As everything becomes interconnected, the way we conduct business, work and play are radically changing.
In the insurance industry, for example, the technology used to be perceived as a tool to cope with changes in markets and changes in regulation. However, insurers have increasingly used technology to transform their business models. Technology has not only provided the opportunity to extend insurance companies’ reach beyond the industry’s traditional boundaries but also is allowing new entrants to compete in those existing companies in the industry.
At the same time, maturing markets, increasing risk and technologically sophisticated customers are some of the pressures the insurance industry faces today. To succeed, insurers will have to work faster, more efficiently and, above all, smarter.
Based on data from several IBM Institute for Business Value surveys, a new study from the IBV, “Insurance 2025,” explores several scenarios of how the insurance industry will look in eight to 10 years and examines how insurers may need to act to be ready for those changes.
We believe that two technological trends, in particular, will have a high impact on the future of business across industries: the rise of cognitive computing, and the increasing potential for decentralisation of systems and decision making.
If systems are decentralised, the question will be where the centre of control will sit, and how fragmented the networks will be. For example, limitations imposed by privacy concerns, regulation, or liability could hamper the use of devices encourage the device autonomy and the centralization of control.
Cognitive computing refers to next-generation information systems designed to accelerate, enhance and take advantage of human expertise. These systems can learn large amounts of data, reason with purpose, and interact with humans naturally. Their ability to handle unstructured data and range across wide subject domains gives them the opportunity to remake business processes. We believe these technologies will have reached maturity by 2025.
An IBV insurance survey a year ago found that 79 percent of insurance company leaders believe technology will have a major impact on their organisations, and 71 percent said they have begun to use cognitive technologies. When combined with artificial intelligence (AI), cognitive systems can enable insurers to assess the risk of loaning to an individual to a high degree.
We believe that insurance companies should consider these four moves to succeed in the next decade:
Take out expenses and build in flexibility by moving core systems to a hybrid cloud that are available as-a-service, which enables experimentation and entry into new markets entry at low costs, on secure platforms. As products move to “as-a-service” models, turn legacy systems into components to help sustain cost competitiveness.
Develop partner ecosystems
Organizations in the insurance industry will need to collaborate in order to have the best data about consumers and the risks of loaning money to them. The goal is to cultivate partnerships and membership in ecosystems within the insurance industry. When using “as-a-service” products, an insurance company will need to cooperate with service partners to offer the complete package.
Improve predictive capabilities:
Insurance companies will need to improve their speed of change by bringing together technology, business capability and product investment. They should use analytics, pattern recognition and data to chart progress, as well as understand customer behaviour and risk parameters.
Leading innovators build an organisation with a corporate culture and design processes that encourage innovation. Corporate structures can be made more flexible by streamlining internal innovation processes, with centralised funding and investment models.
Embracing innovation will build skill with component technologies of whichever future scenario wins, providing the capabilities necessary to prosper in changing conditions. And building agile development and business service composition skills will keep your organisation nimble enough to capitalise on market changes.
As technology evolves, C-suite executives, such as those in the insurance industry, will need to look to the future to maintain their organisation’s competitive advantage. By using that approach, they can continue to transform their business even as their industry is restructuring all around them.
The writer, Ben Mann, is the Chief Operating Officer, IBM East Africa.