"The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." – William Arthur Ward, Writer
New digital technologies, increased competition, and changing customer demands are forcing 61 percent of insurance carriers and financial services firms to move away from traditional business models, according to a recent global study of C-suite insurance and financial services executives. While we don’t need a study to tell us that digital disruption is real, what’s boggling is what the other 39 percent of organizations are (or aren’t) doing about it.
To use a maritime analogy, there are essentially three types of organizations out there: The Pessimist who says, “Humpf, this storm will surely wreck our ship so we’re staying in port.” The Optimist who says, “We’ll stay the course and hope the storm passes.” And, the Realist who says nothing—and goes about the job of plotting a new course. Where does your organization fall? One thing is clear, the seas are changing and the time has come to make some pivotal choices about where and how you’re going to steer your ship.
Ecosystems and interoperability are the waves of the future
The P&C insurance industry has stayed a tried and true course for decades, but now the steadfastness that was once an asset—that incumbent reinsurers, carriers, and brokers built their business models upon—has become a detriment. A proverbial steamer in a sea of more agile vessels who are riding the “open ecosystem” wave as a way to accelerate change and limit disruption while establishing their organizations as leaders and fierce competitors. They recognize that we are increasingly dependent on ecosystems and that inefficiencies and redundancies prevail.
All the waste and operational inefficiency that exists in the current P&C environment is simply not sustainable. By getting on board with a more open ecosystem, organizations can create velocity that accelerates innovation and moves our entire industry forward, faster.
Change is fraught with risk, but so is staying the course
Did you know ships may require up to five miles to stop and over a third of a mile to turn around? Like a big ship, changing course can be difficult for some. The propellers are solidly in motion, and the bigger the ship, the harder it is to stop or turn on a dime. You understand the need for change, but inertia in the system is slowing you down due to a host of challenges—from complex, inflexible legacy systems to regulatory considerations, sunk development costs, and just plain skepticism about whether new solutions can deliver on their promises.
I understand and can empathize with all of these hurdles having spanned the spectrum of the insurance value chain in my career, from broker to modeler and now solution provider. Change is fraught with risk. But staying the course is its own risk just the same.
The two key differences between the 61 percent of organizations who are plotting a new course and the 39 percent who waiver are: One, the pursuit of fundamental change and development of a plan forward. Two, the ability to successfully (and swiftly) navigate the challenges. “Well, in insurance, we move slow,” isn’t an argument you’ll hear from those residing in the 61 percent. Not when there are a host of practical technologies and platforms, such as innovations in data and analytics, that have been built to complement existing systems—and can be implemented right now, not years from now.
Pragmatic innovations, ecosystems, and interoperability accelerate change
Scott McConnell, divisional president for NTT Data Services, who published the global C-suite study previously mentioned, noted in an Insurance Thought Leadership article:
“Modernization and core systems have been a conversation for years, but insurers no longer have to face the costly and time-consuming option of replacing legacy technology – or continuing on the same limited path. With a digital business platform (DBP), they can adopt and integrate new technologies with their existing core systems, allowing them to work with a global ecosystem of partners to become more nimble and customer-focused.”
No matter the size of your ship or the complexity of your systems, reaping the benefits of more pragmatic technologies means tapping into an ecosystem of partners that can accelerate change without disruption to your legacy and core systems.
But, while having a host of practical point solutions to assist in core workflows is necessary, it’s not entirely enough. The ability to advance innovation and market efficiency hinges on improved connectivity between systems, or interoperability. To effectively leverage practical solutions, investment and attention must be paid by insurers, reinsurers, brokers, and solution providers to advance interoperability among systems. This includes the formation of open data standards for the transfer of data in the marketplace, open modeling, and data platforms to allow the market to leverage a best-of-breed view of risk across a multitude of expert providers. Likewise, open APIs are needed to facilitate seamless workflow integrations between in-house systems, technology providers, and modelers/data providers.
Keep it smart and simple
It’s clear we’ve reached a horizon of uncharted waters in our industry. Will you stay the course or brave new seas? Sure, there are regulatory and change management considerations along with competing priorities—all of this is true. The first step starts by acknowledging all of it and recognizing you cannot tread water in a sea of change. The practical innovations that are right in front of you are low-hanging fruit that can create momentum without heavy investment in time and resources, and without a spinal transplant of your legacy systems.
One of our values here at SpatialKey is “keep it smart and simple.” We are relentlessly committed to using our common sense and trading complication for ease. Would you rather sail across this stormy sea alone, or are your odds of a successful voyage more favorable with an army of ships at your side? That is what practical innovations and an ecosystem of partners can provide. They can help secure a profitable future by exploiting the collaborative value delivered through digital technologies and open ecosystems.
I challenge you to think about how you can bring simplicity to some very complex problems. Look to your partners. Look to your customers. Look to pragmatic technologies. And then plot a course for change.
Join the conversation and share your perspective. Email me directly: firstname.lastname@example.org
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Bret Stone is President at SpatialKey and a long-time veteran of the insurance industry. He’s passionate about solving re/insurers' analytic challenges and driving innovation to market through well-designed analytics, workflow, and expert content.