ICT Technology Trends in the Insurance Sector

Transcription

1 ICT Technology Trends in the Insurance Sector January 2014 Warnford Court, 29 Throgmorton Street, London, EC2N 2AT T:

2 Table of contents 1 Introduction 3 2 Key ICT Trends in Insurance Sector Customer experience enhancement Regulatory compliance Business process innovation 6 3 How ICT can support Insurance organisations Unified Communications & Collaboration (UCC) IP Telephony Mobility Contact Centres Social Media Telematics Analytics / Reporting Core Network Architecture 10 4 Addressing the challenges 12 5 Conclusion 13 Page 2 of 14

3 1 Introduction The Insurance sector is under considerable pressure to reduce operational costs, retain customers and improve operational effectiveness. As competition in insurance markets intensifies, cost savings and customer retention have become key differentiators. This is forcing insurance organisations to look for new ways to drive sales and improve customer convenience while keeping costs under control and maintaining profitability. To achieve this, it is essential to balance operational efficiency initiatives with improving customer service, strengthening distribution, improving product development processes, whilst at the same time leveraging the latest ICT (Information and Communications Technology). This report identifies the key ICT trends across the Insurance sector and outlines generic approaches to optimise investment in ICT and improve customer centricity in an increasingly competitive environment. Page 3 of 14

4 2 Key ICT Trends in Insurance Sector Technology has always played a strategic role in the insurance sector providing the capability and processes to support information capture, storage, processing, and analysis. Information and Communications technology (ICT) is critical to facilitating and enabling the interaction between various stakeholders including brokers, agents and end customers as outlined in figure 1 below. Figure 1 ICT Components of an Insurance Organisation "Insurance and Technology Magazine" estimated that insurance companies spend as much as 3.5% of their annual premiums on technology, with $22 billion in the U.S. alone. The Gartner benchmark from 2012 highlighted that Insurance organisations total IT spend equated to 3.1% of their annual revenue. Of that 3.1% of revenue, spend on networks and telecoms accounts for on average 12.4% of their total IT spend. Hudson & Yorke believes there are 3 key themes / challenges affecting Insurance organisations, in which ICT can be regarded as a key enabler: Figure 2 ICT Trends Page 4 of 14

5 2.1 Customer experience enhancement Many customers, particularly the Generation Y age group entering the insurance market for the first time, have very different expectations of their relationship with an Insurance organisation versus those of their parents. The general decline in customer loyalty and trust in long-established brands is reflected in the insurance market, with customers expecting an insurance company to respond flexibly to their needs and being fully prepared to end the relationship if not satisfied. The growth of smart phones and similar devices has placed a computer in the pocket of an ever increasing number of customers and channel partners. The expectations of the Facebook generation, for whom mobile devices and social media are the norm, is that any interaction with an Insurance organisation will be conducted via a channel that is most convenient for the customer at the time, and that all of their customer details and full history will be at hand. Insurance companies need to become more customer-centric (rather than product-centric) and must deliver a consistent, high-quality customer experience across all channels including the internet, contact centres, brokers, social media platforms and mobile. Insurers also need to maintain and improve the traditional channels through brokers and agents, which are still used by those customers who prefer the personal faceto-face relationships. 2.2 Regulatory compliance The most significant example of regulation impacting the insurance industry is Solvency II, which will bring greater regulatory harmonisation across 30 European countries. Other bodies pursuing regulatory reform include the National Association of Insurance Commissioners (NAIC), Solvency Modernization Initiative (SMI) in the US, the International Association of Insurance Supervisors (IAIS) ComFrame initiative, the European Commission s Financial Conglomerate Directive (FiCOD), and the IAIS Globally Systemically Important Insurer (G-SII) initiative. As a result, regulation of the insurance industry will become: Increasingly intrusive, with regulatory authorities demanding far more detail relating to the day-to-day operations, the development of complex risk models, and in some cases detailed contingency plans as to how an insurance company could exit a sector in an orderly fashion if required Increasingly interventionist, with supervisory authorities having greater power to force insurance organisations to take action to improve solvency, cease writing business, or even force the winding-up of a business Increasingly interactive, with regulatory authorities requiring insurance companies to make submissions on a quarterly rather than an annual basis Increasingly transparent, with failure to achieve compliance being publicly reported and known to rating agencies, the stock market, competitors, and policyholders. In order to cope with regulatory change, Insurance organisations are advised to adopt new processes with greater transparency. Page 5 of 14

6 2.3 Business process innovation Innovative insurance organisations are reviewing how ICT can be leveraged to enhance and/or redesign their business processes. For example, the latest mobile communications systems allow the adjuster to visit a claims scene armed with all the information required to confirm coverage and proceed with settlement. Some insurers can now settle auto insurance claims in certain cities while a vehicle is still on the side of the road. Clients benefit from a much faster response time and the insurer benefits from reduced expenses and improved productivity. Such innovation eliminates a great deal of the paper processing and travel cost otherwise required. Page 6 of 14

7 3 How ICT can support Insurance organisations Figure 3 below outlines the key ICT enabling technologies for Insurance organisations to consider as part of any future strategy. Figure 3 ICT Enabling Technologies 3.1 Unified Communications & Collaboration (UCC) Unified communications is the integration of real-time communication services such as instant messaging, presence information, telephony (including IP telephony), video conferencing, data sharing (including web white boards) with non real-time communications services such as unified messaging. Unified communications is a set of products that provides a consistent user interface across multiple devices and media types. Insurance organisations have tended to evolve a multitude of non-interoperable communication mediums, such as , instant messaging, audio/video/web conferencing, making separate handling of these systems complex for the agents and brokers. Moreover, a lack of connectivity between the channels can result in poor customer service. By adopting a unified platform for enabling calendars, directories, and communication services such as voice and video calling and web chat, insurers can maximise the potential for first-call resolution, raise customer satisfaction levels, improve employee productivity, and reduce cost. When developing a UCC strategy, Insurance organisations need to consider the following points: Which platform to use. Page 7 of 14

8 o Providing integration of existing PBX services whilst transitioning to new UCC platform upgrades is a key concern for organisations deploying Microsoft Lync or Cisco Jabber. In addition - will the organisation choose to support all functionality (including video capability)? Whether to use a hosted solution. o With companies offering a range of cloud offerings such as Microsoft Lync online as part of Office 365 there are a range of options open to Insurance organisations. A major inhibitor here can be security concerns with the use of off-premise solutions. Video conferencing. o With a variety of videoconferencing options available as part of unified communications suites, organisations are carefully assessing the impact of videoconferencing functionality on their supporting infrastructure. Mobile. o Beyond accessing UCC capabilities such as , IM and voice, the ability to transfer to and from desktop settings and provide location-based services is a concern for organisations. This is more of a concern across varying mobile estates affected by consumerisation of mobile devices or Bring your own device (BYOD) concepts. In summary, UCC can improve the customer experience through an omni-channel approach, whereby customer interactions are truly integrated across all sales and marketing channels. 3.2 IP Telephony IP Telephony (IPT) can be viewed as distinct from Unified Communications (UC), as it is only one element within the broader range of communications technology services. In all large organisations, IPT provides a number of key advantages over legacy PBX systems, but a coherent technology strategy is required to facilitate these. IP telephony strategy goes beyond selecting an IPT platform to replace existing switched telephony, as this will not deliver any significant benefits to the organisation. Using IPT to deliver voice service provides a flexible platform for integration with other communications technology services but it is not the only option, for example modern PBXs can support UC features for switched telephony. By implementing a converged voice and data network with the removal of redundant and legacy hardware, IPT has the potential to provide cost savings in the following areas: Reduced maintenance charges Lower routing and PSTN costs Lower installs, moves, adds and changes (IMAC) costs Lower network management costs Other IPT elements to consider include: SIP Trunking - SIP-based services provide the benefit of reduced costs (an average saving of 20%-40% from their PSTN bills) and the flexibility for call routing, mobility integration and disaster recovery. Virtualisation IP PBX and VDI (virtual desktop infrastructure) applications and hardware, which were earlier separately installed on multiple locations, are now being consolidated and virtualised at a single location. This can help Insurance organisations in reducing infrastructure and operating costs. Page 8 of 14

9 3.3 Mobility The growth of smart phones and similar devices has placed a computer in the pocket of an increasing number of customers and channel partners. As this trend increases, insurance organisations need to allow new and existing customers to obtain quotes, view policies, report claims and ask questions via live chat applications from almost anywhere. Insurance organisations need to investigate new ways they can use the technology to provide additional value to their customers. Mobility is changing customer expectations, and all Insurance organisations have to adapt. Any application that is rolled out to insurance agents and customers needs to consider the implications of mobile devices, from the design of the interface to the location awareness and the multiplicity of communications options on each phone (such as text, chat, and voice). At the same time, all mobile providers have improved their offerings by: offering self-service tools, for example, tracking, usage reporting (voice minutes, data bites and cost) exploring more flexible and tailored pricing models e.g. company flat rates and terms and conditions expanding geographical coverage through more closely tied partners that facilitate a more consistent offering offering flat-rate offerings which are now more "granular" e.g. including time-capped packages. 3.4 Contact Centres In order to address customers expectations of their insurance providers, contact centres now include web chat, SMS and as well as voice calls. In addition, next generation contact centres are expected to facilitate mobile and/or video interaction for customers with insurance product specialists in order to achieve first call resolution wherever possible. Moreover, Gartner research predicts that at least 75% of customer facing contact centres will use some form of cloud technology by This is brought on by the cost reductions and improved scalable cloud based solutions offered, with the following benefits: Organisations can move away from high up-front expenditure to a more manageable operational expenditure approach A cloud-based service model offers the flexibility to cater for erratic call volume on account of seasonality i.e. allowing insurance organisations to flexibly scale-up or scale-down the operations in accordance with volatile demand requirements Since cloud computing is location agnostic, contact centres spread across different geographies can use the same solution everywhere 3.5 Social Media Customers are now expecting resolution of their queries through their preferred channel in minimum time, and the growing pervasiveness of social media is driving customers to engage on this media. Agents/brokers are also demanding better internet and mobile channel functionalities to increase their ease of doing business and maximise direct sales opportunities. Page 9 of 14

10 In order to strengthen the overall customer experience, Insurance organisations need to firstly understand who the end customer is. The key differentiator will stem from the ability to monitor and extract customer intelligence from social media customer activity and interactions. Unfortunately information about (and for) customers is generally held inside separately managed insurance applications, including underwriting, core administration systems, agency management systems, and CRM systems. These barriers to sharing and coordination will need to be overcome. Competitive advantage will be achieved through the development of a multi-channel capability providing a seamless customer experience across all the communications channels of contact centres, brokers / agents, forums, , SMS and click to chat and video calls. 3.6 Telematics One potentially disruptive technology is telematics for the Car insurance sector, which fuses telecommunications hardware (GPS, wireless) with traditional information-gathering and analytics technologies for cars. This technology could prove vital to claims investigation practices and adjuster assignment, with the potential to impact on the claims processes relating to car and traffic incidents. One potential sticking point is customer resistance on data privacy and the concern that their actions are being monitored by their insurance provider. Other issues include: the lack of communication standards, with different wireless technologies being deployed ultimate "ownership" of telematics and associated data flows the need for collaborative working between insurance organisations, automotive manufacturers and ICT suppliers. 3.7 Analytics / Reporting Managing the customer experience means providing a smooth, personalised environment whenever a customer interacts with an insurance information or transaction system. To that end, information that is entered by the customer via one system should be available to related systems. If the goal is to satisfy and retain customers and create customer loyalty and advocacy over the customer lifetime, customers have to perceive the insurance organisation as a responsive and trustworthy partner as well as a high-quality products and services provider. Insurance organisations need to invest in analytics tools to understand customer motivations and behaviour, CRM systems to measure and store customer data, and preference management systems to smooth the contact process between the customer, the insurance agent and the insurance provider. 3.8 Core Network Architecture Underpinning all the ICT components outlined in figure 3, is the core foundation of network infrastructure and architecture. MPLS as the one size fits all approach for network infrastructure is no longer viable or cost effective for many global insurance organisations. Many organisations today are looking for more flexible and agile network infrastructure such as an Ethernet backbone, while leveraging MPLS in some locations and offloading traffic to the Internet for smaller sites in order to reduce their on-going network costs. Page 10 of 14

11 As bandwidth demand is predicted to grow exponentially with a 10% year on year growth to support network services such as UCC, Collaboration, Mobility and BYOD services, right sizing an insurance organisation s core network will be critical to meeting capacity requirements in a cost-effective manner. Leveraging analytical data to manage demand will enable global organisations to control spend moving forward. Page 11 of 14

12 4 Addressing the challenges In order to address the trends and challenges outlined in this report, the priorities for Insurance organisations should be: To enhance the customer experience regardless of type of insurance, time of day, location of customer, or methods the customers want to use to interact with the insurance organisation To redesign the channels to market to support an ever-increasing variety of mobile devices To support real-time or near real-time flows of customer and policy-related information between the insurance stakeholders To enable insurance brokers and end customers to collaborate with each other through a uniform UCC platform To enable insurance agencies and brokers to capture, store, automatically tag, and search for rich content such as pictures, video, and sound pertaining to customers, their families, possessions and businesses (if applicable) during business acquisition, service, and claim adjudication To provide all of the above ICT services in a secure, and preferably encrypted, manner To provide an agile and scalable network/telecoms infrastructure to support growth, expansion into emerging markets, and new business requirements. As a starting point, Insurance organisations need to ask themselves the following questions: 1. Does the focus of your ICT strategy align with the wider strategic and business objectives of the organisation and your target audience? 2. Does the current ICT strategy address the key ICT trends and challenges outlined in this report? 3. Are you getting value for money from your current ICT suppliers? 4. How much innovation and change is encouraged from your ICT suppliers and your internal teams? 5. Do you have the right network design in place to cope with future bandwidth / capacity requirements? In order to answer these questions, a clear ICT strategy is recommended which addresses the following components: Technology roadmap Commercial objectives Governance and operating model Sourcing strategy Service delivery metrics Page 12 of 14

13 5 Conclusion It is evident from this report that to stay ahead of the competition, insurance organisations need to focus on the following activities: 1. To use ICT technology more efficiently; 2. To become more skilled, and innovative at adapting and streamlining existing business processes to drive out unnecessary costs; 3. To leverage new ICT solutions to improve customer centricity; 4. To use business analytics to better understand the end customer s requirements; 5. To consider new ICT sourcing options (including outsourcing) to get the most out of their ICT suppliers 6. To deliver a true end-to-end customer experience across multiple channels. To conclude, a clear and robust ICT strategy is required in order to provide strategic direction and shared purpose for the organisation. For more information about this report, please enquiries@hudsonyorke.com or visit our website at. Page 13 of 14

14 References: 1. Trends in Insurance Channels Cap Gemini Report Deloitte Report: Technology, Media and Telecommunications Predictions OVUM Research Reports: Defining the Insurance Customer Experience, 11 th Feb 2013 (Ref Code: IT ) Insurers will have to manage key business trends in 2013, 26 th Oct 2012 (Ref Code: IT ) Reimaging Insurance Product Development for the Mobile Digital Workplace, 26 th Sept 2012 (Ref Code: IT ) 2013 Trends to Watch: Insurance, 16 th Oct 2012 (Ref Code: IT ) Insurers must rise to the challenges of a mobile world, 23 rd July 2012 (Ref Code: IT ) Life Insurance Core Platform Transformation Strategies, 12 th April 2013 (Ref Code: IT ) Insurers need a customer experience management strategy, 14 th Feb 2013 (Ref Code: IT ) 2013 US Insurance Regulatory Landscape, 15 th April 2013 (Ref Code: IT ) Page 14 of 14