While on their quest for growth and profitability, the ability of insurers to, among others - craft sustainable business models, take on operational and business process improvement initiatives, ensure compliance and prudent risk management practices, embrace innovation, and leverage off technology to create a more dynamic business framework - while, on the same vein, becoming more customer centric than ever will ensure that they stay a step ahead of competition and keep on a growth trajectory.
But which initiatives are the Asian insurers specifically spending most of their time and resources on? To answer that question, there is no better way than to poll these executives themselves to understand the core business, operational, risk, and technology issues that they are championing. We thus conducted a survey in May to feel the firsthand industry pulse regarding a couple of important strategic and technology-related questions.
Herein, we uncovered that the regional insurers' business goals are now infused with an even more distinct technology flavor, with 9 in 10 surveyed planning to increase IT spending for 2011. The majority projects a 10–20% rise, with two-thirds of these funds being channeled into vertical insurance-specific solutions or services such as distribution channel management systems or core insurance applications like policy administration, underwriting, claims, and billing.
The survey also affirmed the role that insurance agents play -- the traditional way of selling insurance through agents appears to remain the predominant distribution channel with a priority score of 4.2/5.
However, it would be intriguing to note that social media is becoming an increasingly distinct contributor to customer outreach programs and insurers are exploring ways to integrate this into their sales and marketing efforts. Specifically, we feel that the insurance CEOs are beginning to comprehend that the ubiquity of social media means that if they do not have an e-enablement strategy, they would likely find themselves behind the curve. They do however, need to address a series of issues such as how to integrate social media with other delivery channels; how to assess and mitigate risk from such channels; how to deal with the open nature of this medium; and ultimately, how to translate what may seem like extravagant and 'fluffy' social media investments to bottomline benefits.
Meanwhile, as insurers attempt to get leaner operations-wise, they are focusing on weeding out infrastructure inefficiencies via business process reengineering (BPR) projects and are putting in place strategic road maps for the replacement or enhancements of legacy systems to deal with increased customer demands, as well as regulatory or tactical changes. Interestingly, it appears that they are becoming more inclined to outsource technology now than historically - possibly driven by the need to increase organizational flexibility, reduce capital expenditure and access operational best practices and new emerging technologies. As a carry-over of tighter expense controls from the global financial crisis, we are also seeing more institutions focusing attention on creating/enabling a more flexible, dynamic IT infrastructure through the adoption of software-as-a-service (SaaS), Platform-as-a Service(PaaS) or Service-oriented architecture (SOA) so as to reduce capital expense (CapEx).
We reckon that these IT delivery/consumption models resonate with insurers as they are able to break the shackles of traditional technology purchasing methods by leveraging on the concept of shared infrastructure and services, leading to lower costs, higher flexibility, and better business agility. In fact, when it comes to such adoption, Japan seems to be blazing the trail in cloud computing within the Asian insurance space with institutions like Sompo Japan Insurance, Sumitomo Life Insurance, and Nippon Life Insurance leading the pack.
For detailed survey findings covering the fundamental issues around strategies for premium expansions, cost management and risk mitigation, and technology planning - Please refer to: "Business Strategy: Issues and Initiatives of Regional Insurers – A 2011 Executive Survey" (Doc # FIN228125, May 2011).
Further on the role of social media as a distribution channel, also look out for my upcoming report entitled: "Social Media: Time for Asian Banks to Engage in Social CRM?" This document covers the social networking habits across Asia/Pacific, benefits and challenges in utilizing social media for business, and how the social business movement at organizations is evolving.