Much Ado about Everything
Much is said and written about the digital transformation of insurance, and there are many, often varying interpretations of the definition. A total digital transformation must take into account multiple technologies including, but not limited to:
• Portals for distribution channel communication and alignment
• Portals for consumer and social engagement
• Illustrations and quote functionality with varying user experiences to accommodate consumers and distributors alike
Electronic applications with personas for consumers, agents, and supplemental benefit self-enrollment
Automated underwriting for fast, accurate, consistent and repeatable assessment of risk
Policy Administration Systems (PAS) capable of managing all aspects of the policy lifecycle and—just as important—able to rapidly define and bring new products to market
Business Intelligence as an overarching tool to mine, analyze and present actionable data
Digital infrastructure – as Bill Gates said – to make technology accessible to Everyone, Anytime, Anywhere
Currently we are detecting a shift in the market place back to best of suite versus best of breed. Part of the driving force behind this swing is the realization of outof-the-box functionality and pre-integration versus large expenditures and long time frames to integrate disparate systems, technology and vendors. Purchasing a best of suite, complete insurance platform from a single vendor will reduce license acquisition and implementation costs and timeline, which in turn will increase the return on investment and reduce overall total cost of ownership.
Beyond the initial acquisition and implementation, the long-term benefits and real ROI of a digital transformation lie in the effectiveness and efficiencies gained over current processes.
EXAMPLE OF A COMPLETE DIGITAL PLATFORM
As a simple example, consider simple commodity products like Term, Critical Illness and Pre-need. A complete digital platform would allow a consumer to consider and compare these products, get a premium quote and apply for the coverage. In the background the automated underwriting system collects evidence and provides a decision in moments. The consumer then accepts the case, and the Underwriting System automatically interfaces to the Policy Administration System to place the case inforce and deliver the actual policy to the consumer immediately. In other words, it is a seamless, completely automated, digitally enabled transaction exacted without carrier manual actions. Note that the underwriting system is the critical component in this process. Not only does it assess the risk based on the application responses and collected evidence but it also interfaces to the Policy Administration System to:
• Determine the carrier’s total net amount at risk on the person as opposed to just the current isolated application in hand.
Act in automated concert so total coverage retention can be assessed. While reinsurance is typically best managed in the Policy Administration System, an integrated Underwriting (UW)/PAS solution will more accurately depict and manage reinsurance requirements – retention, ceded, treaty or facultative. Together the UW/PAS can even automate the reinsurance placement process.
Collect and book the initial premium and set up the repetitive collection method if the carrier accepts payment cards for initial premium and has the combination of electronic application, underwriting and PAS.
While a small percentage of carriers are doing this today, how is the overall market participating? What are the real carrier perceptions and acceptance of the available products to enable a digital transformation, and what is their willingness and intent to act?
In a July 2017 survey, The Digital Insurer found that “three quarters of the respondents think that we are just at the start of a lengthy period of increasing investment across the sector.”
• 74.4 percent of the respondents thought that way.
• 14 per cent voted “Steady as she goes – current levels of activity likely to be maintained for the foreseeable future”;
11.6 per cent voted “In a hype-bubble which will soon burst – both volume and value of deals.”
If 74 percent of respondents agree that expenditures in this area will increase and another 14 percent believe that current spending levels will continue, that indicates a realization that a complete Digital Platform will be table stakes just to play in the game.
The technology for a complete digital transformation exists. These products are in production at carriers today. Selecting a product suite that contains all the components would appear to fulfill the vision from several years ago for an ”insurance company in a box.”
To paraphrase Verges in Much Ado About Nothing, when we are making Much Ado About Everything we must do it – “And we must do it wisely.” What Verges didn’t say but should have was “Act now.”