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What insurers need to do to bounce back in 2021

By Erich Gerber - SVP EMEA and APJ at TIBCO Software

In 2021, we will see the results of the first tests of ‘bouncebackability’: the ability to have withstood the pressures and privations of 2020 and then made 2021 much better. However, this isn’t purely a case of having survived the annus horribilis just gone; it’s also about absorbing new levels of competitive intensity.

Companies everywhere have accelerated plans for digitally-boosted business transformation during the pandemic, selling and marketing more online, revamping user experiences and reassembling supply chains. To understand this new dynamic in business we could realistically look through any vertical industry lens but, as an example, let’s look at the insurance sector.

Insurance isn’t traditionally associated with innovation. It’s been around for hundreds of years and it’s often seen as an essential protective measure. But, as with every sector, insurance incumbents now need to shift and up their game or, inevitably, be disrupted and discomforted.

That means offering “instant insurance” so products and services are covered from the day of purchase and policies take immediate effect. It involves offering tailored rates for fit or low risk people, providing attractive renewal terms and generally doing everything in the style of an Amazon or other digital giant rather than a traditional insurance firm that’s hampered by old and outdated processes. However, it also offers another possibility in the form of the creation of new ethical brands that appear to modern, conscientious consumers. This is already happening across sectors: think of retail and utilities but even banking, telecoms and broadband too.

This is the dream but let’s be frank: companies in insurance are on very different journeys and have reached varying points on the curve. Or, let’s be even more blunt: most insurers are laggards. It’s still possible for a large insurer to allocate more space to paper in their buildings than that given to human beings.

But insurers have to get smarter: anticipating acts such as local flooding that lead to spikes in claims or accidents, accidents caused by certain driver profiles or illness by lifestyle choices. It also implies practical elements such as routing work depending on skills available at a point in time and deploying bots for tasks where they make a superior alternative to people.

This changing world also means that to grow customers or revenues, insurers must capitalise on the mountains of data that separate them from newcomers. But this will only act as a competitive advantage if that data can be structured and rendered able to be analysed. Automation is critical and every action should pave the way to greater gains from AI, Machine Learning and Big Data. But if underlying core data management is weak, you have problems… big problems.

Even veterans make rookie errors

Too often, however, insurers are guilty of the equivalent of pouring wheelbarrows of potentially valuable data into a pit, with all too predictable loss of context and worth. Insurers must always drive towards the target destination of having a single version of the truth. Again, that involves simplifying fundamental access to data but also becoming event-driven, where one action automatically invokes another based on present rules. The world is moving too fast for unnecessary human interventions, even in the sometimes archaic world of insurance.

Another challenge is customer intimacy. Insurers typically have multiple business lines and they need a consistent view of customers across those lines of business and across geographies. Insurers must know their customers and squeeze out every drop of value from even the shortest and simplest interactions: website visits, service chats and social network exchanges.

These dialogues can be optimised through the use of AI and Machine Learning to immediately establish customer concerns, needs and desires. They also need to study demographics and cleave to the needs of different categories of users: millennials buying their first insurance products by the minute will have very different needs to boomers who have been buying ‘all-in’ packages for decades. Segmentation and micro-segmentation will become decisive tools for marketers, anticipate needs and avoid waste.

In 2021, we will (we hope) be going back to old habits: driving cars, taking holidays, buying property and the like. That pent-up demand should be a boon for insurers and those that boxed clever and invested in infrastructure through 2020 stand to benefit. Those that bonused frontline workers with special deals, were proactive in sending out reassuring customer communications and strived to improve underlying data management will be best positioned to rebound.

The winners will be the innovators but they will also be the ones that have aggressively dismantled infrastructure and processes that are no longer fit for purpose. They will be the ones that have realised that trusted data infrastructure has become the table stakes of business and have therefore prioritised key data and adopted a tiered approach that gives them access to the most valuable customers. They will adopt the mantra of ‘do it right once’ so they don’t end up with multiple data warehouses that exacerbate the problem and they will be leaning, where sensible, on platforms in the burgeoning ‘insurtech’ space.

The rest? For laggards, 2020 might have been the death knell for their chances of remaining relevant and the chance to bounce back will have been squandered. And you don’t want that to happen, do you?

By Erich Gerber – SVP EMEA and APJ at TIBCO Software

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