Ashish Goel, associate vice president and group engagement manager for insurance, healthcare and life sciences at Infosys Technologies answers Post Europe’s questions.
What would you say is the biggest challenge facing European insurers in 2011?
One big issue is the drop in public confidence and almost all insurers in Europe work through intermediaries so it is a big challenge to get to the customer.
What are the growth areas for technology in Europe?
The two technology areas of growth are social networking and digital marketing.
Banks can talk to customers as they call in but insurers need to influence buying power. For insurers it is about a value proposition and making sure it is not all about price. Social networking is going all the way down to mobile devises and getting to the customer where they are. Insurers are a bit late in this but are now doing it. The consumer lifespan is different in insurance than in other sectors. The challenge again is how to do this without affecting the broker channel? It is their biggest sales channel but talking to customers should not conflict with this.
With digital marketing insurers spend a lot of money in advertising and now they are moving to multi-channel propositions. They are optimising the spread but they need to make sure they look at feedback and refine and shift to use it.
How prepared do you believe Europe is for Solvency II? How easy is it for systems to adapt to compliance pressures?
With Solvency II practically every company we work with has decided to use its own internal model. Everyone holds the view that off the shelf models won't work with legacy models so it is not one size fits all. After a risk model is in place the availability of data becomes an issue and even then some of it is missing. Availability is a big challenge and in the past actuaries would operate out of their own Excel document or their own system. This is a business process challenge. The quality of data is the issue. Bigger insurers have systems but small and mid-sized firms are not paying enough attention. It is not just the realisation that is needed but the action to address the business process challenge. It is not just having the data but also being able to control it.
This is interconnected with legacy issues as most insurers have legacy systems in policy administration and claims. They knew they had these systems but they could run them even where costs were up and efficiency was down. However, legislation has highlighted this problem as many of them now can't get to their data. There is a lot of activity taking closed books and rationalising them and saying this is taking away from my core business.
We have one client that has 17 different policy systems so when they launch a new set of products where do they put them? How can Solvency II create a level playing field when it is not possible to do that in one organisation? Technology must be a part of this level playing field as Solvency II is only bringing data to the front and highlighting the health of the company. This is a business process problem and needs big investment. Solvency II has given insurers a wake up call. They are realising that there are constraints in legacy.
Do insurers need to be persuaded to invest in technology? What is the biggest driver?
For investment in technology Solvency II has been a driving force, but the second reason is the ability to protect revenue and ensure customer retention as insurers need the ability to design a new product quickly.
There is also the overall economic problem that is putting further pressure on the market to develop new products quickly. Technology needs to be the backbone but the business models need to be addressed.
Is the cost of technology still prohibitive?
A lot of legacy platforms are based on platforms and technologies that are not supported anymore or are extinct so they are heavily priced. Some firms are almost held to ransom over their systems. Providing firms select the right technology then price shouldn't be an issue. Most insurers produce lots of data every moth and that needs some serious processing power. Cloud systems bring the cost down and make it viable. It is about optimising systems so that one area can be use by another part of the organisation.
Which countries are advanced in terms of technology and which would you say are behind? Are there reasons for this?
France is slower than some countries at adopting technology and Spain too. We aren't seeing resistance but the pain is huge.
What do you think the future is in terms of insurance and technology?
Telematics is a future technology and people are looking at its potential. It will come but not for some time.
In the next two years the focus will be on regulation and the ability to build a relationship with the customer and protect revenue. It will be impossible to do this with out technology and with legacy systems.
Utopia would be where technology is able to allow the reengineering of complex business processes instead of putting shackles on insurers' feet. Technology should be an enabler. It would be utopia when insurers are able to use technology in one way, when they need and how much they need - almost on tap.
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