The transition to a platform economy and the standardisation of product portfolios are among the top priorities of the insurance industry. In addition to classics such as regulation, cost reduction and increasing customer loyalty. More than ever before, the orientation of IT determines how sustainably companies can exploit the development opportunities of their markets. In 2020, ten trends will determine how companies act. They range from the evergreen cloud computing to the rising star of the year, Robo Advisory. Above all, however, there is the tenth trend: the cultural change in the minds of employees. If it succeeds, the digital transformation will play out its strengths to the full. It has been shown that an evolutionary, step-bystep approach is much more promising than pushing through the change in a top-down process.
IT Trends 2020: Top 10
1 Cloud Computing
2 Open API
3 Identity platforms for customer onboarding
4 Internet of Things (IoT)
5 Blockchain-based process automation
6 Next Gen Cyber Security
7 Robotic Process Automation
8 Artificial intelligence
9 Robo Advisory
10 Digital cultural change
If one wants to understand the significance of IT trends, which extend to the very foundations of business models, it is worth taking a brief look at the Far East first. There, the Chinese insurance group Ping An has used the past decade to migrate its entire existing business to cloud-based platforms. Each of these platforms promotes the development of ecosystems that go far beyond the previous core business and thus offer completely new value creation opportunities. In the transport sector, for example. The starting point there was the AutoHome trading platform, which handles around a third of China's car sales. In 2016, Ping An acquired half of the shares in AutoHome. Since then, the Group has been driving forward the expansion of the platform. In some cases, the company has taken unusual paths. Among other things, the peer-to-peer awarding platform Lufax was integrated into the car portal. Its most important asset is a scoring solution that provides information on the creditworthiness of prospective buyers. Ping An shares this information with other capital providers, including more than 200 banks. According to the platform, it thus receives data on around 700 million potential buyers. Parallel to the increase in reach, the significance of the credit check is growing.
Top Trend 1: Cloud Computing
The gradual expansion of the core business, such as Ping An is doing in
a large number of sector-specific ecosystems, would be unthinkable
without the continuing high innovative power of cloud computing.
However, the provision of sufficient and precise computing power is by
no means the only driving force behind this development. At least as
important is the fact that many of the most innovative methods of data
analysis are first available in the public cloud. Among the most
important goals here are the fine-tuning of data models and better
monetization of inventory data.
Despite this, most insurance companies in the DACH region still do not outsource the so-called "Systems of Record" to the public cloud. The supporting legacy IT has such an abundance of legacy systems at different stages of development that cloud migration would involve incalculable risks or high costs. In contrast, a number of new developments that build the bridge to the operational business are already running predominantly in the public cloud. In this mixed situation, hybrid infrastructures ensure that the two system worlds can be managed and further developed in line with the overriding business objectives. The hybrid cloud also provides the platform for streamlining the application landscape. In addition to standardizing existing products and tariffs, the aim is also to quickly implement new market ideas and integrate suitable external partners. Support now also comes from the regulatory area. Both the institutes together with their service providers and the supervisory authorities have built up massive know-how on how the cloud can be used securely in the area of conflict between data protection and information security. A central milestone was the publication of the insurance supervisory requirements for IT (VAIT). Since then, it has become clear that insurers have become much less reluctant to use cloud solutions.
Top Trend 2: Open API
Open web-based programming interfaces (Open Application
Programming Interfaces, Open APIs) are becoming the means of choice
for integrating innovative software services into insurance companies'
legacy IT in a timely and cost-effective manner. Open APIs create an
agile alternative to conventional integration projects in which the
architecture of the legacy systems is drilled out project-specifically,
which is a complex undertaking with often uncertain outcomes. In
contrast, Open APIs provide standardized program code that precisely
regulates the interaction of a newly developed software service with the
insurer's proprietary database and software systems. This provides a pragmatic means for platform operators to leverage the knowledge and skills of freelancers and insurtechs to help their ecosystems grow flexibly. The Open Insurance Initiative currently provides the largest range of insurance-specific programming interfaces. In addition, major insurers, such as Allianz, also offer such interfaces to expand their developer community.
Top Trend 3: Identity platforms for customer onboarding
In order for the demand side to accept the differentiating offers of the
platform economy, it is essential to make user access as easy as
possible. Centralized login services - a market that has been dominated
by Facebook and Google for years - are a first fundamental step in this
direction. However, what is now becoming a real must, especially from
the point of view of the financial industry, are solutions that allow
customers to centrally manage their verified digital identity and make it
available to the cloud services they trust with the simplest possible
means. The verimi platform, which was founded in 2018 and in which
Daimler, Deutsche Bank, Lufthansa, Deutsche Telekom and Allianz also
have a stake, is well positioned to tap this newly emerging market. In
Germany, verimi is competing with the netID platform, which also
started in 2018 and is backed by United Internet and the media groups
ProSiebenSat.1 Media and RTL. The Scandinavian service provider
Signicat, which has been offering cloud solutions for customer
onboarding since 2007, is considered a pioneer on the European
market.
Top Trend 4: Internet of Things
The Internet of Things (IoT) has dominated the trend lists for a number
of years. Nevertheless, the web-based networking of physical objects
and virtual systems is experiencing a further boost this year for a
number of reasons. First and foremost, the rollout of the new mobile
phone standard 5G is worthy of mention. Whether in the area or in the
campus networks of large company locations. Both developments mean
that a large number of new devices can be integrated into the IT
architecture of companies. At the same time, IoT will reinforce the trend
towards edge computing. Edge Computing analyzes data where it is
generated and makes it available to other systems near the edge of the
network as required. For the insurance industry, this opens up ever new
application possibilities. For example, car insurance companies with
telematics tariffs, smart home cover letters (cooperation between ERGO
and Deutsche Telekom) or health insurance companies that analyze
personal behavior and, together with artificial intelligence, support
behavioral changes.
Top Trend 5: Blockchain-based process automation
Blockchain technologies have now reached a high level of market
maturity. Service providers such as Amazon Web Services already offer
special platforms on which the services required to build a block chain
are made available in such a way that they can be used without in-depth
developer knowledge. Even though the majority of insurers have so far
followed the development of the topic more from an observer's
perspective, more and more companies are now investing in building
block chain expertise and launching initial pilot projects. Especially in
the areas of premium payment and claims processing, insurance
companies have a great need to use block chain solutions. Blockchain
also allows the design of parametric insurance policies in which the
payment of the sum insured is based on the extent to which a
previously agreed threshold value - such as the amount of precipitation
on an agricultural area - is undershot or exceeded. Here, Blockchain
builds a bridge to the top trend IoT by cryptographically linking the data
sets to ensure the integrity of the transmitted sensor data.
Top Trend 6: Next gen cyber security
The growing digital ecosystems raise the issue of IT security to a
completely different level. It is no longer just a matter of protecting
one's own infrastructures, databases and application landscapes from
attacks. Instead, the requirements of a fully integrated security that
takes all partner systems into account are coming to the fore. The
establishment and continuous expansion of a central Security
Operations Center (SOC) is the prerequisite for meeting the new
framework conditions. From a technological point of view, the SOC is
based on a Security Incident and Event Management (SIEM), which
collects information from sensors and monitoring protocols, identifies
and monitors corporate weaknesses and incorporates externally
collected threat information into its work. Leading SIEM solutions
provide AI-based functionality that enables data correlation and pattern
detection, so anomalies become visible earlier. In this way, the security
paradigm is shifting from a "detect and fight" approach to "predict and
prevent". The first insurers are recognizing the market and have not
only responded on the technology side, but have also built appropriate
insurance products to cover cyber risks. For example, Allianz or Zurich.
Top Trend 7: Robotic Process Automation (RPA)
In 2019, RPA has reached the breadth of the market. Also in the
insurance industry. Almost all larger companies use RPA to automate
transactional mass processes where the process-supporting IT systems
are not sufficiently networked. This particularly affects the areas of
purchasing, finance, accounting and human resources. With increasing
cognitive and natural language skills, however, Robotic Process
Automation is also suitable for more intelligent forms of process
automation. RPA now also addresses the actual value creation, such as
in the areas of underwriting and customer interaction as well as claims
settlement and receivables management.
Top Trend 8: Artificial Intelligence
Complex business processes, diverse customer requests and large
amounts of different data make the insurance industry a natural use
case for artificial intelligence (AI) and cognitive technologies. However,
strong regulation by market regulators and the rather conservative risk
culture in the executive floors have contributed to the fact that AI
rollout has only recently started to gain momentum. On the other hand,
the comparatively late market entry ensures that insurers have access
to increasingly mature technologies in numerous AI areas. AI and
automation enable faster and more efficient processing of insurance
claims where large amounts are not involved. For example, photos of
accidental damage can be evaluated much more quickly and efficiently
with AI than by humans. But even for more complex claims in the
commercial insurance sector, the use of AI can accelerate decisions and
optimize claims service. Life or health insurance companies use artificial
intelligence as early as the formulation of contracts and the verification
of claims. In addition, they benefit from the ever more extensive linking
of neural networks, which produces multidimensional intelligence that
can be used to address a constantly expanding spectrum of application
areas. This is the case, for example, in the field of advanced analytics,
which can investigate content (partially) autonomously and thus go far
beyond the traditional methods of business intelligence (BI).
Top Trend 9: Robo Advisory
One of the most dynamic fields of application of artificial intelligence is
Robo Advisory. Here, algorithm-based analysis systems open completely
new sales and communication channels. Insurers get a powerful tool to
expand their omnichannel strategy and actually pick up customers
where they prefer to be. For a steadily growing proportion of customers
and prospects, this is the smartphone. The financial sector in particular
is now benefiting from the fact that the first AI systems are learning to
derive synthetic personalized information from applications without
having to process personal data. The resulting data processing respects
the privacy of customers, is DSGVO-compliant and meets the
requirements of the supervisory authorities. After Robo Advisors were
initially used primarily in investment consulting and asset management,
insurers are now also beginning to take an interest in them. A good
example of this market, which is still very young in Europe, is the Swiss
start-up vlot, which focuses on consulting services in the life insurance
sector.
Top Trend 10: Digital cultural change
The following applies to all IT trends: Their added value for the
insurance business is measured by the extent to which employees
embrace the change that comes with new technologies. This comprises
two dimensions: On the one hand, parts of the insurance business are
very persistent, so that change and the recognition of its necessity must
be supported by organizational change management programs. Finally,
the culture of a traditional insurance company is not the same as that of
a start-up. On the other hand, the introduction of new technologies
requires competence building on the employee side. Be it in the
application of the technologies. Be it in taking on alternative tasks when
familiar activities are replaced. In the course of this transformation
process, the concept of the agile enterprise is undergoing a
fundamental change: While many companies initially saw agility and
DevOps as a model for transferring their entire organization to the new
world in the form of a concerted effort, a more evolutionary approach is
now becoming apparent. This approach concentrates transformation
work initially only on all those instances that actually have a current
need.
