Have insurers mistakenly prioritised digitalisation to the detriment of improving back office processes, with potential consequences in terms of regulatory compliance, productivity and customer service?
Insurers are increasingly looking for ways in which they can improve the interface between themselves and their customers via digitalisation. However, less attention is often payed to the extent to which back office legacy systems can hamper progress.
A recent Post and Onbase Study saw 72% of respondents rating replacing these systems as very important or important. With this in mind, Post teamed up with Onbase to host a roundtable discussion on whether insurers are paying enough attention to their back office processes.
Tokio Marine Kiln’s head of IT Michael Harris started the debate with the suggestion that customer experience has been neglected: “It has been underestimated, but to be fair, those people at the front end really shouldn’t have to worry about these things.
“The secret is making sure the back office is involved in some of those discussions, more so than trying to help the front end understand exactly how complex the back end is, or what we might need to do.”
Most around the table agreed, with QBE’s director of shared services Ronan Hanrahan adding: “We talk an awful lot about the customer and the customer journey, where as an industry we’ve failed is actually to translate that into reality.
“So while we’ll use phrases like ‘we want to be customer-centric’ and ‘we want to put the customer at the heart of everything we do’, a lot of the narrative is now the customer-centricity, when the reality is to do stuff in the back end.”
What is the solution facing organisations with back end issues? Tim Yorke, chief operating officer at ERS, said: “Ideally, we have to man up and get rid of the legacy. I’m not sure that with that legacy, you can become a digital-enabled organisation.”
Hanrahan disagreed however: “No matter how mature the organisation is, what stage of the lifestyle, there’s always going to be some element of legacy. If you consider a legacy as the sort of inherent complexity that we’ve added to the way we do business, there will just be another iteration of whatever we replace it with in five years’ time.”
The discussion moved to the issues companies can face when shadow IT systems are in use by employees. Shadow IT is software used within an organisation by employees without the approval of the company itself.
Harris said: “This will always be an issue. I wish this was my quote, it’s not, but I do agree with it: ‘Look at all this technology capability that’s out there that I’m not having to provide. All I have to do is govern it, harness it, understand it’s there and, where possible, steer it’.
“But, from a regulatory perspective, it is an issue, because we’ve normalised the load of data, we’ve centralised, and the first thing people do is extract it to a spreadsheet and mess with it, right?”
“It’s not making decisions,” Yorke commented. “So your data governance then becomes a nightmare.”
However, David Nichols, UK GI chief operating officer at Zurich, said: “In a scenario like that, I’m less worried about it if it exists from a regulation point of view, because I tend to take the view most people are there to protect our interests.
“I’m more worried about it around data insight and what I’m missing. Because something new is being created.”
Director of IT and electronic business at Ageas Robin Challand wondered whether shadow IT, like legacy, was something companies may have to learn to live with. He said: “I don’t think the problem will ever go away, because actually we see lots of IT in our day-to-day lives that we think actually might have a place in the business, but actually it reduces the scale of that problem.”
Hanrahan responded: “The challenge is to recognise when someone creates that extract, and it involves them getting an extract to a key man dependency or a critical system, recognising when that inflection point happens and then bring it back into IT. That’s the challenge. If that can happen, you can mitigate the worst.”
How else can organisations mitigate the concerns around shadow IT? The attendees discussed whether more funding innovation and experimentation could be the answer.
“Organisations need to have the funding to be able to experiment,” said Warren Pilkington, head of insurer systems at Markerstudy. “That’s one of the failings, that we’re too focused on the day-to-day, while one of the inhibitors I see is that they’re doing the same thing day in, day out, and they don’t get the opportunity to come out of that and actually get involved in something to change the business.
“And that’s why it’s been quite slow, the technology is pretty much there. We’re talking about getting data from other sources to enrich the products, or change the products, and traditional underwriting will change over the next five to 10 years, but how quickly that change will be depends on who you get involved in doing that. We don’t do enough on research and development or experimentation.”
With 72% of respondents to the Post and Onbase survey listing replacing legacy as a high priority, attendees discussed if it is possible to envisage a time where this won’t be an issue for organisations?
“The way we get away from legacy is to stop it being the monolith,” said Yorke. “And putting architecture in places that allow you to plug things into an architecture that is flexible. And that’s a giant piece, isn’t it? If we design that kind of flexible architecture.”
Pilkington added: “You see all the big retailers and the Ubers of this world, their application planning interface layer is fantastic. So their connectivity is the best. And they’re using that, and they’re monetising it even. So that’s got to be right for us. And making things more component based. So the architecture is really important.”
Paul Dineen, head of business management at Towergate Insurance, highlighted the potential pitfalls of mislabelling essential infrastructure as legacy. He said: “You’ve got to be careful you’re defining the legacy, if you think of some of the core infrastructure like data centres and networks and stuff like that as part of legacy.
“Your IT function can’t run without a data centre, networks, and someone to connect it, and the day you put it in, it becomes old, and things are changing. It depends what you mean by legacy, but that core architecture is there, and you can’t run your business without it.”
Onbase’s insurance account manager John Rockliffe and Nichols discussed the hidden costs involved with legacy. Rockcliffe said: “When measuring the cost of legacy, something that Colin [Dean, Onbase sales director] and I see pretty much on a daily basis is not just the cost of the bits and the bytes, it’s the cost of the process that surrounds that legacy.
“What we need is insight not only into the application running, but all of the other business processes that surround that application and make that application work with the insurance company.”
Nichols added: “Typically it’s the quantity of the legacy, not necessarily the individual cost of it. Because if I look at the individual cost, it’s not that expensive. It’s actually running quite nicely, there’s no problems on it. Why would you go anywhere? But then when you multiply how many layers there are to the legacy, for me that’s where the cost starts to creep in.”
“Any programme of change, though, causes disruption to the business,” continued Rockcliffe. “So if you are going to embrace change, you need to be able to adopt that disruption within the business, otherwise if the users don’t adopt the technology, if people do not like the change, and then have a behaviour that circumvents that change, then it stops the business innovating.”
Hanrahan weighed in: “What we haven’t really specifically talked about, and it’s where a lot of businesses go wrong, is people. Because people make these things happen. Technology does stuff, but it’s people that will get in the way of something, that will support something and make it happen, that will make something work or fail.
“All of these change programmes that I’ve ever been involved in, there’s never, ever an element that says people. You are lucky if there’s a communication plan. Well, that’s a good start, right, talk to people about what you’re up to, but there doesn’t ever seem to be an appreciation of how we need to manage the people more than the tech and the project and everything else, to take them through this journey. If you get that bit right, you stand much more chance.”
The discussion then moved to the future and what role a chief digital officer might take going forward. Harris thought that trends would be cyclical: “The CIO is dead, long live the CIO. You keep seeing this cycle. The CIO is going to be a thing of the past, and then two years later it’s not, actually, it’s the thing of the future, because now it does this and it does this.
“Chief digital officer. Chief marketing officer was the one before that. It’s all the same sort of thing, and we try to invent these things and reinvent these things. Do you need a COO? Do you need a CIO?”
Pilkington added: “The roles will change if we don’t address the problems that are inherently there. The problems will still exist. So the roles will change if we don’t address the real problem, which is around our ability to deliver and execute. And if we don’t do that quickly enough, with the rapidly changing environment, then the roles will change around that, because the organisation will try and adapt itself to address those problems, without actually addressing the problems really.”
“So a challenge for the future is going to be silos,” commented Yorke. “Because they were specialist bits of knowledge which can work together, but that will disappear. The underwriting director can’t be ignorant of the technology, so actually those teams of people will need to become much more broadly oriented, and the way in which you manage those kinds of organisations will need to change.”
Robin Challand, director of IT and electronic business at Ageas, said: “All the pundits say everybody’s in IT nowadays. And that’s just a transition we need to come and marry.
“It’s a truism that digital natives – people who are growing up today – are so much more familiar with technology than the people who grew up 30 years ago, when we needed this black box IT department that was slightly weird people that you didn’t talk to all that often. But there’s more of those weird people spread across our business.”
He concluded: “Harnessing the power and capability of IT across an organisation is where it needs to go. So I don’t think the CIO disappears, but the IT department in which he sits has to drop its barriers.”
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