The 21st Century Insurance World Set for Change

The 21st Century Insurance World Set for Change
For the insurance sector, the future is far from nebulous – it’s right here and now. And as globalization continues to grow in reach and scope, insurance firms should in theory find it easier to reach into new and emerging markets and expand their business strategies.

But in reality they face numerous challenges as they adapt to a 21st century world. Today’s customers are demanding greater transparency and flexibility and insurers are being compelled to deliver.

During the recent Microsoft Canada Smart Solutions Breakfast Series held in Toronto, the discussion focused on how insurance firms can better connect their people to their customers. Tony Jacob, Director, Business Development, Insurance Industry, WW Financial Services at Microsoft and Don Canning, Managing Director, Insurance, Worldwide Financial Services, Enterprise & Partner Group discussed the challenges the North American insurance industry faces as it strives to retain a competitive edge in a rapidly changing sector.

The profile of today’s customer is changing, notes Jacobs, as individuals born between 1981 and 2000 enter the work force and become active consumers. He pointed to a recent study released by Insurity and Microsoft Corp. at the ACORD LOMA Insurance Systems Forum 2008, which reveals that technology will play a critical role for insurance firms recruiting or serving those in this "Millennial generation."

"This is a generation where consumer technology is really going to influence their expectations for enterprise IT,” says Canning. “We need to think about the way people work and start developing more portal-based applications that work the way they do – including making systems more intuitive and familiar for today’s knowledge workers."

The rise of the Millennials
Indeed, the report notes that the insurance sector faces a “brain drain” as nearly 60 per cent of employees are now over age 45. The challenge for today’s firms, according to Jacob, is around maintaining a balance between acquiring new customers and developing and retaining existing ones. Not only must insurers proactively move to become more transparent, they will also need to focus on leveraging internal technology and develop more innovative products and services.

Millennial customers are not only demanding newer, technologies in the workplace —— they also carry specific expectations as to how insurance companies should interact with them as consumers, such as the ability to view their full accounts online, access web-based support and instant-message agents directly.

There is also an increasing desire for more flexible and customized IT applications, says Jacobs. In order to adapt to this new world of work and maintain competitiveness in a global economy, successful insurance companies will need to look at responding quickly to economic opportunities and threats by incorporating more flexible IT processes that facilitate distributed collaboration and innovation with customers and partners.

“The question from a technology standpoint is, what can we do as an industry to be proactively more transparent as a way to avoid regulatory regimes?” says Jacobs. “We're entering into an era where there's going to be an expectation of the customers that they're able to interact with insurance firms on a 24/7 basis. This will obviously have huge implications on our future employees, future agents and brokers.”

Why IT innovation is key
Technology innovation, says Jacobs, will be essential for insurance firms in a global, knowledge-based economy.

“Things are changing so rapidly in India, China and across southeast Asia, because that's where innovation is growing. As a result, North American firms will need to increase innovation. We've got to come up with the innovative products and services,” says Jacobs.

Recognizing this new world of work, Microsoft is actively involved in working with insurance firms to develop and deploy better IT – applications that empower individuals through systems that help with the blending of structured and unstructured data.

Microsoft’s IVC program, for example is an emerging ecosystem of insurance partners that address key solution areas across the industry — from point-of-sale and service to policy administration and claims processing — by utilizing the core strengths of Microsoft software in front- and back-office technologies. The objective of the IVC program is to deliver innovative, straight-through processing for insurance on the Microsoft platform using Web services, Extensible Markup Language (XML) and industry-specific standards.

“The insurance industry will need to manage both outcomes and processes. It's really the Millennials we need to think about as they're going to expect virtualized support. We're going to have to think about rules extraction and getting those embedded into our processes,” notes Canning.

Insurance companies will also need to consider implementing projects that look at new ways of data management and service delivery. This involves building out a more flexible IT architecture – including enhanced enterprise resource planning (ERP), business intelligence (BI) and customer relationship management (CRM) software.

“Think about new business models and how you are going to grow in emerging markets. It’s all about enabling businesses and processes to connect faster and accelerate,” says Jacobs, adding that firms will need to look towards developing a 360-degree view of the customer while developing stronger straight-through processing capabilities to maintain a competitive edge.

The goal is to allow customers to work with insurance companies in a much more interactive way. Today’s agent and broker services – including independents and third-party agencies – will require better reporting tools with real-time access to the customer service representatives in order to make better risk decisions.

“You need to think about the quality of the data and what can you do with that data, particularly in terms of standards-based systems that help get even better at looking at underwriting profitability, performance of product lines, performance of intermediaries and opportunities for niche products,” says Canning. “It plays really well into the sense of the Millennials as our next customers for insurance products.”