Modern Insurance Magazine Issue 66

INSURTECH
The Insurance Industry
at a Crossroads
Being at a crossroads means you’ve reached a stage that requires
a very important decision to go one way or the other, each with
different results and consequences. This is where the insurance
industry stands right now.
Denise Garth,
Chief Strategy Officer, Majesco
Name a pressure and it’s happening. Inflation, supply chain
challenges, high interest rates, lower disposable incomes
and low unemployment, with growing retirements coupled
with declining profitability, increased claims costs and
losses, rising loss ratios, and rising reinsurance prices. All of
these have combined to create a massive wedge, lifting the
industry out of its seat of complacency and into a position
of decision and action. Each pressure makes its own case
for rethinking business operating models and technology
foundations, in order to remain relevant and growing.
Current business and technology frameworks no longer
meet the challenges, demands, and opportunities of today’s
dynamic and fast changing world, let alone the one of
tomorrow. The primary challenge is the significant legacy
debt generated by old operating models underpinned by
multiple legacy core systems, technology architectures, and
archaic business processes.
Attempts to place new technologies on old foundations
haven’t achieved their intended value. Legacy architecture
and operational models are an unstable foundation. Their
weakness is decades of modifications, myriad constraints and
growing business challenges. Operating models are proving
to be inefficient, unprofitable, and experience-constrained.
Layered technology has added complexity that has increased
costs, rather than decreasing them.
The way forward must include both operational and
innovative initiatives to drive transformation of today’s
business model and technology foundation. This can bend
the cost curve that drives profitable growth and efficiency,
creating competitive differentiation for customers and
managing the growing need for talent.
Nearly 50% of insurance industry employees will retire by
2030. Institutional knowledge and expertise is in jeopardy.
Add to this the fact that 44% of Millennials don’t find
an insurance career interesting, even though insurance
offers great opportunities to work in a variety of avenues:
underwriting, data and analytics, cutting-edge technologies,
and more – all things that would seemingly appeal to this
generation. These Millennial and Gen Z job expectations,
including the technology they will use, places further
pressure on insurers.
The cost and impact of legacy debt is now catching up and
pulling organizations down, certainly from a cost, speed to
market, operational and talent perspective. The devastating
combination of retirements and lack of interest by Millennial
and Gen Z creates a real opportunity for rethinking the
business model and technology foundation. Legacy business
models and technology got insurers to where they are today.
They can’t carry insurers safely into tomorrow.
So, what needs to change? Next Gen intelligent solutions
will meet the expectations of new employees, bridging the
institutional knowledge gap and bending the learning curve.
A groundbreaking leap in software design is making this
possible, fueled by the pillars of modern innovation: cloudnative,
API-first, microservices and containerization, headless,
and embedded analytics - including AI and GenAI.
AI and GenAI are awesome tools that have the power to
revolutionize insurance — offering a tailwind for cloud-native
market leaders who embrace AI and GenAI as a competitive
advantage — putting distance between them and those with
legacy, on-premise solutions.
The insurance market is being challenged and reshaped
by colliding forces. They have given the insurance industry
a catalyst — a reason to refocus on transformation, drive
operational optimization, and examine how insurance does
business.
But transformation must be more than just legacy system
replacement. It must be a burning platform for strategic
change of the operating model, and a flexible technology
foundation that will adapt to rapid market changes, create
new experiences, and allow a company’s innovators to
innovate. A new foundation will decrease operational costs,
improve productivity, allow marketing to tap into market
opportunities that will grow the business, and keep the
company prepared for change, wherever and whenever it
occurs.
Forward-thinking leaders recognize the crossroads,
identifying the areas that intersect the operational business
model with the technology foundation in order to drive
optimization, growth, innovation, agility, and long-term
business success. Every insurer and every transformation is
unique, yet each deserves a solution that addresses every
aspect of the business.
Stop investing in the past, and commit to a new direction. No
more patchwork solutions. Build with the future in mind.
MODERN INSURANCE | 71