MANILA, Philippines - Technology not only bridges the insurance company to its clients, but it also helps create products and new distribution channels.
Insurers often see information technology (IT) as a cost center that is prone to overruns. The industry spends 25 percent of its operating budget on IT, and executives often lament poor returns on the investment.
“The industry must not only focus its strategic attention on areas from better financial and risk-pool management to mergers and acquisition (M&A) but also develop innovative, growth-oriented products that can secure the loyalty of existing customers and attract new ones,” McKinsey Global Institute (MGI) said in a study.
It said that across a number of industries, rapidly changing technologies have been changing the post-recession competitive dynamic. Web and communications technologies are spurring ways of creating products and reaching customers, as well as opening doors to more efficient and effective ways of delivering products and services. They are also giving rise to entirely new business models.
McKinsey said that rapidly evolving technologies would change the industry’s competitive patterns. Forward-looking companies are already taking steps to gain first-mover advantages through the intensive use of technology, which could facilitate new types of interactions with customers and company agents.
In a growing number of areas, for example, IT may allow insurers to automate processes and cut costs without damaging service delivery. Customized products that rely on data and better risk analysis could provide new avenues for growth-boosting innovations.
Finally, the combined effects of technology could change the nature of insured risk, leading to market disruptions that insurers will need to understand.
“None of this is to say that the industry should pursue technology at the expense of core strengths, like empathy, service, and trust. Technology cannot replace the trust-based relationship between insurers and their clients but it can enhance it-offering better ways to understand and satisfy customer needs. We believe that business and IT leaders together should begin examining technology at a level that matches their strategic goals and appetite for change.
The McKinsey Global Institute (MGI) is McKinsey & Co.’s business and economics research arm. McKinsey & Co. is a global management and consulting firm.