You’ve heard a lot from me about how to prepare your business for the coming decade—a decade that will be defined by wearables, personalized digital experiences, new demand patterns, and a nimble competitive landscape. Now, with 2020 upon us, let’s look at how you can optimize your budget to meet the demands of the new age.
Insurers are spending more on IT with each passing year, and that trend will only continue as customers expect ever more sophisticated products, apps, and marketing from their carriers. Our partner, Novarica, has studied IT budgets in 100+ insurance companies for over 10 years, and the data is clear: IT has become the driver of new competitive advantages. What insurers want most out of their IT budget is increased speed to market, better distributor services, and advanced analytics capabilities. Allocating your spend to optimize these three areas will set you up for success in the new decade.
Insurance disrupters are making their mark on how legacy brands do business. With Artificial Intelligence enabled chatbots that replace entire sales divisions, Augmented Reality-led marketing efforts boosting smart home sales, and more, traditional carriers must do more to bring their digital offerings to market faster.
The key to increasing speed to market is to embrace the power of agile development, whose adoption has become a roadblock for many carriers. Fifty-four percent of property and casualty insurers cite agile maturation as their top challenge for 2020 and beyond, with that number rising to 76% for life and annuity insurers. Without the iterative nature of development and end user feedback the carriers are reluctant to commit to new product mix. Eventually the insurance and the annuitant both lose the benefit that the carrier could offer from a richer product experience.
Another top challenge in this area is attracting and retaining talent. With an aging workforce and overwhelming demand, it’s important to get the best developers on your team to run your agile environment.
And let’s not forget the importance of Quality Assurance in agile development. As you ramp up your time-to-market, there will be a need to keep an equal focus on product quality and experience. We strongly recommend allocating part of your budget to a fully-functional QA org—whether internally or externally—to automate testing and ensure the digital products and services you offer run smoothly every time with high rate of adoption.
Insurers are spending more on supporting new distribution channels. More than half of insurers are planning for new systems or major enhancements in portals, business intelligence, and predictive analytics. The enhancements help solidify your distribution, as you can attract and retain agents more easily by providing robust portals and advanced tracking and analytics. Considering that new entrants to the market put these elements top-of-mind as they build out their product portfolio, it’s important that traditional carriers not ignore their agents.
For most insurers, spending in data analytics is still inside the IT Budget, and business intelligence is one of the top capabilities that insurers want their IT to deliver on in 2020. This budget will largely dictate how well you perform in any other area. Actuaries and underwriters need to be able to process huge data sets to design innovative products and resolve claims more accurately. Agents want intelligence on who is most likely to buy which products, where they are, and when to contact them. Customers want deeply personalized experiences, which can only be achieved through customizations rooted in predictive analytics. And let’s not forget your CFO who needs to track spending to real business results.
Ultimately, the fruit of your IT spend is predicated on your core systems. More than 20% of insurers are planning core systems replacements in 2020. This is critical to supporting all of the amazing digital initiatives you’re planning—your apps, portals, and business intelligence are only as good as they systems they run on.
Pyramid Consulting consults with insurers at every stage of digital transformation to help them properly allocate their budget, attract talented developers, and prepare for rising customer expectations. From core systems replacements, to QA orgs and agent portals, Pyramid Consulting is a true partner. Reach out today to find out how we can help optimize your business in the new decade.