Adapting to the new economic and regulatory realities requires some new thinking on the part of insurance executives. It’s always easier for them to continue using legacy systems without any significant changes. In times like these, however, change is needed. There’s a considerable amount of research predicting that insurance industry IT budgets will increase in the remainder of 2009. This is a good sign for the industry’s future, and for vendors selling hardware, software and services to the industry.
Research shows that insurance industry executives are more likely to seek advice from technology vendors than their counterparts in banking and most other industries. I haven’t seen any convincing arguments regarding why this is the case; but anecdotal evidence from our clients supports it.
A recurring theme in media predictions and analysts’ research is that insurers are investing in better underwriting and improved risk management. These offer good and necessary improvements, but only on the tactical level, i.e. incremental improvements in efficiency.
Technology providers ought to focus on changing the way insurers operate strategically and help them to place greater emphasis on customer lifetime value. It requires some creativity and a change of mindset. It’s amazing to me that this is still an issue. Twenty years ago, when I was in Digital Equipment Corp.’s Insurance Industry Consulting Practice, we were addressing ways (mostly data warehouses) of building 360 degree views of insurers’ clients across lines of business.
It may be that, given the current environment, insurers are finally feeling enough pain to take the steps necessary to increase value and profitability by better knowing their customers. It takes more than just a vision to make things happen, though, especially with such a high level of uncertainty in the air.
I’d like to hear from insurance executives, research pundits and IT providers out there:
- Is customer knowledge across lines of business still the holy grail for insurers?
- How are you solving this issue?
- Do you think insurance industry executives are finally ready to tackle this beast?
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Depressing to think the industry hasn’t progressed much over 20 years, and worse because this is the second time I’ve heard the same thing in less than 24 hours.
My take–industry execs want (and we see in Forrester surveys around IT plans) guidance around how to extract and manage all this–BI, analytics, ECM. We’re definitely seeing vendors pitching to insurers (and bankers) about deploying these tools as a way to get that cross line of business view. I think that while the insurance industry has held up better than banking in the Great Collapse, it’s definitely now feeling pinched, and maybe it is this business pain that finally gets them going.
Vendors and their sales teams need to do some education here, get their insurance customers comfortable with the fact that this isn’t the holy grail.
And it’s more than anecdotal that sales reps are a key source of information–they also provide information that insurers trust. We did some research last year, and learned that tech vendor sales reps are trusted more than consultants, and a little less than industry analysts (http://www.forrester.com/rb/teleconference/influencing_influencers_how_banks_and_insurers_research/q/id/5165/t/1)
I’m happy that Ellen Carney, Forrester financial services analyst, agrees with my opinion on this. I’m thinking, Ellen, that when you wrote “this isn’t the holy grail”, what you meant was that it’s achievable… it isn’t out of reach. If that’s so, this is a major opportunity for IT vendors in the insurance space.