As published in FA News June 2019 edition
It is too easy to blame legacy systems and empty budgets for the lackluster pace of digital transformation in South African insurance. We need to look deeper.
While legacy systems and tight budgets most certainly play a part in the relatively slow adoption of technology in South African insurance, there are few more nuanced factors that get skipped over.
Bottom line focus
When it comes to technology solutions, insurers are sometimes more focused on the bottom line than with top-line potential. By breaking down the costs, other things are mostly overlooked.
When calculating the total cost of ownership (TCO), executives holding the keys to the safe often stop at IT licensing costs, running costs and some rough change when planning the budget for the year.
However, dig a little deeper into the true cost of legacy systems and compare that to a system that runs on advanced automation technology. The higher sales numbers, less client drop-off (resulting from improved user experience), better client retention (thanks to technology assistance and improved services), the freedom to redeploy administrative talent to a revenue-generating area due to automation, and improved pricing with agile rating and smart data, are all the reason for a different bigger picture to start emerging.
The average C-level tenure in a South African company is just over four years. This is a very short space of time to gain the confidence and trust of others in the company, in order to deploy cost-effective and efficient systems over older internationally recognized systems.
Nobody gets fired for buying IBM is an old saying in the technology industry. Yet, who is brave enough to fire the IBM of the policy admin and claims market?
Legacy systems are expensive and oftentimes, millions are spent on making small changes to systems which can quickly drain a budget. Insurers are going to have to pull the plaster off eventually. At the rate that smaller insurers and underwriting management associations/managing general agents are adopting new application programme interface driven ecosystems, the larger players cannot ignore this evolution forever.
With apologies to Darwin, and as I have said before, it is not the strongest of the species, nor the most intelligent that survives. It is the one that is most adaptable to change.
If your technology stack cannot already accommodate change, how is it going to cater for an unforeseen future?
We need to talk about the policyholders more. These are the people we all work for at the end of the day.
They deserve the best cover and the best service. Technology can help those in insurance in various ways to deliver this to them. The organisations that have adopted this operational mindset have an edge on those who have not. They will educate the market with innovations and the competition will catch up. Then we will go around again until the next evolutionary insurance technology cycle.
Insurance is a complex industry and technology evolves at such a pace that there is no saying what will happen next.
All we can do is future proof our business with technology that can adapt and change direction quickly when needed. We can then build a foundation that can deal with the unforeseen challenges that lie ahead.