I believe there has been more change in the P&C insurance industry over the last two years than in the previous 10 or, arguably, 20 years. The trends of change have been well documented and I won’t cover them here. Suffice it to say, the pace of change will accelerate in the years ahead. This begs a question: In this time of accelerating change, what technology is required to ensure that P&C insurers can be successful in the short and long terms? One way to answer this question is to explore the different eras of P&C insurance technology. At Guidewire, our view is that there are three eras and that we are at the dawn of the third. Let’s explore these eras and the reasons why insurers should care.
In the first phase of P&C technology, the transaction era, the focus of system design was in capturing financial data, such as premium-in-force, policy limits, claim reserves, and myriad other examples. Mainframe systems became prevalent, helping to reduce paperwork and ensure adequate processing performance but hamstrung due to these systems’ inflexible and monolithic design and neglect for the needs of end users. This era lasted from approximately the 1960s to the 1990s.
In the second phase, the process era, the north star of system design was to help insurers enforce standard processes and management control across the insurance lifecycle. Enter web-based systems, modular core systems, systematized business rules, and straight-through processing. It was during this phase that Guidewire came to market with our ClaimCenter product and subsequently PolicyCenter and BillingCenter—providing a suite of core systems. This era lasted from the mid-1990s until recent years, when we saw a new era emerge.
The engagement era is now the third phase. Here, the guiding principle for systems is to enable the insurer to meet the user on her own terms, to provide the experiences and journeys that she wants. Rather than equating “users” solely with customers, as most commentators do, we at Guidewire define “users” to be customers, agents, and insurance knowledge workers. The engagement era is in its formative stage and will persist for years to come. In a future blog post, I’ll elaborate on the following attributes of engagement era systems:
Support for core operations, data and analytics, and digital engagement must be provided in a cohesive, orchestrated manner.
The user experience must be consumer-grade.
The technology has to support an omnichannel experience supporting all channels and modes of user engagement.
Why should P&C insurers care? What are the consequences of embracing the engagement era? Consulting firm McKinsey answered this well in a report published in September 2016.* According to McKinsey’s research, insurers in the top quartile of technology investment are growing twice as fast as their less advanced peers. At the same time, they are delivering better profitability, with the top quartile (in terms of technology investment) having a combined ratio 6% less than their peers.
So the outcomes can be compelling in terms of operating results. User engagement is also a strategic theme, one which is being embraced by leading brands, thereby causing raised expectations in all industries. Consider what Amazon’s Jeff Bezos says about Amazon’s attitude toward its customers: “We see our customers as invited guests to a party, and we are the hosts. It’s our job every day to make every important aspect of the customer experience a little bit better.” And consider what Apple’s head of retail, Angela Ahrendts, has to say about Apple employees: “I don’t see employees as retail employees. I see them as executives in the company who are touching the customers with the products that Jony Ive and the team took years to build. Somebody has to deliver it to the customer in a wonderful way.”
To learn more about the engagement era—and why insurers should care—watch this short video featuring Guidewire’s CEO, Marcus Ryu.