RL - Insurance

Chapter: Introduction 2 INTRODUCTION Traditionally, the insurance industry has enjoyed relative stability. Distribution patterns were largely unchanged for decades. Servicing of policyholders was primarily accomplished by the insurer, or through a set of longstanding partners such as third party human adjusters and automobile and property repair networks. Insurance automation responded appropriately. Core systems were designed, managed, and maintained to optimize product and process efficiency. Legacy technology delivered stability at low cost and was not required to be particularly flexible or responsive. However, in the last five years, the industry has experienced an increase in variability in many areas, presenting both opportunities and threats to insurers. These include: • A greater emphasis on user experience to satisfy customer expectations around ease and speed. The multiple sales and service channels available to a prospect (telephone, tablet, smartphone, face-to-face) mean that it is important to offer a consistent look and feel and continuous functionality across all access points. In response, technical architecture must be oriented less toward processes for providing internal product services and more toward enhancing the external customer experience. Integration between internal and external systems is critical as insurers seek differentiation through user experiences. • New technologies are lowering costs and creating new modes of interaction. Insurers which act aggressively create competitive advantage for themselves. Those which do not fall behind. • Distribution diversification has increased. Companies which previously only used independent agents are adding direct-to-consumer distribution. Insurers are white-labeling their products and, occasionally, even distributing them through competitors. • Partnerships have multiplied in number and importance. Insurance has always had numerous parties involved in the value chain: prospect, insured, agent, underwriter, customer service representative, estimator, claims adjuster, auditor, regulator, attorneys and courts of law, etc. Any may be actively involved at different times throughout the "life" of a quote and/or a policy. With the advent of the insurtech market, new service providers that are not part of the traditional value chain are deftly using new technologies to engage customers, and to secure a new customer base with products and services across financial infrastructure segments. The result is that the number of needed product services now exceeds the limits of vertical integration for a single insurer. Connected home devices from one vendor "speak" to a third party data aggregation company which reports risk patterns to the insurer; for-hire drone inspection startups survey properties to inform underwriting decisions or claim settlements. For insurers, establishing new partner relationships is a crucial component for their digital strategies. One insurer cannot do all. Today's ecosystem and new value chain requires technology that enhances the flow of information and money. Pressure to change also comes from developments in the adjacent industry of banking where regulators are mandating increased transparency (see Appendix for a full list of consumer transparency regulatory initiatives across the world). In Europe, the Payment Service Directive 2 (PSD2) requires that European banks share account information data and payment initiation capabilities with account information service providers (AISPs) and

• Cover