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FEATURE: The New "Normal" Has the Industry Innovating, Transforming

Posted on 06 Dec 2010

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At the ACORD/LOMA Conference in May we at ProgramBusiness attended a session given by Kimberly Harris-Ferrante, Vice President & Distinguished Analyst of Gartner Inc., a leading information technology research and advisory company. Her session, “Disruption and Opportunity: Preparing for Insurance 2015 and Beyond” identified the major shifts taking place in the next five years and key actions needed for survival and growth in the industry. We followed up with Kimberly recently to discuss some of these shifts and what the insurance industry needs to do to transition to what she defines as the “new normal”, better aligning with customers, and capitalizing on emerging technologies.

Kimberly in her role at Gartner is responsible for monitoring the business and technology trends within the property and casualty and life insurance industries. She specializes in strategies and technologies in the global insurance sector for distribution, customer relationship management, exception-based underwriting, policy administration, claims management and administration, business process management, business intelligence, and infrastructure management and optimization. She’s been with Gartner for 13 years, and is an active participant in its outsourcing research and chief of research for the industries practice within the company.

Annie George (AG): What challenges do you see for insurers for 2011 and on? At the ACORD Conference you discussed the “new normal”. What defines the new normal?

Kimberly Harris-Ferrante (KHF): “2009 was a challenging year for the industry. The stock market dip resulted in consumer spending and confidence declining. In 2010 business began to return to normal, with revenue improving. However, the ‘normal’ market is characteristically different than years before. Market conditions, consumer demand, and the regulatory environment, for example, are all very different than those of 2008 or 2009. Furthermore, social media has connected and empowered the consumer in ways that implicate how we market, service, and communicate. Technology, including cloud computing and social networking platforms, has been embraced by other industries and has propelled the insurance industry to do the same. There has also been a shift in the political climate with new regulatory requirements emerging and on the horizon, as well as other industry drivers including fluctuating economic conditions and focus on managing environmental changes such as rising energy costs and focus on going green.”

“These triggers have caused us to look at a new insurance model. The industry must change, innovate and transform. This involves taking a look at our organizational structure, our processes, data, technology, and people.”

AG: In what ways do we innovate, transform?

KHF: “Take a look at how the customer is changing. There is a movement from ‘one size fits all’ to a variation in devices, products, content, and processes. Is your organization positioned to meet the customers’ needs of the future? Can you provide information in real time, deliver this information across multi channels, engage in a collaborative dialogue, and entertain while educating consumers on products? Are you thinking about a long-term IT landscape, with improved data management and business intelligence?

“Are you looking at social media? Social media has made it easier to reach specific or niche consumer segments, to blend in customer service in a way that is less expensive in the past. Is your organization focusing on a customer-centric approach?”

To become a truly customer-centric organization, Kimberly explained that companies must address their internal culture. “Are you putting in place the people needed to shift the focus on customer centricity?”

Customer intelligence is also critical. “Know your customer and provide personalized, intimate customer service based on the breath and type of the relationship. Look at whether you have a customer aggregator, if you have the ability to know the number of policies in a household, for example” she said.

“Look, refresh and understand life events to understand what your customers will need. Get into a client’s mindset. Based on a customer’s age, where they live, and behavioral attitudes, where are they in life, what types of products can you anticipate them needing?” said Kimberly. “Do you have access to information and the mechanism in place to communicate when a birth occurs, when a teenager in the household is about to become of driving age, when retirement nears? You need the ability to do predictive analysis and deliver on that analysis.”

Developing customer interaction and experiences through new channels, including interactivity on your website, is another way of engaging your clients and keeping touch with what they need.

Kimberly also suggests reviewing the way in which you develop insurance products, programs. “Are you able to create and take a product to market in a timely fashion based on intelligent data from consumers? Do you know what your customers want from you? Look at them as your partner. Get insight into the future, by looking at demographic and consumer shifts, including attitudes, channel preferences such as mobile and smartphone use. Then assess and realize business processes to match the consumer’s desires.”

AG: Are companies moving in the right direction to adapt to these new shifts?

KHF: “Some insurers have made substantial investments and they understand the importance of transforming. For others it’s a work in progress. For example, with new channels, such as social media, it is imperative that insurers have a reactive strategy based upon responding to growing consumer demand. It is no longer an option to watch and wait, but insurers must create strategies now to respond to the disruption and opportunities created by social networking Creating policies for monitoring social media and networking sites is fundamental, as well as having a communication plan to share the policies with employees, partners, and agents.

This approach can be applied to other emerging technologies. “For each major shift that occurs, ask yourself will it be a disruption or an opportunity for your organization? And what will you do about it and what are the risks if you do not respond but your competitors do?

“Taking a more proactive approach with a greater understanding of the shifting market conditions will enable insurers to better meet emerging business demands. Throwing traditional out the window and embracing change is a critical success factor for 2011 and beyond.”

About Gartner

Gartner, Inc. is a leading information technology research and advisory company, delivering the technology-related insight necessary for its clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to technology investors, Garner is the valuable partner to 60,000 clients in 10,800 distinct organizations. Founded in 1979, Gartner is headquartered in Stamford, Connecticut, U.S.A., and has 4,300 associates, including 1,200 research analysts and consultants, and clients in 80 countries.