InsurTechs have seen a boom in the last 2 years. They are solutions for an industry with a lot of legacy systems and processes, but is rapid digitalisation and technology adoption the answer to bring the insurance sector into the 21st century? According to Dimitri Anagnostopoulos, Partner, True North Partners, and Periklis Thivaios, Researcher, IE Business School, that’s not necessarily the case.
Although the insurance sector was lagging behind in the ‘innovation charts’ in 2015 and 2016, we have observed a lot of fast tracking in adopting technology and digitising processes. In our experience, the primary challenge is not the pace of embracing innovation per se but the understanding of the concepts underlying it, and their appropriate incorporation in the organisation’s cultural fabric.
We believe that insurance companies should not be focusing on what may be the key innovation and technology to adopt or implement, but rather focus on addressing business problems like customer experience, operational efficiency, etc. Technology is then to be chosen as the enabler, rather than the other way around. In other words, when it comes to choosing innovation and technologies such as big data, machine learning, or blockchain, the starting question should be the problem we are trying to solve.
Get it right: innovation, digitalisation, efficiency, automation
We oftentimes see concepts being used interchangeably, which may negatively impact the effectiveness of the solution we are trying to implement.
For example, ‘innovation’ and ‘efficiency’ are often being confused. When the challenge faced is improvements in efficiency, innovation is not necessarily the right answer. Instead, simple and tested solutions may be preferable in order to deliver the desired results. Nonetheless, we often see expensive and complex implementations being pursued driven by our ambition to demonstrate ‘innovation’.
In a similar manner, there is a difference between ‘digitisation’ and ‘automation’. We have observed a lot of effort and investment in an attempt to automate processes under digitisation initiatives. However, if the problem we are trying to solve has not been properly identified, the organisation may be simply automating legacy mistakes.
The most important aspect of embracing new capabilities (whether technology, digitised processes, innovative solutions, etc.) is the organisation’s culture. Technological innovation should be motivated by a desire to serve our customers better. Alternatively, we run the risk of implementing lip-service solutions for the sake of appearing innovative, with detrimental consequences on client experience, overall efficiency, as well as staff morale.
Solutions need to be driven by business and customer needs. If our priority is servicing our clients in the best possible way, then we need to decompose that problem statement and focus on solutions that can address it (technological, process related, or both).
Due to rapid expansion of the InsurTech ecosystem, it is easy nowadays to fall in love with technologies, but we might not be solving for our core priorities. From our experience, what tends to happen, if we don’t start with the problem and focus on it, is that solutions start becoming more inwards oriented, i.e. benefit and value the organisation while leaving the customers as a second priority.
The InsurTech ecosystem is well developed and has plenty of solutions to offer. Embracing and ultimately succeeding in benefitting from new technologies should be aligned with the cultural drive of the organisation and not from a desire to be perceived as forerunners in technological adoption.