Past, present and paradox

Past, present and paradox | Insurance Business

Past, present and paradox

Insurance was an early adopter of technology – and it’s now lagging behind because of it, writes Bill Pieroni

Mention the insurance industry to a layman – or even an industry insider, for that matter – and the image that springs to mind is usually not one of a pioneer on the cutting edge of technology. To be fair, that reputation isn’t exactly undeserved.

The paradox at the heart of the matter is that insurance was one of the first industries to aggressively use technology and now often finds itself lagging behind not in spite of that fact, but because of it. Where some other industries might be able to deploy state-of-the-market tech solutions, insurance enterprises often must navigate the complex process of integrating them into their existing – perhaps decades-old – infrastructure. It’s not surprising that the industry is seen as a tech laggard, open to disruption by nimble insurtech firms.

As one of the earliest adopters of computing technology, the insurance industry has matured through three increasingly sophisticated periods. In the 1970s, the goal of ‘data processing’ – as we called it back then – was to support business through cost optimisation. The first forays involved using technology as a tool to efficiently execute non-core activities such as billing and printing. In essence, the computer was simply a more sophisticated adding machine or typewriter – but this established the groundwork for development.

In the ’80s and ‘90s, the industry continued to marry new technology with legacy processes, but with a more sophisticated understanding of its potential. Computing technology was increasingly incorporated into core areas such as claims and underwriting. ‘Systems integration’ became the watchword as solutions dealt with managing the transfer and distribution of information within the enterprise.

As companies realised they could leverage technology to reduce costs and increase revenue, they began to create tech-centric processes. At the turn of the millennium, insurance turned to technology to deal with changing consumer demands and product imperatives and the internet phenomenon.

Are we now in a fourth era? Somewhat. Around 2015, the Outcome Era emerged, with a focus on the integration of operations and technology to create novel business models and enhance positioning. Certain inevitabilities drive these developments. Data is front and centre. Customers will demand digital interaction across devices. Change driven by market forces is increasing at an accelerated rate. Technology disruption will continue to occur across the insurance value chain, and established players need to leverage the lessons of the insurtech revolution.

In addressing these inevitabilities, the industry must deal with the limitations born of legacy. It’s difficult to simultaneously support legacy capabilities while funding and executing transformational change. Budgets become dominated by maintenance expenses, and skills are geared to last-generation capabilities. Shareholders often baulk at near-term outlays for the potential of long-term benefits.

Successful long-term value creators are positioning themselves to deal with these pressures by embracing the new technology era. This Outcome Era includes several characteristics:

  • The merging of operations and technology to develop and deploy fundamentally new operating models beyond simply optimising revenue and expenses
  • Merging business and technology to create differentiating capabilities to increase strategic flexibility and operating adaptability
  • A focus on positioning the business to most effectively take advantage of opportunities to expand into new products, customer segments, geographies and channels
  • An acute awareness of option value in strategy and tactics, an appreciation of value management as a key skill, and the prioritisation of outcomes
  • Embracing digitisation as the most effective way to achieve and support change

Across all of these activities, those who execute the transition into the Outcome Era understand that throwing technology at every problem is not the path to success. By making purposeful decisions aligned with strategic intent, they’re positioning themselves to thrive in the 2020s and beyond.


Bill Pieroni is president and CEO of ACORD, the standards-setting body for the global insurance industry. His insurance career has spanned technology, operations and executive roles with leading carriers, brokers and consultants.