12 minute read

Overview

The insurance industry is in a state of transformation, and now is the time to overhaul how we view our systems and the goals we have for that technology. Our history has driven us to think “process first,” and for a time, that made sense. But today, that mindset won’t do. 

Data and analytics have been critical to the insurance industry since its inception. Yet, many of us in this field frequently fail to put data and analytics at the front of our technology strategy. We then wonder why data quality continues to be a challenge or why predictive modeling isn’t yielding what we had hoped. But by shifting to a “data first” mindset, we can begin to change all of these poor practices.  

The Long History of Insurtech

Systems within the insurance industry have a long history, much like many of the organizations that are within it. The systems we utilize for our core processes like underwriting and claims, were largely built with an eye toward efficiency. They were enablers of process.

 

These enablers worked fine for their time and achieved their ultimate goal, which was to get a policy issued or a claim processed quickly. This focus on ease of processing and efficiency was the state of affairs of insurtech in the ’90s and well into the 21st century.

I am sure we found something to complain about back then.  However these systems were totally aligned with the goals of insurance at the time.  Facilitating processes, saving time and speeding up complex calculations was our focus, and these breakthroughs helped carriers, brokers, and clients alike. Good stuff!

Today, carriers and brokers still work together to bind policies, we continue to implement new technology in hopes of gaining an advantage, and despite what you may read about artificial intelligence and machine learning, claims still occur. While many things remain the same, today technology is drastically different. The potential that insurtech now holds for our industry is far greater than mere process efficiency.

Technology, data and process have an opportunity to combine in new ways that open up tremendous opportunities for carriers and brokers alike. This is the basis for much of the excitement around insurtech right now. If we avoid the mistakes of the past, we can capitalize on this opportunity.

Insurance Industry: Big Technology Investment and Big Disappointment

I can’t speak for the entire industry. My experience is based on carriers and brokers I have talked with over the years (an “n” of 10s, not 100’s). It appears that, generally, there is a sort of disappointment with our existing systems. Furthermore, it seems like this sentiment is growing. The reason for this growing discontentment is that resident technology fails to keep pace with the wants and needs of our business.

The insurance industry invests a tremendous amount of resources on systems and technology every year. Companies continue to spend on new technology or update old technology. They even seek to develop proprietary technology or partner with insurtech start-ups. In all of these ways, companies hope to take advantage of a quickly evolving technology landscape.

Yet our technology remains frustrating. Systems take years to implement. Costs continue to rise despite promises to the contrary. New capabilities that seem like second nature to the likes of Amazon or Facebook appear to be elusive for us. Why, despite all of this time, effort, and money, do we still find ourselves disappointed with our technology solutions?

Technology Strategy

Technology Strategy Demands a Change In Mindset

I am not a systems architect, but it seems like process enablement continues to influence technology strategy.  This statement is especially true when it is being driven by professionals who have “come of age” in the insurance industry.

A process bias leads to technology that is about making manual procedures faster, calculations easier, and providing structure and transparency to processes. This “process mindset” was a massive breakthrough for insurance. As a result the industry realized many gains. Today, however, these goals are simply less valuable.

Where systems once had to enable processes, processes are now transformed because of systems. This symbiotic relationship is something that too many professionals within the industry do not fully understand.

Technology has advanced at a far more rapid pace than many of us can really appreciate. That includes those of us who are pretty technical. Systems today imbed process efficiency, structure, control, and accuracy as a part of their core systems architecture. It should be second nature for systems engineers and developers to meet these common goals. If you have a system that doesn’t consider these factors as “table stakes,” then you have missed something fundamental.

Advanced insurtech allows for whole new approaches to business transformation. However, to leverage the possibilities that are before us, our mindset needs to change across every department. This shift in mindset is not just a call for systems architects to change how they view their world. It is about professionals across disciplines thinking differently about how technology and their business goals interact.

Shifting Focus to Data Quality, User Experience, and Innovation in Insurtech

Today’s technology offers us remarkably innovative ways to interact with customers. Simultaneously, we can enhance their experience while creating new opportunities for our companies. If we remain rooted in the old process mindset, we will be doomed to repeat past mistakes. With process efficiency no longer being the goal, we need to reconsider what the ultimate endgame will be for our insurance systems of the future. Only then will insurance companies achieve strategic alignment between our business, our people, and our policies.

5 Transforming technologies

Transformation comes from technology when we rethink the experience, redefine the goal, and broaden our idea of the possible. Having this clear vision is one of the biggest challenges for insurance professionals today. This realization is precisely why I believe we are so intrigued by “insurtech” companies that bring a fresh perspective. We need to push ourselves to change our perspective and mindset as we contemplate our business needs.

While there are probably many different ways to consider how technology can transform insurance, these three are the ones I like best.

Customer Experience & Engagement Mindset

Insurance has long been something of a necessary evil, and building remarkable customer experiences could meaningfully shift that perspective in the hearts and minds of customers, partners and society in general. Creating this cultural shift offers as tremendous potential value for carriers through a multitude of new products and services.

Product Innovation Mindset

Insurance struggles with churning out new products that meet the various and complex needs of its marketplace. There are lots of good reasons for this. On the other hand, if insurers can innovate their offerings more quickly, then they can create opportunities for themselves while helping their customers at the same time. Products that keep pace with a world that is moving increasingly at breakneck speed can experience hard markets, pricing favorability, and profitable growth.

Data-First Mindset

Insurance has always been about data and analysis, but the capabilities that technology affords us in this space have grown far beyond our wildest dreams. If we think of data as an asset, then we can build systems, processes, and even products around it. Inevitably, data quality opens up an equally impressive world of opportunity.

All of these business transformations have merit. However, my choice and the one that is easiest for most insurance organizations to align with is the “Data First Mindset.”

Being data-first is the most attractive option because it is already a part of our culture (to a greater or lesser extent). It could also be argued that true product innovation and customer engagement really isn’t within reach until you have already established a foundation of capabilities that are built upon quality data.

Lastly, going data-first is a good choice because it can allow us to refine an existing asset that every carrier already has. All insurance organizations have lots of data. While much of it may remain locked away in documents and forms, this barrier is falling as I write. A data-first strategy offers a quick win for those of us who would seek to unlock this data and incorporate it into our decision making.

Autonomus Cars

The Data Driven Products we Underwrite

Autonomus vehicles area a great example of how data will become an increasing part of the products our clients develop and our underwriting of those products. Check out the full article on on autonomus vehicles Volvo and Uber are bringing to the market at Insurance Journal.com.

What is a Data First Mindset

Every business that has been operating for more than 40 years has had to change how they think about data. So, to some degree, this process is likely already underway across your organization. If this is news to you, then you are behind.

This change needs to be deliberate. Leaders, especially those in the decision science space, need to help their organizations reframe how they look at data. Factors like data quality and data governance will be difficult to institute meaningfully unless data is viewed as an asset to everyone. For industries that have a long history, like insurance, this can be difficult. However, the benefits of re-framing are significant.

With a data-first mindset, people approach how systems are built differently. They will prioritize things like data capture and validation so that high data quality is embedded in a system.

Members of organizations will understand how improved data quality can yield deep, data-driven insights. For this to happen, leaders should be prepared to drive three important principles home within their organizations. Then, the data-first mindset can win out.

 Shifting to A Data-First Mindset in Insurance

Data is viewed as a byproduct of our business rather than central to our business. Sure, data is important. Insurance professionals understand that. However, when you view data to be central to the insurance process, we are much more likely to prioritize data quality in a way that facilitates analysis and, ultimately, data oriented products and services.

This idealist point of view doesn’t necessarily mean that more is always better. If we see data as an asset that is central to our business, then we will be much more likely to invest the time and energy into considering how to best preserve and leverage that asset.

We will contemplate which data is necessary versus that which is not. Team members will invest in strategies that facilitate sharing and aggregation. Everyone will emphasize validation and automation to ensure we have high data quality. All of these things are a natural extension of thinking data first.

It is easier to spend money than it is to change behavior, but to implement a data-first strategy, behavioral change is necessary. If you have ever tried losing weight, you know that changing your actions is crucial to success. It’s tough to lose weight if you can’t bring yourself to eat differently or exercise more. While this is really simple in concept, it is extremely difficult to put it into practice. The same is true for people in organizations.

Like many industries, insurance has a habit of spending money on tools or systems (even people) while failing to change associated behaviors. We are creatures of habit, and bad habits can be formalized in processes that lead to poor data quality.

There are many day-to-day things we do that can inhibit our data’s value. We may rate policies in Excel spreadsheets as opposed to in our policy systems. Other times, we skip data entry steps to get a claim processed faster.  These “shortcuts” may help move our process along, but it actively undermines our data’s value. To use a data-first mindset would mean that we focus on changing those daily behaviors that either decrease data quality, make data less accessible, or otherwise limit its value. 

Leaders Tend to Care About the Destination Over the Journey

Big picture thinking is essential. In fact, it is critical. We all know the devil is in the details. This sentiment is especially true for regulated industries that have complicated networks that are a part of their day-to-day workflow. Combine this caveat with the genuine need to access multiple data sources over a long period of time (sometimes decades) and the insurance industry becomes one of the most complicated sectors around from a data perspective.

In these cases, destination-focused thinking can seduce business leaders into ignoring the many details that are really important for success. To combat this, data leaders must be prepared to articulate how the value gained from data is dependent on the journey. They need to show how the eventual destination is connected to many smaller successful actions along the way. They must illustrate how these changes will improve data quality, make data more accessible, or enrich an organization’s data assets. Leaders will have to demonstrate how incremental value is gained, communicate how an organization’s data journey can take the organization where it wants to go as a business. 

The Take Away

Changing our mindset to being data first (or any other mindset for that matter) is a big challenge. Compared to the investments our industry makes in technology and collecting data (even if it isn’t well managed), changing your organization’s data culture is a far higher return on your investment.

By shifting our thinking to a data-first philosophy, we can view systems differently, transform processes, and align our business in a way that can leverage technology and innovation to create tremendous value. While this is a challenge, it is one that is far more interesting to overcome than continuing to cope with suboptimal outcomes resulting from the old way of thinking.