By MIKE DUFTON, president, MajescoMastek
Charles Lindbergh's prize-winning solo flight across the Atlantic in 1927 was the result of ingenuity and risk-taking in the face of competitive and technological pressure. It was commonly held that a long-distance aircraft would need to be big, have a two- or three-person crew, and use multiple engines. Lindbergh eschewed common "knowledge," stripped the plane to the necessities, used one engine and flew into history by himself.
So here we are today, on the brink of 2010, and it appears that nearly every insurer in North America is rediscovering the principle that often the best innovations happen under pressure, and that many times it is about rebuilding with a lighter framework--instead of adding on.
In the last 12 months, the recession has brought carriers to a period of consolidation and lower premium growth. Cost management and shorter-term investments in technology took precedence. But a bit of economic recovery and an increased investment mindset may make the next 12 months a period of increased agility. As insurers work within a frugal mindset, they won't give up on the dream of becoming more competitive.
To move forward, they will likely be pursuing new business models, new technology options and new value-driven relationships.
STILL LOWER COSTS
In 2010, the need to lower costs will continue to drive business decisions. Executives will begin to examine how the implementation of new technologies can help them do just that. The agent and broker channels, for instance, will be under great scrutiny on several fronts because they are increasingly viewed as expensive.
As a result, carriers will use advanced technology to identify and retain top performers, as well as improve customer and carrier experience. They will be looking to bring in more business through other channels, utilizing emerging Web 2.0 technologies.
This will improve the flexibility to bring new products to market quickly and get new business on the books within the year. Systems that allow business users to configure products avoid the IT backlogs that keep identified needs from being met, helping your business goals drive your offerings instead your programming capacity.
Real agility and innovation will be found by companies that are focused less on the product and more on the process.
The need for operational-efficiency improvements and commoditization will mean a renewed interest in systemwide overhauls, especially for companies involved in recent mergers and acquisitions.
Service-oriented architectures (SOA) and systems that can provide a consolidation solution will be sought-after solutions that provide much-needed business agility. A recent Novarica survey identified that this is already a top priority for 30 percent to 40 percent of insurance companies.
Also in 2010, an interest in business transformation will drive demand for business process management (BPM) and business rules engines. Underwriting, billing and claims are areas where these latest technology improvements are likely to bear fruit for those companies who invest in them.
The goal in all three is to achieve the maximum level of automation possible. Billing and underwriting especially have the potential to improve cash flow while reducing risk. Paper bills that sit in the inbox on someone's desk aren't getting into a carrier's account; increasing a client's billing options goes straight to the bottom line.
In underwriting, tele-underwriting is improving data-gathering, while continually honing the rules that drive ratings and decision-making will streamline the process and cut underwriting time, providing a better experience for clients.
Speed to market and organizational agility will determine which companies emerge as industry leaders. The deployment of scalable, flexible systems becomes the key factor in responding to new business demands and competition.
Of course, the big strategy issues for any CIO in 2010 will likely surround the allocation of resources to vital projects. Outsourcing firms or vendors that can develop and maintain trusted relationships and continually produce quality deliverables will be highly valued. If a vendor partner is regularly not meeting performance requirements, hold them to higher standards or find a new partner. Good partners produce high-quality solutions in a timely manner with great communication when issues arise.
From a tactical standpoint, mixing in architects and developers from the outside will lend expertise and risk-mitigation to IT endeavors. At the same time, these IT relationships are often the easiest way to bring agility and a spirit of innovation to any project.
Like Lindbergh's team on the ground, good partners find and gauge their success on someone else's flight.
December 1, 2009
Copyright 2009© LRP Publications