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The evolution of insurance: what is left to be done



By Oliver Werneyer, CEO and co-founder, Imburse


The insurance sector has been devoting a lot of its resources and attention to enhancing its core competencies in recent years. These would traditionally be centred around underwriting, claims, and distribution. In this area, insurers consider themselves experts. Insurers’ investments focus heavily on data analytics, creating and accessing new data sources, and developing new distribution partnerships and product development. Exciting and cutting-edge enhancements has the insurance industry very giddy while appealing to the strong traditions and disciplines of the sector. These advancements are delivered with excellent logic, reason, supporting data, and proof. Insurers are getting better at categorising and identifying risks and creating more distinct risk pools that can be measured and priced. The insurance industry offers policyholders a simple contract that exchanges several small payments to the insurer in return for a significant pay-out if the worst happens. 


However, what has been completely neglected is the operational modernisation and technological revitalisation of the insurer’s capabilities and tools. Lines of business are still generally run by antiquated legacy systems or multiple IT systems for varying reasons; we often see this in areas that are not considered core competencies. One of the main areas this is felt is the customer experience of the whole insurance engagement. Customer expectations are very much created by other industries, such as e-commerce, digital banking, food delivery, mobility, and entertainment. They are all obsessed with great visuals, efficient journeys, and a fantastic payment experience. Something that customers are now also expecting from their insurer.


From my viewpoint, payments will play a critical role in delivering an insurance agreement. However, many consider payments mission-critical to their operations but not a core competency. It’s not something they can invest in and create value from outside their own systems. They generally do not have dedicated resources or teams for the payments topic and would not hire payments specialists. There is often not even a clear owner of the subject of payments in the insurer. It sits anywhere between the CFO, CTO, and COO, all of which have different priorities and evaluation criteria. 


There is also a reason why insurers feel like this. That is because payments are painful to deal with. Insurers need to cover both collections and disbursements and pick payment technologies that fit customer interaction, e.g. bank, credit cards, vouchers, virtual cards, wallets, etc. Because no payment provider covers all markets and all technologies, and in general more collections than disbursements, they would have to connect to multiple payment providers to get the payment coverage in place. For example, they would need credit cards and alternative payments from a PSP, bank transfers from a bank, and vouchers from a voucher company. 


The good news is that the payments world has nearly everything on offer in terms of payment technology and experience that an insurer might need. However, insurers do need to select multiple providers. Connecting to various providers means multiple integrations to make and maintain into old, complex, or different IT systems by people who don’t specialise in payments. Multiple integrations mean high costs, resources tied up, and other priorities that can’t be delivered, all for something considered not a core competency. This results in payment-related projects, on average, taking seven times longer, costing 11 times more, and failing eight times more than expected. This would be considered a high risk for executives to allocate funds and resources and take the personal reputational risk. Insurers would prefer to do nothing drastic and look for small, incremental changes of no real significance. It’s painful and challenging when you have no one to help you navigate that space. Thus, it is nearly impossible for insurers to offer anything ground-breaking without changing their entire core systems or using solution providers to solve this integration problem.


When compared to other sectors that can offer customers enhanced payment experiences through a variety of methods, insurers are not as prepared to take the time to invest in this kind of transformation. Ultimately, allowing insurers to continue to fall behind in the shift to digitalisation. They will always be very slow to deliver because they are always looking to buy solutions from fast-moving sectors (e.g. payments, UX/UI) and connect them to their very slow-moving core competencies. The core competencies and their evolution set the pace, and the other sectors completely out-pace these, meaning insurers struggle to keep up with the change.


It is clear that insurers want to drive more business value through payments but have the reality of system, knowledge, and capacity limitations to deal with. For insurers to make rapid advancements in areas not considered core but mission-critical, such as payments, they need to leverage the technologies and services from a specialised solution. Partnering with such solution providers enables insurers to get all the technology, support, and competency they need to deliver anything in payments without major IT projects or costs. This way, they can control their portfolio or payment vendors, set up the payment options, and access any payment technology in the market for a fraction of the cost, time, and resources. 


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