The world looks very different now than it did just a few short months ago. As the COVID-19 pandemic has spread to every corner of the world, protecting employees and customers has been at the center of every leader’s agenda. Insurers across geographies have demonstrated incredible resolve and resilience as they have taken workforces remote, rapidly mounted digital tools, and supported communities through this unprecedented global crisis.
Much remains uncertain, but one thing is clear: business will not return to the old normal. As insurers have adapted their processes and operating models to cope with physical distancing and shelter-in-place measures, leaders are debating the shape of the next normal and recognizing the opportunity to make some of these changes—particularly to core technology and digital capabilities—permanent.
From 2012 to 2017, technology’s average share of operating costs rose by 24 percent (for P&C) and 12 percent (for life). However, there is a large difference among carriers in terms of what they get out of their investment in IT. Some have managed to jump to a new frontier of productivity and operational performance, while others are still not getting the full value out of their investment.
Make no mistake: insurers’ ability to thrive in the next normal will hinge on the quality and flexibility of their IT setup. And these strides in digitization and automation—and the subsequent requirements of the technology function—will most likely become table stakes after the crisis subsides.
The next normal: Reimagine, reinvent, and future-proof
In the past few years, advances in technology, data, and analytics have been accelerating the fundamental reshaping of insurers’ cost structures. COVID-19 has only increased the urgency to sustainably reduce expenses and deliver business capabilities.
The next normal of core technology will see insurers making the leap from traditional to modern IT that is on the frontier of technology and operations efficiency (exhibit). Companies at the vanguard are able to deliver more business capabilities with the same amount of spending. These gains have already led several incumbents to invest the time, money, and resources in core technology transformations.
The transformation needed to reach the efficient frontier requires three bold actions: reimagining the role that the technology function plays with respect to other business functions, reinventing the manner in which the technology function delivers products and services to customers and internal users, and future-proofing the quality of the underlying technology systems that provide the organization with essential capabilities.
Starting the journey
In this compendium, Reaching the next normal of insurance core technology, we begin with two articles detailing how insurers can achieve resilience amid the new world formed by the COVID-19 pandemic and how CEOs can orient the technology function to focus on the company’s strategic priorities. The articles in the three chapters that follow explore reimagining the role of technology, reinventing technology delivery, and future-proofing the foundation. On the whole, the compendium offers a closer look at what it means to reach the next normal of core technology and operations and become a tech-led insurer, using examples from the insurance industry and beyond. The articles provide insight into the challenges that lay ahead for carriers as well guidance on how to navigate them—particularly in a world that has been so quickly and permanently changed by the COVID-19 pandemic.