As I listen to insurance companies talk about where they are, where they want to go, and the obstacles in their path, it is clear to me that the discussion around digital transformation is happening everywhere—in teams both large and small. However, while some insurance companies seem to be taking action to move forward, others appear stuck in the mud— unable to make progress, or even decide where to begin.
As an architect, I am all for dedicating plenty of time and thought to the planning and design phases of any digital transformation journey. But in order to maintain pace with innovation, we also need to be as efficient and quick as possible in getting through these phases, and onto execution and delivery.
The trick is to invest that design and planning time wisely and in the right way. This is a competition, and companies will not win it if they cannot get off the starting line. Here are three ways I see digital transformation shaping the insurance industry.
Trend 1: Different speeds of digital transformation
From what I can see, property and causality (P&C) insurers seem much more motivated to digitally transform than other lines of insurance, and with good reason. Generation Z grew up attached to their smart phones and have high expectations of digital experiences, with little patience for poorly designed apps or glitchy user journeys. Today, Gen Zers looking for auto or home insurance have many options and will just switch to another carrier if they are not happy with their digital experience. In this competitive environment, P&C providers cannot afford to fall behind on the path towards digital transformation.
In contrast, when it comes to group benefits, such as health, dental, and life insurance, many in the workforce, including Gen Zers, still obtain plans from their employers—which makes switching between insurers a more complicated process. And even when customers decide to seek out these insurance products independently, many remain hesitant to go through the hassle of switching. This is especially true if they have already invested into the life insurance over time or if they are happy with the service levels they receive from health or dental providers.
In this context, it makes sense that P&C carriers would be out in front, leading digital transformation.
Still, it is wrong to ignore the need for digital transformation on the group benefit side. The reality is that there is great opportunity in the group benefit space to beat the competition to the punch with digital transformation. That is how insurers will be better positioned for growth and market share as compared to their peers. Group insurance leaders would do well to follow the example of their P&C colleagues, prioritizing modernization efforts related to user experience with improved digital offerings and streamlined customer touchpoints.
Trend 2: The mainframe is alive and well
In past years, I could have lined up several Kyndryl mainframe architects who would tell you why the mainframe is still one of the best platforms out there. Today those folks would double down on that same position now that there are cloud-based data and analytics tools running against their mainframe data.
However, we all know that there are many challenges in maintaining legacy mainframe applications, such as technical debt and similar time and cost factors related to inefficiency. Some clients want to move off the mainframe platform as soon as possible. Other clients plan to run their existing applications for another 10 to 15 years. At the same time, most of these customers have challenges in evaluating and balancing the cost of transformation investment against their cost reduction goals.
Many modernization stories begin with a move to cloud, or at least away from the mainframe. But digital transformation does not imply that your business needs to get off the mainframe altogether. You can move off it if you want to, but you can also keep it around for a long time, too.
