Building the Foundation for Digital Insurance. An IDC InfoBrief, sponsored by CSC and EMC September 2016

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1 Building the Foundation for Digital Insurance September 2016

2 Executive Summary Insurers are moving away from the traditional wait-and-see approach to embrace new technologies as never before. They realize that digital transformation is key to addressing the many challenges the industry is facing today. Many insurers are investing in digital technologies to adapt to changing business requirements technologies that can help exceed customer experience expectations, create new revenue streams through agile business models, and maintain cost and efficiency. Insurers need to nurture an open culture and innovative mind-set, build a strong technology foundation and have the right talent and leadership in place to transform themselves in to a truly digital organization. Foundation for Digital Insurance Modern front office enables omnichannel personalized engagement with customers and businesses on the move for insurance distributors. Modernization of core IT enables agile response to market and modern agile infrastructure that enables safe and secure access to IT resources and frees valuable resources for innovation. Big data and analytics investments help drive insights throughout the business units, use data as an asset, and leverage information for competitive advantage. Effective sourcing, deployment, and integration of internal and external resources and tools help address the skills gap to achieve transformation objectives. pg 2

3 The Many Challenges in a Digital Era Insurance Industry Perspectives Insurers have been traditionally slow to adopt new technologies compared with their retail or banking counterparts. However, in the wake of ever-changing customer expectations and market dynamics, IDC observes that the industry is moving away from this approach to embrace new technologies as never before. Customer Demands anytime/anywhere insurance buying and service experience influenced by other industries. Expects insurers to be risk advisors across the policy life cycle rather than just product sellers. Distribution Distributors and partners expect business on the move. They want insurers to be easy to do business with. Competition New market entrants and nontraditional players including peerto-peer insurers, niche startups, pay-per-mile insurers, driverless cars, aggregator sites. Costs Living with the old (legacy systems) while aspiring to invest in the new (digital technologies). Lack of talent familiar with new technologies. Risks New risks such as cyberrisks as a result of increased digitization. Lack of insight into risk exposures hindering product innovation for cyberinsurance, shared economies. pg 3

4 Insurer Response to Industry Challenges Digital Transformation Is the Key Insurers realize that digital transformation is key to addressing the industry challenges and enabling them to adapt to changing business requirements. Digital transformation needs a strategy and relies on 3 rd -Platform technologies and innovation accelerators. Exceed customer experience expectations Stream new revenue through new business models Maintain efficiency and cost pg 4

5 Top Business Priorities for Insurers Increase productivity Optimize business processes Improve customer acquisition and retention Increase organization s revenue Reduce costs Meet compliance requirements Source: IDC s Vertical IT and Communications Survey, 2015 (Insurers surveyed n=186) pg 5

6 Top IT Initiatives Aging legacy systems, manual processes, data protection and regulation, culture issues, and talent shortage are all barriers for transformation. However, insurers cannot afford to wait for the perfect strategy to kick-start their digitization initiatives. The need of the hour is to build and deploy digital capabilities while also tackling the legacy problems. The top IT initiatives of insurers are a positive indication that digital adoption is a major focus for them, and it s at the heart of their IT strategy Cloud Services Business Intelligence and Analytics Mobile Technologies Application Modernization Risk Management Technologies Customer Experience Technologies Source: IDC s Vertical IT and Communications Survey, 2015 (Insurers surveyed n=186) pg 6

7 Transforming Front Office, Core and Infrastructure for Improved Customer Experience, Productivity, Business Process Optimization Digital transformation is not just about bringing one mobile application to market or one service it s about a redesign of an insurer s IT architecture and operating models. The technology foundations for that are a modern front office that enables exceptional customer experience, modernization of core for agility, big data and analytics to drive insights throughout the business units, and cloud and converged infrastructure for improved SLAs and cost savings. Digital transformation is not just about bringing one mobile application to market or one service it s about a redesign of an insurer s IT architecture and operating models. pg 7

8 Transforming Front Office, Core and Infrastructure Modern Front Office Use of online, mobile and social technologies to engage and influence customers and distributors through personalized, seamless and consistent experiences Core System Replacement Policy admin, claims, agent system replacements for improved agility, speed to market and exceptional customer experience As-a-Service Models Shift from bespoke application development with long cycle times to agile models for development, testing and deployment Private and Public Cloud Shift from traditional in-house/ outsourced fixed infrastructure to private and public cloud for cost savings, improved SLAs and agility Hybrid Cloud Models Flexible model where core, sensitive data can be in enterprise private cloud while not losing out on the advantages of public cloud, such as scalability, external data access for improved risk management Hyper-Converged Infrastructure To have fully scalable, highperforming back office that drives quick product rollout while also meeting regulation, mitigating risks and controlling costs pg 8

9 Transform Information into an Asset for Competitive Advantage and to Generate New Revenue Streams Data Discovery Acquire, prepare and visualize data from customer records, social media interactions, distributor and partner scorecards, processes, sensors (telematics, Internet of things [IoT]). Knowledge and Collaboration Make it easier for proposition and marketing, sales, actuarial, claims and underwriting, customer service teams to safely and securely access and use data in their work from both internal and external data sources. Value Development and Realization Use analytics and other techniques to increase data s business impact and enable product and service innovation, boost operational performance, improve customer experience, and expand in to new markets (cyberinsurance, shared economies). Information Architecture Provide a technology foundation for information assets, including data management and models, integration, storage and security. Many insurance companies are tapping into complex streams of big data and applying advanced analytical techniques to transform the way they do business. IDC estimates that the worldwide BDA opportunity in insurance was $0.83 billion in 2014, an amount that is forecast to grow at a CAGR of over 24% through Source: IDC s Worldwide Big Data Forecast by Vertical Market, pg 9

10 Addressing the Skills Gap in the Digital Era 3 rd -Platform technologies will create a skills gap. Insurers can address this and achieve their transformation objectives by effective sourcing, deployment and integration of internal (full-time and part-time employees) and external (contract, freelance, partner) resources. Transformation and optimization are realized by adopting strategies that leverage digital interactions and collaboration, connections, relationships and tools. This way they can identify the right resources for their initiatives and maximize productivity and outcomes. The 10 most difficult positions to staff More difficult to hire Easier to hire CIO IT Strategy CTO Chief Architect Enterprise Architect Chief Information Data Scientist Security Officer Data Architect Solutions Architect Risk and Threat Management Source: IDC s 2015 IT Staffing Study, April n=139 pg 10

11 Success Story: A Leading European Insurer Undergoes IT Infrastucture Transformation to Achieve Agility, Scalability and Improved Performance Challenge Transform the IT infrastructure supporting regulatory Solvency II requirements while standardizing, optimizing and creating a more scalable environment: 4 Improve global IT services delivery. 4 Modernize the IT stack to meet scalability, reliability and performance requirements. 4 Significantly reduce the IT cost of ownership of this mandatory application portfolio. Solution Evolve to next-gen within a strategic context and programmatic approach: 4 Application estate remediation and process reengineering 4 Automated deployments and dynamic-environment scaling with embedded policy and governance 4 Implement and manage Dedicated private cloud and public virtual private cloud environments Hybrid cloud services Results Insurer worked together with technology partners and achieved the following: 4 Seamless foundation in place for hybrid cloud environment 4 Dramatic lowering of IT costs and accelerated provisioning time 4 Performance improvements in business applications 4 Faster decision-making ability for regulatory requirements 4 Vastly improved DevOps, autonomy and agile capability pg 11

12 Digital Transformation in Insurance Is Multifaceted Leadership Transformation Creating a digital investment strategy to integrate IT into processes, products and services. Help nurture ideas through an open culture and digital mind-set. Omni-Experience Transformation Improving customer engagement across the policy life cycle through the transformation of front office, core and infrastructure. Information Transformation Changing the way insurers access and apply internal and external data to ever-changing business requirements. Operating Model Transformation Enabling connected assets, products and services to change the insurance buying and servicing experience. Worksource Transformation Optimizing work with the tools employees and partners across the value chain need for information sharing, collaboration and decision making. pg 12

13 Building the Foundation for Digital Transformation Essential Guidance 4 Assess organizational readiness and build a digital strategy in line with the overall business strategy. 4 Plan big for the transformation, but start with small projects that deliver business value quickly. 4 Place customer-centricity at the heart of all digital initiatives. 4 Have an open culture and digital mind-set that is conducive to nurturing ideas. 4 Promote an environment that allows workers to attempt, fail fast and learn fast. 4 Invest in the right building blocks in terms of application and infrastructure modernization, and account for innovations around IoT, telematics and drones in this plan. 4 Make valuable information assets and analytics tools more accessible across the organization s units. 4 Build leadership teams that develop and embed the vision for digital transformation of products, services and experiences that are optimized to deliver value to partners, customers and employees. 4 Address the skills gap by effective sourcing, deployment and integration of internal and external resources with deep industry expertise, innovative mind-set and digital capabilities. pg 13