe in 2021 we will start to see insurers deploying core platforms made up of a bunch of best of breed InsurTech solutions intelligently glued together and process gaps being filled with process automation platforms rather than committing 10’s of millions to a single platform and tying up resources for the next three to five years. Does anyone even know what sort of world we’ll be operating in in three years?

If the pandemic has proven anything to us it’s that we have to operate in varying structures, moulding our processes and resources to adapt to any new environment that is thrown at us. That’s pretty difficult to do with our traditional way of thinking and with our hands tied by our monolithic systems. We need to be able to ‘plug and play’ any new solution that’s relevant to the challenge that we need to address. That may mean taking a new InsurTech “component” or building out a new automation process within days or weeks. The old norm of a digital transformation strategy that takes years to plan and years to implement may well have had its day.

We all talk about being “customer-centric” but in reality, most insurers are focused on internal process efficiency and reducing frictional costs rather than starting from what our customers are wanting or expecting. We either have to proactively adopt the new mind set or try and play catch up when the insurer equivalent of Amazon comes sprinting onto the playing field like Usain Bolt and suddenly changes what people accept as being the new normal

Several industry pundits were predicting the demise of a big chunk of the InsurTech eco-system during this year but in reality, whilst the investment community took a more cautious approach there has still been almost the same amount invested into InsurTechs as last year. Luko, a connected home-based insurer, practically unheard of two years ago, just raised over $60m this week!

I, for one have not missed the daily commute into London 5 days a week, and I know many of my peers feel the same. People have experienced a new way of working which a lot of them actually prefer. This will inevitably prompt insurers to look at new hybrid working models which will potentially have a significant knock-on impact on other industries particularly real-estate. We are probably also going to have to rethink about our technology environments – expecting our claims handlers to work with 2 and in some cases 3 screens on their desks so that can access all the disparate applications needed to perform their duties just won’t work in the home environment

From a customer perspective, I wish I had a pound for every time an insurer has blamed “legacy platforms” as the main reason for not being to provide simple services such as customer self-service portals for mid-term policy changes or enabling a claimant to be able to track the progress of their claim. Not even having some flexibility in scheduling the various tradespeople required to fulfil a claim is just not acceptable these days, especially when the insurer has just invested £50m to £100m in a shiny (ok not so shiny) new core platform.

Even the big boys are starting to agree: The future is likely to be an “ecosystem of technologies enabling end-to-end automation” (Gartner), based on a “combination of tools and methods” (EY) with focus “shifting to rapid iterations” (Accenture)

Intelligent Glue

In short, Insurers embracing a new digital future and changes in their tech infrastructure is critical for short-term performance and long-term competitiveness. According to Gartner, the bigger the project – the greater the risk of failure: analysis showed that projects with budgets over $1M have a 50% higher failure rate than projects with budgets below $350,000.

In the short-term, whilst insurers understandably need to conserve cash, we are likely to see a move away from lengthy, big-budget “rip and replace” projects to leveraging “Intelligent Lego” components to connect and enhance existing systems. By using automation as an alternative to replacement, insurers are potentially more likely to be able to adapt to the new norm and deliver the digital based, customer first, insurance propositions that we must provide in order to stay relevant

2020 has certainly been an ‘interesting’ year and I believe 2021 will see more transformational progression in the industry than we’ve seen in the past 10 years so, as the sun sets on 2020, I am looking forward to an exciting and interesting 2021.

I’d love to hear what you think …

Email: Manjit.Rana@psKINETIC.com
Web: www.pskinetic.com/markets/insurance

About psKINETIC

psKINETIC is a leading provider of Intelligent Automation Solutions for Financial Services and Insurance. Our focus is on delivering outcomes and financial return for clients at pace. We don’t believe in ‘just rip out and replace’ – it is too risky and too costly – with our Intelligent Glue we help clients connect and enhance existing systems and processes. Our experienced professionals master a range of automation technologies and we support customers through full cycle of Design, Build, Run & Optimize.