As everything becomes digital, the way we conduct business, work and play will radically change.
In the insurance industry, technology was used as a tool to cope with market and regulation changes. However, insurers have increasingly made technology integral to their product and business models. Technology has not only provided the opportunity to extend insurance companies’ reach beyond the industry’s traditional boundaries but is also allowing new entrants to compete with existing companies in the industry.
At the same time, maturing markets, increasing risk and technologically sophisticated customers are some of the pressures the insurance industry faces today. To succeed, insurers will have to work faster, more efficiently—and above all—smarter.
Based on data from several IBM Institute for Business Value surveys, a new study from the IBV entitled “Insurance 2025” explores several scenarios of how the insurance industry will look in eight to 10 years and examines how insurers need to act to be ready for those changes.
We believe that two technological trends, in particular, will have a high impact on the future of business across industries: the rise of AI and the increasing potential for decentralization of systems and decision making.
Will systems become increasingly decentralized, enabled by burgeoning sensors and actuators on devices? Or will they be hampered by the limitations imposed by privacy concerns, regulations, or liabilities that encourages centralized control to continue in the industry for a longer period of time? Internal data plus new data from IoT and external sources like weather create unlimited potential.
IBM’s AI platform for business offers the fullest spectrum of cognitive technologies to professionals who are transforming work and decision making. Cognitive computing refers to next-generation information systems designed to accelerate, enhance and take advantage of human expertise. These systems can learn from large amounts of data, reason with purpose, and interact with humans naturally. They handle unstructured data across many subject domains giving insurers the opportunity to remake business processes. These technologies are becoming rapidly embedded in many systems and we believe they will have reached maturity by 2025.
To succeed in the next decade, insurance companies should consider four moves:
1) Increase flexibility: Take out expenses and build in flexibility by moving to core systems with a modern architecture such as an Industry Platform approach. Core systems are not the place to differentiate. Drive the cost of business down using a hybrid, secure and scalable cloud-ready infrastructure that is available as-a-service and enables experimentation and entry into new markets.
2) Develop partner ecosystems: Organizations in the insurance industry will need to collaborate to have the best data about consumers and understand the risks of insuring to them. The goal is to cultivate partnerships and membership in ecosystems that reach the customer. When using “as-a-service” products, an insurance company will need to cooperate with manufacturers or service partners to offer the complete package.
3) Improve speed of change: Insurance companies need to decide where to bring together technology, business capability and product investment. Work will need to take place outside of silos with a cross section of stakeholders and subject matter experts. This will allow them to leverage the massive amount of internal data, deploy analytics and enable sophisticated pattern recognition to allow professionals to quickly make the best decisions possible. The variety of data services, analytical models, cognitive APIs, and micro services can be executed on the cloud. Organizations don’t need to wait for technology infrastructure to define a roadmap and chart progress to more deeply understand customer behavior and risk parameters.
4) Embrace innovation: Leading innovators build an organization with a corporate culture and design processes that encourages innovation. Corporate structures can be made more flexible by streamlining internal innovation processes, with centralized funding and investment models.
Embracing innovation will build skill with component technologies of whichever future scenario wins, providing the capabilities necessary to prosper in changing conditions. And building agile development and business service composition skills will keep your organization nimble enough to capitalize on market changes.
As technology evolves, executives in the insurance industry, will need to look to the future to maintain their organization’s competitive advantage. By using that approach, they can continue to transform their business even as their industry is restructuring all around them.
Christine Haeberlin specializes in Insurance Industry Solutions at IBM Canada.