Cloud, data, mobile and social media are all transforming the way consumers interact with their insurers. This represents an exciting opportunity for South African insurers that are willing to invest in new core technology.
Historically, South African insurers have invested in aging, tightly-coupled monolithic systems that adapt poorly to changing technologies and are failing to meet the requirements of this growing customer base. Even the recent technology upgrades insurers have undertaken haven’t really changed this. According to Rhys Collins, Head of African Operations at SSP, these legacy systems are unable to address the needs of the new landscape and they are, in effect, hampering business growth opportunities. “This is in contrast to the latest micro insurance businesses that are growing from a new cost and technology base,” he explained. “While micro insurance is but a small portion of the insurer’s portfolio in South Africa, there is a profitable opportunity there if the model is right.”
Established insurance businesses have the advantage of a wealth of historic information, but they need to be able to leverage this data more effectively. Newer insurance businesses have already accomplished this by adopting technology platforms that are flexible and adaptable to change. These insurers can operate across multiple channels, access data that gives them a bird’s eye view of the landscape, and launch newer products faster. Furthermore, recent regulatory change in South Africa has had a massive impact on insurers. There is regulatory scrutiny on products, and pressure to change existing distribution channels.
“The challenge is to manage growth and exploit the revised channels through the intelligent use of customer data, while, at the same time, adapting to changing legislative requirements,” explained Collins. One area of consideration is the Protection of Personal Information Bill, which will impact on the way companies manage personal information. At the same time, focus needs to be placed on the Solvency Assessment and Management framework and Treating Customers Fairly standards. Legislative change can have both a positive and negative impact on the insurance industry, but it’s critical to have a flexible technology infrastructure in place to be able to deal with the competing forces for technology change. From research, it is clear that updating the core technology platforms that underlie the main processes within insurance is imperative for survival. Adapting legacy platforms is complex, time-consuming and fraught with issues, so building a business case for technology investment can be difficult. As a result, these expenditures need to be prioritised and cost-justified, more so than ever before.
“However, insurers should balance their lack of competitiveness with the pain and cost of implementing a new core system,” said Collins. Insurers should consider ‘Enhance and Evolve’ strategies that gradually replace core systems. This approach is helping some businesses move to new flexible technology platforms whilst maintaining business as usual. The ‘Enhance and Evolve’ approach also helps businesses mitigate risk, and to extract all the value and data from their existing systems on a step-by-step basis. It enables insurance businesses to upgrade their most critical legacy technologies on a modular basis and to evolve without complete replacement, ensuring they remain competitive and that customers do not suffer in the process.
“In this manner, the most urgent business priorities can be addressed first, whilst other systems can be updated in line with strategic business need. This approach allows the business to be proactive in addressing its legacy systems, rather than being driven purely by market change,” said Collins. The opportunity to take advantage of Software-as-a-Service (SaaS) delivery will also play a big role in legacy evolution for those companies able to manage the constraints and risk around data management. “The result is a flexible, adaptable modern platform that enables the business to respond quickly to change, and is optimised for Big Data and new product development, as well as digital, mobile and social – all the things that will impact insurance businesses today and in the future,” remarked Collins.
Investment will always be needed, but modern platforms make it so much quicker and easier to add new functionality, respond to change, modify processes and adapt to new legislation or best practice. Keeping the business at the forefront of technology in these times is an imperative, and an ‘Enhance and Evolve’ strategy makes this possible.