Digital disruption is changing the world around us – but has the insurance industry really grasped the extent of the impact? Insurance Business commentator Darren Trott gives his views.
The topic of technological change and its impact upon the insurance industry is a hot one. We continue to read articles about the need to get ahead of the curve and ‘embrace the change’ yet it seems so hard to actually do something about it. Why?
I clearly remember the days when only senior managers were given access to the internet. It was thought staff members could not be trusted to use it for business purposes. Would you believe this was only 15 years ago? Even in today’s world, many companies won’t allow employees to access social media, such as Facebook, despite its power to put their products and services before a potential audience of millions. I even know of one brokerage which does not even allow staff members to access mobile phones, for any reason, during office hours. Will the last disgruntled employee please blow out the candles when you leave?
Disruptive technologies have already transformed many industries. A decade and a half ago, three young guys developed the Napster mp3 file sharing network. Within three years Napster had over 80 million users and seriously threatened the major music industry distribution companies, who responded with legal action rather than embracing the technology. This disruptive technology was ultimately the fore-runner to iTunes, which has gone on to become one of the world’s largest distributors of music, movies and television – and many of those traditional music and movie companies no longer exist.
There are other examples, too. When was the last time you purchased a roll of Kodak film? Have you popped into a Borders bookstore recently? My local video store is long gone, replaced by a DVD vending machine, situated just inside my local supermarket. Did I mention I can buy my car insurance while I’m doing the grocery shopping as well?
Advances in technology are providing an environment where actuaries, risk modellers, insurers, re-insurers, brokers and supply-chain providers have access to more data than at any time in history. If you need to know how many galvanized iron roofing nails were used in the aftermath of Cyclone Yasi, and the actual labour costs of hammering them into new roofs, by specific street location and house number, I can give this to you in less than two minutes.
The trick is accessing and extracting this data. Most insurers still struggle with legacy mainframe systems, which have become very expensive to maintain and make insurers slow to respond to innovation. Their mentality has been “we must build it ourselves” or “go find one system which does everything”. Eventually this leads to other cost-cutting measures, such as centralisation or off-shoring entire sections of their business. I find myself scratching my head and asking “why do something your customers don’t like when there are alternatives out there?”
A truly customer-centric business carefully analyses customers’ wants and needs and then source business processes and systems to make that happen. But you don’t need to invent it or build it yourself. Your restaurant doesn’t farm its own beef, or grow its own lettuce and tomatoes. It assembles the right ingredients, in the right order, and delivers a personalised customer experience. Sadly, there are many players in our industry still trying to make customers squeeze into their antiquated processes. How many times have you heard “but our procedures require this form to be completed”?
A rethink is needed and it’s needed now. It’s time to embrace the technological advances in social media, mobile applications, analytics and cloud storage and become part of the revolution. Combining these key components, in a unique way to suit your customers’ needs, might be the difference between future success or future redundancy.
On that note, I’m off to pick up a copy of the Trading Post
from the newsagent. Oops. Hang on. Another one bites the dust.