Today’s insurance firms are experiencing pressure on three fronts. The first is that of evolving customer needs. As tech-savvy millennials become the major consumer base, insurers must adjust their engagement methods. Unlike older customers, millennials expect responsive customer service through mobile and digital platforms, and distrust traditional advertising while looking to social media to support buying decisions. Responding to these needs and expectations requires significant changes for the traditional insurer, both in approach and in the organisational structures required to support new delivery processes.
Second, the rise of InsurTechs is driving a significant change in the competitive landscape. While InsurTechs provide insurers with the complementary capabilities to deliver services through partnerships, such capabilities are also impacting insurers’ traditional models. For example, the platform model could have considerable impacts to the nature of the relationship between insurers and their customers. Platforms’ ability to reach a large customer base and access individuals’ demographic and behavioural data through their activities within ecosystems gives a significant advantage in pricing risks, which could potentially compete with incumbent insurers. Rakuten, Japan’s prominent platform, has been providing financial products including insurance to its members, while in China Alibaba’s e-commerce site Tmall launched a car vending machine this year.
Third, M&A in the insurance sector remains active, triggered by factors such as divestment of non-core assets by Australian banks and continued global expansion by Asian insurers. Insurers are under pressure to preserve deal value for investors and other stakeholders during the post-merger integration phase where technology integration has historically been a challenge for many deals.
A sustainable and nimble digital infrastructure is critical to insurers’ ability to respond to each of these challenges, providing the basis to meet evolving customer needs, capitalise on emerging InsurTech opportunities for future growth, and preserving deal value. However, many organisations are still challenged by legacy platforms inhibiting true customer centricity, faster innovation and a de-risked post-merger integration.
Legacy insurance platforms are built on sustainable and scalable mainframe technologies suited to processing a large volume of transactions. However, as a result of historical mergers and acquisitions, pressure to launch new products under time constraint and the need to fulfil specific distribution channel requirements, most legacy systems have added peripheral features, become siloed across lines of business and bound by inflexible integrations.
As insurers embrace the new digital future, change to the organisation’s technology infrastructure becomes increasingly critical not only for current performance but also long-term viability and competitive differentiation. Organisations looking to evolve their tech stack to keep pace with current innovation are recommended to:
Responding to evolving customer expectations and shifting market pressures requires insurers solve legacy platform challenges and create a nimble, sustainable and connected platform. Whether investing in customer-facing digital apps, intelligent automation to streamline processes, smart contracts for claims, or more, it is critical that insurers take the optimal approach to transform legacy and accelerate the delivery of exemplary service in pursuit of the corporate vision.
Yoshi Makita – Director, Technology Strategy & Performance, Insurtech Leader, KPMG Australia
Yoshi is an expert in insurance technology and opeations with over 20 years of experience leading complex management consulting engagements in Japan, Australia, South East Asia and the US. He is focused on maximizing the value of M&A deals from a tehnology perspective, advising all aspects of deals from due diligence, separation integration and transformation. Prior to his current role with KPMG Australia, Yoshi was Partner in KPMG Japan and led their insurance Management Consulting practice.
Article original published in The Digital Insurer's July 2018 newsletter – Technology infrastructure: Addressing the challenges of global insurance