On March 12, 1928, William Mulholland, Harvey Van Norman and Tony Harnischfeger walked the dry side of the newly filled St. Francis Dam in California and inspected disturbing leaks. Mullholland was the brains behind Los Angeles' new aqueduct – a 233-mile series of man-made rivers and reservoirs that would eventually bring much-needed water to the San Fernando Valley. Before leaving that day, Mulholland Harnischfeger assured that although the leaks needed to be remedied, they did not pose a serious structural danger. That evening, the dam gave way and 400 people living under the dam, including Tony Harnischfeger, were washed down the valley. It was a tragedy that could have been avoided if perceptions had matched reality and knowledge had been shared.
Knowledge can almost always improve results. We still have preventable tragedies, such as COVID-1
Those of us in insurance technology know how facts can help us take advantage of opportunities and avoid risks. At Majesco, we stay up to date with facts about technology and customer and market trends to provide real knowledge and insight to our customers. To help us look ahead, we gather the insurers' views and assess strategic priorities for the coming year. This year's survey report, Strategic Priories 2021: The Insurance Industry Shift Hits Hyper-Acceleration for Digital Business Models the first of two reports, is particularly crucial for an understanding of priority shifts: How COVID-19 affected insurer's priorities and how they which accelerates important strategies leaps forward and positions itself for future success.
In today's blog we see that the COVID pandemic is not the only challenge facing insurers. We take a closer look at what affects insurance companies today.
Internal Challenges – Insurance Customers Share Their Opinions
Majesco Examined Insurance Managers Regarding These Internal Challenges:
- Digital Functions
- Data Security
- Older Systems
- Adjustment business strategies
- Data and analysis functions
- Talent (retention, availability)
- Change management
- Aging workforce / retirement
- Post-COVID work environment
Of the eleven internal challenges in the survey, five indications of that they become more "the norm" for doing business (Figure 1): Digital capacity, adaptation of IT and business strategies, data and analysis functions, Data security and Talent (availability, storage) . These challenges showed steady increases of concern over time but peaked in 2018-19 and have had lower trends over the past two years. This probably suggests that companies have adapted to these standards through improved capacity, adjustment of expectations or increased confidence through the benefit of experience gained over time.
The question remains, however … Do these perceptions match reality? Some examples:
- Many insurers embraced portals, but most of them do not deliver the next generation, holistic digital experience that customers, employees and distribution partners want and expect and some of the digital maturity needed.
- Insurers have made progress in organizing their internal data sources, but are still struggling to realize the benefits of a fully integrated data environment consisting of internal and new external structured and unstructured sources, with AI / ML-generated insight.
- Given the continuing and increasingly serious data breaches, data security may be more of an illusion than the reality for many critical industries such as insurance and why the need for cyber insurance is so critical.
- Confidence in an aging IT workforce to keep old older systems running should shift the insurer's priorities to rapid older transformation, including no code / low code function.
Figure 1: Decreasing concerns about internal challenges
The challenges regarding Budget and Older systems continue to remain stable with above average levels of concern in each survey. Budgets are likely to always be a universal source of discomfort, but as companies begin to establish new business models that have new cost structures and move IT costs from Capex to Opex, this opens up the possibility of reallocating resources to new initiatives.
While many insurance companies have completed or started older transformation projects, many of these are modern, non-platform implementations that are the "new older" systems and are now being replaced by the next generation of cloud-based digital insurance platforms. This next-generation platform has superior features that meet the needs of today's and tomorrow's insurance customers, including no code / low code features mentioned above.
Interestingly, four new internal challenges in this year's results got all the lower concerns: Innovation and Change Management Digital and Data / Analytics Capabilities and IT-Business alignment . Low concern about Aging workforce / retirement and Work environment after COVID adapted to the downward trend in concern about Talent (availability, retention) . These can be blind spots for many companies, which we will discuss immediately.
Talent and Retention – Major IT Crisis or Minor Business Conundrum?
It is not surprising that IT managers are much more concerned about internal talent. problems than their counterparts, as shown in Figure 2. Their 25% higher concerns about the availability and retention of talent are driven by the fact that they face stiff competition from InsurTech and Big Tech for employees with the skills needed to transform into digital first insurers. Until they can achieve the transformation, however, IT must retain as much of its aging workforce as possible to maintain older systems and keep its current operations running. This lack of adaptation is problematic, which means that resources are allocated to companies as usual rather than focused on creating the business needed for the future.
Figure 2: Levels of Concerns over Talent Issues, IT vs. Business
External Challenges – Insurance Officers Share Their Opinions
Majesco Examined Insurance Managers Regarding These External Challenges:
- Changed Customer Expectations
- COVID-19's impact on target markets
- Rate of change
- Growing market availability for new / innovative insurance products
- New competition from the insurance industry outside  New competition from the insurance industry
- direct sales (B2C and B2B)
- The rising costs for the agent channel
- AM Best innovation points
This year we see declining trends in concern for several external challenges, including Changing customer expectations, regulations, speed of change and new competition from the insurance industry . Like some of the internal challenges, insurers seem to feel more confident in these areas, either through improved features, customized expectations or experience (or a combination of these).
However, as with the internal challenges, is there a risk of being too comfortable, confident and complacent, especially to get out of COVID? Andreessen Horowitz notes that e-commerce has increased more in the last 6 months than in the whole decade! [i] Add to this the new customer experiences from Fintech and retailers like Sofi and Amazon that create experiences, rather than transactions. Majesco research shows that customers who are willing to share their data if it leads to more customized products and pricing that suits their changing lifestyle and risks, such as on demand and embedded insurance.
In addition, there has been almost flat to small reductions of concern over New Technology, New Competition from InsurTech, Startups, MGA and New Competition from Technical Giants Outside the Insurance Industry . This last challenge issue is about blind spots, as experiments and market entry of players outside the industry are accelerating. Consider a few examples:
- Intuit launches QuickBooks insurance and 401K services – QuickBooks customers can now protect their companies with comprehensive insurance coverage and offer their employees a 401 (k) benefit, as traditionally only offered by large companies. This integration enables QuickBooks users to seamlessly receive a custom quote and easily purchase general liability, professional liability and employee compensation from Next Insurance with a few keystrokes directly from their QuickBooks account. [ii]
- Petco Launches Insurance – In October, they announced the launch of Vital Care, a paid annual plan that provides pet parents with a convenient and affordable way to meet their pets' routine health needs. [iii]
- Walmart Offers Pet Insurance and Health Insurance – In November 2020, Walmart announced that it was adding pet insurance when animal adoptions hovered during the pandemic. The company offers insurance through Petplan and connects people to pet keepers or dog walkers through Rover. [iv] In July 2020, it was announced that they were launching a health insurance arm – called Walmart Insurance Services LLC – to sell plans to consumers. Walmart's low prices and wide footprints can pose a threat to insurance startups – especially those companies that break into the Medicare benefits market. [v]
- Tesla Insurance Approved in Texas – In December 2020, the Texas Department of Insurance approved insurance applications to be taken out by a third party in Austin-based insurance companies and distributed by Tesla Insurance Services, Inc., following the company's launch in 2019. in California. Tesla's Texas program uses driver-based information collected by the vehicle as an input to determine collision speeds in the event of a fault. The program also covers expenses for cyber identity fraud, electronic key replacement, loss or damage to the original wall charger and for loss when the vehicle is driven by autopilot. [vi]
As industrial and market trends develop, so do topics covered by our annual survey. We have added five new external challenges this year. Although these do not have historical trend results, COVID's impact on your target markets had the fourth highest overall ranking among all 14 external challenges, reflecting the real uncertainty about the pandemic's impact on consumers 'and businesses' economic health. , and the effects of insurance.
Growing market availability for new / innovative insurance products was ranked sixth, tied with InsurTech and raking higher than New competition from and outside the industry challenges, suggesting that current insurers more strongly associate InsurTech with these new offerings – yet another potential blind spot for new competition.
The remaining three new editions, The increase in direct sales, The rising costs of the agent channel and AM Best Innovation Score had significantly lower ratings than all other external challenges. (See Figure 3.) Are these blind spots again, or do insurers have a good grasp of these challenges? As e-commerce increased in all industries and demographic changes in channel preference, we expected higher scores on these two channel challenges. With the weak results of AM Best's first innovation assessment mentioned earlier, it is a little surprising that this issue came in dead last.
Figure 3: New external challenges are added to the survey
Important differences between segments
Summary of grades in all internal and external challenges highlights some important differences between DWP levels and business segments. The largest level is much more concerned about internal challenges overall. This suggests that the complexity of large organizations leads to a greater number of challenges that can be an obstacle to flexibility. Smaller companies should have an advantage here with less bureaucracy and complexity – but old systems can also be an obstacle that denies this advantage. Replacing these systems with the next generation of core platforms should now be of the utmost urgency .
Companies with new products are much more concerned about the internal and external challenges, as shown by the aggregated grade comparisons. (See Figure 4.) The L & A / Group Only segment is close to two out of five of these. This makes sense when you consider that these companies are challenging the status quo with non-traditional products and flaming new tracks can exacerbate existing challenges (eg IT, talent, etc.) as well as take on completely new challenges.
Figure 4: Differences in aggregate levels of concern about internal and external challenges by industry
How is your opinion ranked within these challenges? Can knowledge open your organization to the possibilities in our midst?
Do you know what you do not know?
With these executive views for next week, we will consider Planning . How do insurance companies take their knowledge and apply it to priorities for strategic initiatives? Are business and IT adapted? Do the initiatives match the market?
For more insight and an overview of the upcoming report, listen to Majesco's latest webinar, Strategic Priorities 2021: The Insurance Industry Shift Hits Hyper-Acceleration for Digital Business Models.
[i] A16z Leader, "Company 2020 – What 24 Business Builders Had to Say," December 18, 2020, https://a16z.com/2020/12/18/the-enterprise-in-2020/ ] [ii] "Intuit Launches New QuickBooks Insurance and 401 (k) Services," CPA Practice Advisor, October 22, 2020, https://www.cpapracticeadvisor.com/small-business/news/21159570/intuit-launches-new – quickbooks-insurance-and-401k-services
[iii] "Petco launches revolutionary" Vital Care "health plan," PR Newswire, October 2, 2020, https://www.prnewswire.com/news-releases/ petco -launches-revolutionary-vital-care-wellness-plan-301144624.html
[iv] Repko, Melissa, "Beyond dog food: Walmart adds pet insurance when animal adoptions hover during the pandemic," CNBC, November 12, 2020, https: //www.cnbc.com/2020/11/12/walmart-expands-pet-insurance-and-pet-care.html
[v] Ahmed, Erum, "Walmart will start offering health insurance to consumers," Business Insider, 10 July 20 20, https: //www.busin essinsider.com/walmart-breaks-into-health-insurance-2020-7  [vi] Zawacki, Tim, "Latest Tesla Insurance Offering More Evolutionary Than" Revolutionary "," S&P Global Market Intelligence, 13 January 2021