Until recently, insurance companies have enjoyed unprecedented success. However, changes in the operating environment both locally and overseas have raised the risk profile of the industry, impacting profitability and putting insurance providers at risk. With the targeted deployment of industry-specific technology solutions, insurers can mitigate many of the greatest risks they face today.
That’s according to Karen Malkin, Insurance Director at Business Edge.
She says PricewaterhouseCoopers’ annual ‘Insurance Banana Skins Survey’, an international study of 139 companies in 21 countries which highlights current issues facing the insurance industry, has revealed the top 10 risks as:
– Too much regulation
– Natural catastrophes
– Management quality
– Climate change
– Cycle management
– Distribution channels
– Long tail liabilities
– Actuarial assumptions
– Longevity assumptions
– New types of competitors
South African companies were among the respondents.
“South African insurers ranked technology as the one of the top four drivers of change going forward,” she says; while technology itself rated as one of the top challenges, Malkin adds that many others can also be addressed and mitigated through the deployment of appropriate technology solutions.
Too much regulatory compliance was highlighted as a major concern for the entire industry but especially for Life. “The ongoing introduction of laws impacts business by adding further layers of complexity and potentially interrupting and lengthening business processes,” says Malkin.
Systems can verify that diligence is maintained by enforcing standard and consistent business processes. Process driven systems allow tasks to be integrated into processes to monitor and track regulatory requirements. “Some systems cater for these changes to be business driven, requiring little dependence on IT specialists,” says Malkin.
The Survey results indicated that all respondents focused strongly on whether management had the ability to manage effectively in a rapidly changing, risk dominated environment. Management information [MIS] and business intelligence systems are essential to automatically gather and present information from across the business, supporting more effective management decision-making.
Once limited to the broker model, new distribution channels such as direct insurance and the Internet are today a reality. “The Internet and call centres provide insurance companies with more cost effective ways to process business, reducing the need for direct assistance. The business must ensure that the various channels provide a consistent customer experience. Changing from one channel to another should be seamless for the customer, driving the requirement for integrated business systems,” Malkin notes.
The proliferation of new competitors is putting pressure on insurers to innovate in order to provide attractive solutions to the market. The ability to create and rapidly introduce new insurance products to market – often in partnership with retailers, airlines, gyms or other businesses – is increasingly an essential requirement for insurance companies seeking to remain relevant in the modern market.
Malkin says this ability is directly linked to the underlying business systems, which must provide the flexibility and agility to assemble new products that can rapidly be introduced to market.
A major operational challenge facing the industry is the requirement for modernisation of back-office systems and technology. Paper-based or legacy IT systems dominate, escalating costs, creating inefficiency and limiting innovation. “Today, various technology options are available to insurers to meet this challenge. Depending on circumstances, insurers can either replace systems or extend their existing systems. Service Orientated Architecture (SOA) allows insurers to ‘componentise’ their systems. This gives them the opportunity to replace portions of their systems, to easily integrate additional capability and to isolate changes. This type of architecture also gives them the capability to streamline processes with partners like suppliers and intermediaries,” Malkin explains.
In avoiding ‘banana skins’, insurers can look to technological advances, including configurability, straight through processing, process management, workflow, MIS and SOA, to gain efficiencies needed to maintain profitability, innovate, grow market share while continuing to provide high quality, affordable services to the public.
Article provided by: FAnews