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Thriving in the digital age

In order to thrive in our 245/7 digital age, businesses should focus on their service provision and enriching the customer experience. In this piece, Stefano Bellandi, PwC leader for digital transformation in the insurance sector, discusses how the industry needs to evolve.

In thefuture, clients will increasingly want to buy experiences alongside products;anytime, anywhere and with  any device.Clients buying cars  for example, wantmore than  mobility; they expect anexperience that goes beyond  the basicvehicle provision.

As aresult, producers are competing to sell an experience. They’re moving away fromthe pure product and embracing other potential collateral elements, breakingdown sector  barriers to do so. Goingback to the mobility example, car producers now focus more on connectivity and services than on their cars’ technical specifications.

Bill Ford,president of Ford international commented: "All are saying we will be destroyed as car producers by thedigital companies. I affirm that we, as car producers, have to scrap ourselvesand develop a completely new business – changing from car producers to mobilityservice providers.”

To be ableto sell experiences, different  sectorsthat were completely separated and where every producer was characterized by aspecific part of the  value chain, nowhave to join together. Collectively the single elements can offer  an experience to the market.

This newphenomenon is called  digital disruption,however I prefer the definition of sector convergence.

Digitaldisruption or rather the potential offered by new technologies: digital, Enterprise Service Bus (a communication system between interacting software), de-structured data base and openarchitecture (marketing software enabling you to add, upgrade and swapcomponents), etc, will destroy sector barriers, facilitate a new value chain propositionand alter how clients  approach us andwhat they ask us to do.

Continuingthe mobility theme, insurers are only one of the stakeholders  within this value chain; we’re seeing  more and more players becoming componentparts and contributing to the experience (car producers, financial companies,car sharing companies, telecommunications, etc).

 

The impact on our world

The impact could be huge on theinsurer that fails to view its business as a commodity and integrate within thewider value chain. In contrast, if the choice is to maintain the clientrelationship, the insurer must become the aggregator of other value chains.This will however, affect all its processes:

Product packaging and pricing

- Newpackaging to reflect the new services that change the nature of the product

- Newmarketing and communication

- Newpricing approach based on a premium adjustment at the end or during the year(using data/telematics).

 

Underwriting

New policy issue processes to focuson immediately delivering the service and managing any delay between premiumpayment and policy inception.

Post sales and billing

• New internal services structure/processes– providing a real new management function

• Focus on prevention and notreaction

• New structure/processes to manage third-parties;the external value chain components that characterize the product

• New Quality Assurance processes – qualitydepends on the calibre of the external value chains

 

Claims (services in the post-sales component)

• New way to prevent and managefraud

• Proactive First Notice of Loss andclaims services, relying more on telematics

• New claims processes reflectingcomputer science rule-based machine learning.

 

The insurance market’s reaction

We are starting to see some initialmovement with big players either becoming aggregators or commodity producers.

Examples have until now beenlimited, essentially to increasing flexibility around health care where insurershave a mission, ‘to take care of the client’s health’. ‘Take care’ means preventionand consequently telematics, but also gyms, spas, etc – services that canimpact the health of a client.

It is clear technology will be aconsistent and fundamental enabler. A large majority of European insurers (86%according to PwC research) are starting to change their core system platformsand the IT landscape in Property & Casualty is ready to support thesechanges. Insurance carriers are making unprecedented investments in modernizingtheir policy administration systems and processes.

Those who successfully transform anddeliver their policy administration programmes will be the winners, alteringthe competitive landscape.

This new IT landscape ischaracterized by:

- A flexible system using rule-basedmachine learnings and a workflow package that connects to and manages othervalue chains

- An omni-channel approach able tosurf or cope with digital disruption and the needs of a digital client

- A data analytics approach; dataenables us to learn and continually improve.

We see in the market, a growing awarenessthat these elements are interconnected and collective components of larger coretransformation. Similarly, more and more of our clients are defining theirtransformation journey before investing/ starting a large IT project.

This is fundamental to successfully  delivering this type of project. Recent PwCresearch shows that while implementing a new policy administration system islikely to be the largest single project investment a carrier will ever pursue,historically, most projects are challenged, with only a small percentageoptimizing their outcome.

The goal of a policy administrationprogramme is not merely to implement another legacy application, but todeliver  transformative capabilities tothe business.

Only 30% of policy administrationprojects meet the traditional definition of success in terms of time, budget andscope delivery. And of that 30%, less than one in three realize the fullbusiness benefits.

Those carriers that do optimize andachieve this rare level of success will be able to leapfrog the competition,leaving around 70% of projects challenged or likely to outright fail.

 

Stefano Bellandi
Is PwC’s EMEA insurance core transformation leader. Stefano manages one of thelargest insurance advisory practices in EMEA - a specialist centre supportinggeneral insurance and life projects in this region. He has over 25 years'insurance industry experience and during this time, has  led large-scale transformation projects  including the merger of four insurancebusinesses, creating and managing one  ofthe top insurance companies in Italy, and developing the
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