The need to modernise insurance systems

Shifting customer expectations and the need to replace aging systems are contributing to insurers’ decision to modernise their environments and become more adaptable to the digital needs of the market today. Lee Kuyper, COO at SilverBridge, examines the process this will likely entail.

“Insurance is not a modern industry, with many companies having been around for a long time. As technology has evolved and as new insurers, not limited by legacy solutions, have entered the market, the incumbents have had to embrace the possibility that not only their systems, but also their business models must change. Consumer behaviour is radically different with technology becoming an integral part of people’s everyday lives,” he says.

The reality is that systems can only enable a good customer experience within the context of an optimal business model, but having a modern platform make this possible. Legacy systems have limitations when it comes to integrating with modern front-end systems such as the Web or a mobile app. In addition, it is typically not easy to access data from traditional insurance systems, often with disparate databases, in a way where it can be leveraged to better understand the customer and manage the business.

“Insurers who still rely on hosting systems on-site, open themselves up to significant risk when it comes to being dependant on their own infrastructure and skills. They also lose out on the opportunities that cloud platforms provide. While there are effective ways of moving legacy systems to the cloud, they will remain constrained in terms of their ability to access and integrate into the numerous functions and systems available.”

Business-driven change

Modernising a core insurance system is not a simple task and should never be approached without the necessary support from the business at the highest level. It also provides an insurer with the ideal opportunity to modernise its business overall.

“Even with the buy-in from leadership, modernising an insurance system remains a daunting prospect. If attempted as a single ‘rip-and-replace’ project, there is a high risk of failure. Rather, by identifying a single product to modernise, the probability of success increases exponentially. This solution can then be used as a basis to provide the basic capability needed to operate in a more modern way,” adds Kuyper.

He says that once this is achieved, other products can be migrated to the new system. At the same time, the initial solution can be continued to be optimised.

“Optimisation should not be driven from or limited to boardroom discussions. Instead, the business must examine how it operates and how customers respond to the new solution and use that as further input into what additional optimisation is required. Often, this approach highlights the importance of what at face value might appear to be trivial things but are important to the customer.”

Gaining a return

By modernising their core systems, insurers can take the first step to digitalisation and intelligent process automation. These initiatives are only possible to the full extent once a modern backbone is in place. By unlocking the benefits of digitalisation, an insurer can achieve improved policy-holder experience, increase new business policy volumes, and ensure improved retention of existing polices.

“In addition, business operations can be optimised for efficiency gains, and the insurer can better manage risk and ensure regulatory compliance. Internally, staff will be more motivated as they are able to become more efficient and effective in their jobs. Like consumers, employees have also gotten used to modern systems and apps in their daily lives. Modernisation is therefore critical to the success of an insurer as it seeks to continually deliver value to customers,” concludes Kuyper.

Digitalising customer engagement vital for retail insurance growth

One of the realities of the current COVID-19 pandemic is the fact that it has made people realise the importance of having adequate life, disability, and funeral cover in place. And with clients considered the most disruptive force in the insurance industry, insurers would do well to ensure they provide innovative retail products that meet the expectations of increasingly digital-savvy customers, says Annalie Terblanche, head of product at SilverBridge.

COVID-19 has been referred to as the agent for change in the way the life insurance sector operates, challenging the status quo for insurers and becoming more responsive to client needs. When the country commenced its lockdown at the end of March, the immediate concern for insurers centred on protecting the health and safety of employees and distribution partners in the agent and broker community as they focused on maintaining business continuity.

Shifting engagement

“Part of this entailed putting in place interventions designed to deliver a comprehensive contactless environment between the insurer, its partners, and customers. This was not only limited to the corporate side, but also focused on modernising traditional practices when it came to retail customers. For those brokers reliant on face-to-face sales, the lockdown signified a period where growth opportunities would be impacted as meeting a client over coffee to discuss their insurance portfolio could not take place. Because of this, attention shifted to an increase in demand for digital distribution. According to a recent news article, insurers who have given trading updates for April and May reported significant sales declines. And while there has been a growing increase in consumer awareness regarding the importance of insurance during these challenging times, insurers must be able to provide a digital experience to mitigate the risk of a lack of face-to-face engagements,” says Terblanche.

Furthermore, the demand for online life insurance products is also expected to increase. Its ease of access and quick turnaround times from application and policy management perspectives make it an ideal solution for people concerned that they might not have adequate (or any at all) cover during these uncertain times. By better leveraging their digital distribution capabilities, insurers will be well-positioned to effectively do so. This crisis will likely prove to be a catalyst for not only product simplification, but digitally-assisted ways of engaging with customers and servicing their needs.

Renewed importance

“In India for example, even though new business premiums declined by 32% in March due to COVID-19, life insurance sales using online channels increased by 20% in the same month. This trend is one that is likely to be reflected around the globe. Central to insurers being able to respond to these changing customer expectations for the availability of more digital channels, it has become critical to modernise insurance systems and digitalise processes. Without either of these in place, an insurer will be limited to almost exclusively traditional sales opportunities significantly impacting on its growth potential.

The road ahead for life insurers might be difficult to predict, research suggests that there may be a number of long-term positive benefits for the sector. This will not only give impetus for the increased demand in life insurance but will also see attention turn to retirement policies. This can at least partly be attributed to the ‘taste’ of unplanned retirement the lockdown has given some people. The significant impact on income, limited mobility and access to goods, and isolation might just be the spur required to rethink how an individual’s retirement annuity is structured or managed.

“Ultimately, those insurers who facilitate a digital customer journey using digitally enabled go-to-market models, will be the ones that are best positioned for growth in the current and post-lockdown world. Through these digitalisation and modernisation efforts, the insurer can help grow trust between itself, its partners, and customers in more user-friendly ways with the ability to provide best-in-class solutions delivering value through online means,” she concludes.

Cloud delivers security that financial services organisations require

Worldwide, financial services organisations are turning to the cloud as the means to transform outdated legacy systems and commit to disruptive technologies. The size of the public cloud market is expected to top $354 billion by end of 2022, a significant jump from the less than $197 billion of 2018. But instead of going the all-or-nothing route, the hybrid cloud is positioned to provide companies with a more secure way of leveraging their data. Yunus Scheepers, CTO at SilverBridge, discusses these security benefits at a time when Microsoft Azure data centres in the country are attracting attention from financial services organisations as a safer alternative to what their current on-premise offerings can provide.

A hybrid cloud environment also provides risk-averse financial services executives with the option to keep certain workloads internal or in private hosted environments as opposed to migrating everything to the public cloud. One of the critical areas that has been limiting cloud adoption has been concerns about data sovereignty. With legislative requirements calling for certain personal customer data to be stored within the borders of the country, many organisations have been wary of starting their cloud journeys. However, the arrival of Microsoft Azure data centres has addressed those concerns ensuring all related compliance requirements are taken care of.

Cloud performance

“The cloud does provide an opportunity to automate what has become a tedious, manual, and expensive exercise. For example, leveraging the high-performance computing capabilities of a Microsoft Azure data centre will provide financial institutions with a wealth of artificial intelligence, machine learning, and automation capabilities to address many compliance concerns. And all this is developed within a highly secure environment,” says Scheepers.

By centring financial service processes and data analysis requirements in cybersecurity, cloud vendors ensure the mechanisms are in place to safeguard critical insurance and banking assets. In fact, the market for cloud security solutions in the banking sector is set for a compound annual growth rate of more than 33% from 2019 to 2024.

Furthermore, it has found that the cost reduction, scalability, and efficiency provided by cloud computing is driving the market. Due to the constant decline in the absolute cost of IT equipment, many financial institutions have changed other production factors with IT. The essential idea of cloud computing is to deliver IT services such as computer infrastructure or storage as a utility thus making these services ultimately more flexible and cost-efficient.

More secure

“The modernisation of financial services infrastructure through a cloud-based approach also aids in delivering an improved customer experience. This is focused on delivering more personalised experiences by leveraging the data analysis capabilities of cloud environments. But to accomplish this, the traditional view that on-premise environments are more secure than those provided for in the cloud, must change.”

For its part, Microsoft fends off seven trillion cyber threats daily and allocates more than $1 billion each year to cybersecurity. Its Azure cloud environment runs in 192 countries using more than 100 data centres and one million physical servers to deliver more than 200 cloud services. The typical cybersecurity budget of a financial services organisation cannot compare to these resources.

Another critical advantage that cloud security services provides over on-premise solutions is that it is continually updated with no user intervention required. IT teams can therefore focus on other strategic deliverables leaving the cloud vendor responsible for security.

“Microsoft’s investment in securing the cloud is indicative of its importance to the organisation and the steps it takes in ensuring that the data hosted on the Azure servers are protected at all costs. This should give comfort to those in the financial services industry who believe that their on-premise environment is adequate for all their security needs,” concludes Scheepers.

Digitalisation in insurance

The current lockdown in South Africa is a major challenge for businesses to maintain operations. For insurers, much of this revolves around empowering employees with the capability to work remotely and continuing to provide customers with the required products and services. Annalie Terblanche, head of product at SilverBridge, looks at the importance of digitalisation in insurance in this regard and how to position organisations to remain fully operational.

“Most South Africans are feeling the impact of the lockdown even though the long-term repercussions will probably be felt for years to come. The next several weeks will be vital in the country’s ongoing attempts to ‘flatten the curve’ and battle the COVID-19 virus. During such uncertain times, insurers must be able to maintain operations with as little disruption as possible to provide customers with a sense of comfort that the business is stable. To this end, employees must be able to work remotely and maintain service levels that deliver on the ever-increasing customer expectations.”

Being consistent

Of course, by digitalising their processes, insurers can empower customers to access their policies, track claims, and exercise more self-service options. Moreover, all sales channels that include intermediaries and call centres can also benefit from such a process. Being able to work digitally, enables them to overcome the challenges of not being able to meet with clients face-to-face due to the lockdown.

Those insurers who have already begun the journey to modernise their core systems are in a better position to have employees working remotely and to digitalise business processes to such an extent that they can continue delivering their full value proposition during the lockdown. Regardless of the current crisis, the business remains in a position to deliver a consistent customer experience.

“A priority in a modernisation drive is for the insurer to focus on its core insurance system as this represents the heart of operations. Doing so will enable the business to scale according to its customer requirements and become more agile in embracing digital technologies to deliver value. As part of these digitalisation efforts, a cloud-based approach will empower the insurer to respond more efficiently to a changing business environment,” says Terblanche.

Not quite plug and play

However, this is not as easy as simply installing a piece of software and hoping it will automate many of the administrative-intensive functions at the insurer. Instead, many insurers must find a way to balance their need to digitalise business process and automate administrative functions whilst working with the challenges of the legacy solutions that they still have in place.

“By modernising insurance, the organisation will be in a position to embrace emerging technologies that deliver significant value to customers and be in a stronger position to scale according to customer requirements. This digital enablement of customers and all the related sales channels is a critically important step to help ensure the delivery of a positive customer experience.”

Take for example completing an insurance policy. The traditional paperwork required in this regard makes for a tedious process. But by digitalising the end-to-end onboarding process and offering brokers and call centre agents Web portals to digitally capture information and process the applications, the insurer can increase new business efficiencies and levels of accuracy.

“Furthermore, a digital approach to business creates the opportunity to inject business intelligence (BI) into the organisation. This provides decision-makers with a more efficient way to gain complete oversight of all critical elements associated to the insurer. BI, through its structured dashboards, provides a visual way to view data and generate insights. If the current crisis is showing businesses anything then it is the need to be proactive and make more informed decisions especially as we navigate through this new norm,” concludes Terblanche.