Perspectives on how it systems can facilitate insurance innovation, disruption and value chain integration

Navigating digital disruption

The economic essentials of digital strategy – interesting reading from McKinsey

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Surviving massive competition? Being agile is the answer.

Insurance companies are in a considerably increasing competitive market. Not only threatened by technologically more agile and innovative players, but also by new intruders. To cope with this, today’s insurance companies need to think outside-in.

No doubt, the insurance industry, like others, will in the coming years be tremendously influenced by further IT evolution. On a short view, the IT efforts are likely to concentrate on demands in adapting to a new digital economy.

Price competition has become more intensive due to an increasing commoditization of the traditional insurance products, so there is a high need for IT effective business processes. At the same time new insurance products and channels emerge – demanding that insurance product configurators can create, change and retire products quickly and cost effectively. Unfortunately, not many insurance IT systems are capable of delivering the needed level of support for agile product creation and omnichannel management today.

But this is far from sufficient. On a medium and longer view, the biggest changes are likely to come from a number of derived circumstances.

The buyer is in control
B2B as well as B2C customers change their buying behaviour as more digital opportunities arise. Consumers have already for years used social media, price comparison portals, search engines and other digital media out of the control of insurance companies. In an American study dated three years back McKinsey found that the average american auto insurance shopper received more than 3 quotes and considered 4.5 carrier brands before buying. (“2012 McKinsey Auto Insurance Customer Insights Research”)

Today 90% of B2B customers use digital channels for collecting information before a purchase.

When insurance is no longer the core product
It can certainly be difficult to compete with companies who are not playing by traditional rules and have different value chains. Other players had difficulties in handling Google’s arrival in the Internet- and IT industry. Others sold their technology, but Google gave it away for free, generating their revenue from advertising, not technology.

Likewise, new types of insurance companies are entering the market place, founded on the idea that the insurance policy is not necessarily the core product, but maybe even a ”loss leader” to open for more sales of a completely different product category. With the new generation of insurance systems, delivered as Software-as-a-Service, such insurance business can both be created and managed purely by outsourcing. A truly disruptive scenario for the established insurance industry.

Anders Engdal, CEO

Anders Engdal, CEO

CEO of IBA, Anders Engdal, gives a few examples, “Let’s pretend a retail chain launched a loyalty card combined with a short-term income protection insurance; the coverage amount depends on how many points you have earned on your loyalty card during the last six months before occurrence of unemployment. Most likely this would affect the buying behaviour of the policy holder. So, if the retailer is also the risk carrier the insurance product does not necessarily have to be profitable in itself, as it is likely to accelerate the turnover of the remaining business considerably. In the same way, I doubt it was to get rich from the insurance business that Volkswagen established their own insurance company.”

Insurance Business Applications (IBA) provides and implements products and solutions for the insurance industry. End-customers in 17 countries benefit from the IBSuite insurance platform, which is especially designed for the agile insurance businesses, where sales channels as well as products are in constant development, and where the buying process is very much defined by the customers.

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Mastering the Business Case – IBA does

Mastering the Business Case is a comprehensive book about optimized benefit realization, and how to produce a Business Case that supports this. Why is this relevant? As written in the foreword: “One of the root causes of failed projects is unclear business objectives.”

You get a profound documentation of such business objectives in Mastering the Business Case. If the Business Case is missing, the project manager and all resources related to the project have no clear guidance. This could end up in de-focused decisions, add wasteful complexity to the project, add unnecessary cost, prevent any focus on realizing the benefits, etc.

IBA – an ideal case of Business Management

The Business Canvas Model of the insurance industry has changed considerably to more complex business models. As the selected case for the Business Management chapter, you can read how IBA during our agile solutions make it possible for our customers to match increasing market dynamics and new demands – not least because we are capable of implementing insurance solutions multiple factors faster than market average.

As Anders Engdal, CEO of IBA, points out, “When the implementation of a solution starts, all energy should be focused on the business application change. The faster the implementation will be completed, the faster the company is able to change their business model to support the new requirements from customers, partners, aggregators and statutory authorities.

The organization will be able to quickly follow new market trends while adjusting products to new demands, and the break-even level where the return becomes positive from introducing new products is lower than before.”

Authors of the book: Klaus Nielsen, Cambridge-educated dual MBA holder, and Martin J. Ernst, M.Sc. and Assistant Professor at the IT University of Copenhagen

Read more about Mastering the Business Case