Technology, and how you harness it, has the potential to be a great market differentiator. However, information technology (IT) can be a frightening thought for insurance firms and brokerages that rely on it for business functions, but don’t possess IT-whizz skills as a core competency. RISKSA speaks to administration and software providers for some insights on the industry, and how to make IT work for you.
Accessing and acquiring data accurately is vital for brokers, and a large contributing factor to the success of software providers. Brokers are expected to be able to access their business 24 hours a day, seven days a week, through various access points, and competitive advantage is often driven through the technology used.
Brokers need a solid, dependable and fast way to do business, with a reliable back-end process. However, alignment with various types of administration can be complex and costly. Assistance with administration is indeed one of the major benefits and value propositions put forward by larger franchised brokerages, which offer assistance with systems integration and administration.
Insurers that have a piece of their business on external platforms are not afforded the luxury of having all the information they require on hand, to dictate more accurate pricing; better control of claims; spending; and more structured processes that come from having that information in-house, and hence the push for more integration with the third party external systems.
Cardinal Insurance Management systems reiterates that the broker today needs a system that has some insurer integration and can provide the data that all involved parties require.
Drivers of change
It is well known that brokers and underwriting managers want to spend more time acquiring new clients rather than on administration, says Ashley Thomas, GM at Innovation Group South Africa. This need, Thomas adds, has been met on new system architecture by partnering with underwriters, developing customer portals, multi-computing, aggregator models, streamlining processes and capitalising on generic business models through automation.
“Insurers want greater control of financial and underwriting aspects. While these are mostly achieved on in-house underwriter systems, brokers typically own facilities with a number of underwriters,” Thomas says. Systems should offer products and solutions, approved by multiple underwriters, with an additional option that the same system will be usable to underwriters, brokers and UMAs without any conflicting aspects between any of the involved parties.
Craig Olivier, solutions architect at Genasys Technologies explains that software platforms currently in the market are expected to perform the day to day tasks, such as: batch processing to reduce manual intervention and room for error; self-service and straight through processing; providing tools and access points (supporting mobile) directly to the end user or insured to facilitate self-service; and data sharing and compliance – however, focus must be on efficiencies and compliance.
These requirements mean that clients are insisting that their solution providers put emphasis on mobile presence allowing clients to self-manage changes, requests, quotes etc., as well as real-time integration with third-party platforms to ensure data accuracy and quality, and data sharing capability to support industry compliance requirements.
Mobile presence is considered vital, and gives clients some of the power. The result of this evolution and whether the information gathered is better, and is used better, is a work in progress.
FSP Solutions marketing director Pierre van Huyssteen remarks that everyone wants an app. “But these have to be good, and interactive. Clients are savvy. Behavioural analytics and geo-location capabilities are the future,” he adds.
Another issue driving system upgrades is that there is a consensus across the short-term insurance industry that a more sophisticated approach to understanding underwriting risks is required. Cindy Beets, head of marketing at Lightstone, highlights that there is also a race for insurers to be able to cherry pick the best customers, given a better understanding of the risk profile of potential customers, their risk assets and their pricing behaviour.
And, of course, the complexity and sheer volume of data and the growing need to capture more of it and use it dynamically is one of the major drivers forcing upgrades of systems and software, adds Jonathan Holden, managing executive: insurance, at Innovation Group South Africa.
Holden notes that the value in insurance businesses of the future lie in their ability to harvest the data assets they have now, and ensure that it generates sustainable income streams for the future as well as underpins more sophisticated risk management techniques.
Not right now…
Van Huyssteen points out that some companies were ‘sweating their assets’ prior to the economic downturn, and some because of it. With the rapid advancement of technology, they have no alternative but to upgrade and this may pose serious challenges for some.
While it is never viewed as a good time to undertake a systems upgrade or overhaul, Olivier says that running on outdated legacy platforms hinders opportunities to innovate with new ideas.
“New technology and platforms facilitate day to day requirements and also enable B2B transactions to facilitate sharing of pertinent information, single view of a customer, self-service and various integration points to ensure data accuracy and data sharing capabilities,” Olivier states.
“Upgrading systems is always a big decision as it has a massive impact on your current day-to-day processes, however there is never a good time. With the correct planning and management the process can be relatively seamless and provides excellent future opportunities. Upgrades and software changes are often referred to as ‘servicing the Boeing’s motor while in flight’ which can seem quite daunting when this is not your core business,” reiterates Olivier.
Costs, timelines and change of focus are the biggest concerns for companies when implementing new systems and software, particularly as the day to day operations still have to continue. Based on historical statistics most IT projects run horribly over budget and take much longer than expected or planned.
“The key is to understand the process and what is required, and proactively plan business involvement to manage the usual day-to-day tasks together with providing the key inputs to the project from the specification phase all the way through to user acceptance testing,” outlines Olivier.
He adds that most IT projects underestimate the training and change management processes with upgrading and or implementing new systems. “These points need to be the biggest risks within any IT project and managed and mitigated accordingly. You can never spend enough time on training and change management,” Olivier emphasises.
When it comes to the costs associated with implementing systems, this, and the associated risk that it brings is often the greatest concern for a company. Holden explains that the cost is several-fold, not only in monetary terms, but also the cost of time wasted on failed implementations, the opportunity cost of having gone down one path and not another, and so on. Upgrades can bring similar complexities, though sometimes are a necessary evil and can, of course, bring enhanced functionality if successfully implemented.
Thomas adds that market conditions, through legislation, sales and so on are constantly changing, and systems developed with configuration as a core component will enable faster and cost effective deployment and upgrades.
Cardinal states that a big challenge for software providers is to constantly stay up to date with the latest regulation changes, hence the massive requirement for software to be flexible yet remain robust.
Another challenge is to communicate to the different insurance systems, notes Cardinal. The new STRIDE initiative does just that by allowing systems to communicate between insurers and brokers seamlessly while maintaining data integrity and structure. Cardinal has welcomed this initiative.
Striding toward a common language
STRIDE CEO Deon Olckers tells RISKSA that STRIDE was created by the industry with two purposes in mind: firstly, to implement a single data standard across the industry, and secondly, to provide a single technology platform to enable secure communication between stakeholders. Combined, these two solutions will enable numerous opportunities for process efficiencies and innovation.
“STRIDE is managed by the industry through various forums and committees, ensuring that we are always aware of the industry needs and that these requirements are prioritised and delivered appropriately. We are there to service the needs of the industry, and we will do what the industry requires of us, to ensure that the capabilities of the industry develop for their future needs,” says Olckers.
By implementing one data standard, industry players can seamlessly talk to anybody else in the industry without additional interpretation or mapping effort required. This means that processes, programs and apps can be designed around this single data standard. Complete datasets in a single technology also enable compliance to Binder Holder and SAM legislation, reiterates Olckers.
In the initial stage, STRIDE reduces the reporting burden for binder holder regulation from the broker and system provider as the insurer has full access to the data. For the insurer, the benefit is receiving data in a single format on a single platform, enabling them to comply with legislation and do better business. When moving to real-time, brokers and insurers will be able to manage quotes, claims, renewals, amendments and cancellations almost immediately.
The future vision is a short-term insurance industry where all the players in the industry, including those service providers in the claims environment like panel beaters and plumbers will have apps to complete their forms electronically and the data sent to the insurer real-time on a single data standard.
Enabling the industry as a whole to have access to big data – from providing the SAICB with more and better data to identify fraud, to enabling communication between banks and insurers regarding insured risks, to allowing accurate SAM calculations – the possibilities are endless once the groundwork is in place, says Olckers.
Because insurers are missing the big portion of their data that is being outsourced, the role of STRIDE is to enable them to receive this data in a manner that they can work with. “Currently we do not believe that insurers are doing everything they can with the data, but they are seeing the potential value of this data, and all the major insurers are committed to increasing the quantity and quality of the data through the focussed roll-out of STRIDE to their brokers and system providers,” explains Olckers.
He adds that as a minimum, all systems should be ACORD compliant since this allows all in the industry to capture data in a single standard and reduce the cost of data conversion. The process consists of three stages, firstly to change and update the existing software or secondly develop integration software between the existing data models and the ACORD data structures. Lastly, there are companies that understand that their future core system will be ACORD based without the need for middleware that needs to be constantly updated.
Olckers says that the biggest challenge is that everybody is busy implementing new systems, upgrading existing systems or rolling out new rating engines. This makes it difficult to roll out a new solution across the industry and challenges the income model as everybody is in different stages of implementing STRIDE. “We overcome this through a great support team within our technology partner, Astute, that helps our clients through the various steps of investigation, development, testing, implementation and roll-out, regardless of where the specific company is in the process. This is like coordinating the Comrades marathon while all of the participants are not starting from the same place and some are running a road marathon while others are doing an Iron-man. All I can say is that there are runners, cyclists and swimmers in this race and IT and water don’t go too well together,” quips Olckers.
Remaining relevant
Olivier reiterates that technology changes on a daily basis, to the extent that many articles refer to infrastructure and systems as a type of stationary to be replenished regularly. Research and Development (R&D) should be a key focus area in any software deployment company. Understanding new technologies and having the ability to apply it to your focus industry makes for a truly innovative provider or partner.
“At Genasys, we suggest at least a 40 per cent investment back into the product and innovation should be the driver in any software provider. If focus is not put on R&D, the platform will soon be out-dated and not leading in the industry, and in turn not provide clients with competitive advantages,” indicates Olivier.
Holden and Thomas note that Innovation Group benefits from being able to leverage its global footprint and expertise, and combine that with local experience. The company receives input from a diverse client base which spans multiple industries, not only insurance.
“Various training programs and investments into young enterprising individuals see the emergence of new technological trends and developments,” adds Thomas.
Lightstone highlights that within its product development team, the company encourages a culture of research. The product owners are industry specialists who support the sales team in different market verticals. This forces them to understand both generic and unique customer requirements. They interact with the development team who are tasked with picking the relevant technology delivery mechanism to ensure that the incoming data, as well as the delivery of the systems, are in the most appropriate form for the customer to consume. “We also allocate time on a weekly basis for each team member to explore new technologies as part of their growth. We participate in some international knowledge sharing sessions where the latest technology applications are discussed,” adds Beets.
This is an industry where cost always remains the greatest differentiator, and keeping costs down is a constant challenge, as is the time to market, which also has cost implications.
“Our key focus is to partner with our clients rather than just providing a platform or performing as a vendor. If strategic direction is aligned it allows for a common direction and the ability to be focused in delivering what works for both parties. The other aspect is to build generic solutions and not custom solutions to provide flexibility. By building generic solutions that can be configured, this allows rapid configuration and deployment which in turn means reduced costs and timelines to get new ideas and innovation configured and out there,” says Olivier.
The competitive solvency and profitability pressures increasingly being felt by insurers and brokers drives them to seek data solutions that help them price risk assets with greater granularity and certainty, understand their risk profile more accurately and remove unnecessary operational steps, says Lightstone. This is a huge task, and the biggest growth prospect lies in providing accurate and easy to consume information.
Holden reminds us that the insurance industry remains a vibrant one because of the multitude of touch points for insurance and risk management and the changing world means new risks emerging each day which require a solution.
The intermediary model remains relevant in this changing world, and with technology enabling alternative distribution and data capture, there is enormous growth potential through this model.