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Carriers

The Next Era of Digital Innovation in Insurance

Luis Romero
August 6, 2020

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Insights » Insurance » Carriers » The Next Era of Digital Innovation in Insurance

Insights I learned working on the front line of change

I can’t believe it’s been 25 years since we founded Equisoft. Every week it seems somebody asks me what I’ve learned navigating the changes that have shaped the industry over those years. And they always want to know:

  1. What will the future of our industry look like?
  2. How will technology impact our companies and our clients?
  3. What can we do to prepare?

I wrote this article to share what I’ve learned about overcoming disruption over the past two decades and encourage our industry to continue to incorporate those hard-won lessons into preparations for the transformations we all face.

Crises have made our industry stronger

To me, the past 25 years tell the story of an industry that has been transformed by difficult cycles of boom and bust. But, as tough as those experiences were, they taught us how to develop better products, run leaner and invest more wisely. They strengthened the entire ecosystem-making it more efficient, adaptable and resilient.

I think the maturation started in the 90s when the first tech bubble was expanding. Everyone had an eye on the future, even though trying to build new capability on 20 or 30-year-old back-office systems was an almost impossible task. The internet was new, and possibilities seemed boundless­ until the bubble burst.

Almost overnight, investment and new development slowed to a crawl-but, even though we became frustrated by the slow pace of growth, we didn’t stop adapting and trying to grow. The internet continued to explode.

Connectivity became the holy grail, leading insurers to seek better front-end tools for their sales force and their clients. Companies started thinking about developing web-based solutions rather than being tethered to desktop PCs.

Unfortunately, the full internet revolution didn’t actually happen in life insurance when it should have.

Our recovery from the tech bust was cut off at the knees by the catastrophic 2008 recession. Just as markets and investment started to improve, the markets tanked–and yet, once again, the industry responded. We created new products to replace the variable ones that were no longer profitable.

Companies refocused on their core businesses, resulting in a shift from in-house development to external, market-ready solutions. Insurers began to seek out integrated end-to­-end solutions which created efficiencies and improved margins, enabling them to survive the lean years.

Companies who persevered in those difficult times are now leaner, more responsive. And now, many of the things we have wanted to do since the birth of the internet are becoming possible. We find ourselves at an inflection point-a moment in which large-scale changes will revolutionize the business for those who seize the opportunity.

What does the future hold for life insurance?

The immediate priority for insurance leaders is simple-catch up! There’s a lot of talk about innovation, but first we need to build the right foundation for all stakeholders. The majority of advisors still don’t have a CRM. Most carriers have multiple 30-year-old back-office systems. Few enable real-time policy service.

There is a clear need to modernize to accelerate new product development and enhance customer experience in order to meet heightened customer expectations and compete with born-digital insurtechs.

Find efficiencies

The lessons we learned about recovery and growth after the collapses of the past 25 years still apply. Going forward we’ll continue to be challenged by low interest rates. Margins are likely to be further eroded by the added costs associated with regulatory changes like IFRS 17, data privacy laws and tightening best interest rules. We need to find efficiencies, improve margins, invest wisely-and continue to focus on accelerating innovation

Add value for advisors

Just as we did in the wake of the tech bust, companies need to leverage technology to add value for advisors. They need digital tools that increase efficiency and deliver a 2181 century experience for their clients. Carriers and brokers who provide better CRM, financial planning, illustration, electronic application and self-servicing portal solutions will attract and retain the brightest talent.

Innovate and integrate

At a time when growth is slow, and the pace of change is high, it’s necessary to apply everything we’ve learned about finding innovative solutions for our clients. Front-end tools must be integrated with back-office platforms. CRM’s and agency management systems need to be linked to data feeds so that information can flow freely where and when it is needed. These fundamental changes will lower operational costs and price. They make possible new direct and hybrid distribution models as well as accelerated, highly personalized customer experiences.

I believe that the hard lessons from the past 25 years that made us more efficient, resilient and adaptable are now making possible an era of innovation like we have never seen before. I’m looking forward to seeing how technology will have transformed the industry 25 years from now!

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Luis Romero
CEO
Luis.Romero@equisoft.com