This article was originally published on The Telegraph and is reproduced with permission from The Telegraph.


In the digital age, industries of all stripes have been caught up in a maelstrom of transformation. And the insurance sector is no different, as it looks at how to exploit and benefit from this period of upheaval.

Under such pressure, business models that have worked for decades are beginning to show the strain, says Brian Bacsu, global chief technologist for insurance at DXC Technology.

“Like all industries, insurers are witnessing the rise of a generation of consumers who have never known a world without the internet or mobile access, and are always on and always connected.”

“This, coupled with the evolution in technology, where things like cloud have fundamentally changed IT and raised client expectations, is really driving digital transformation in this sector. Insurers need to adopt it quickly and effectively to move forward and capitalise on the opportunities it brings.”

The quickening pace of digitalisation means that both the way insurance works and the way insurers work is up for review. The industry faces the reversal of traditional business dynamics from inside out to outside in, says Mr Bacsu.

“Instead of insurance products being developed from within the industry and presented to the marketplace, as they have been for years, product development is being dictated by consumer needs. This ‘outside in’ perspective is fundamental to every aspect of strategy and planning that insurers will undertake.”

Customer loyalty is also being challenged: it has never been easier to switch to another insurance provider. This has led to a re-examination and a recognition within the industry that products need to be easier to understand, simpler to use, and of greater value to the customer, all of which can be facilitated by access to available data.

“This has always been a data-intensive industry, yet a lot of that data was never fully used,” Mr Bacsu says. “By digitising all available data and investing in data analytics platforms, insurers will have the insights and tools to engage in more meaningful conversations with customers about their broader requirements, rather than simply completing a transaction.”

While insurance has always relied on a complex and often exhaustive set of figures to, for instance, calculate a premium, data about customers’ situations can now inform what they want or need far more precisely.

Driven by robust data and analytics systems, the rise of AI-enabled platforms and ecosystems promises to deliver a hyper-personalised customer experience, along with a highly personalised set of insurance policies and protection geared for an individual customer.

Potentially, such a smarter system could be more accurate and cost-effective, differentiating those able to deliver it from and those working with much older methods.

Out with the old

One of the biggest barriers to digital change for insurers will be their legacy technology; closed systems and infrastructure that required huge investment and whose tendrils often snake across systems and processes, making change difficult.

“Simply adding extra layers of technology to what is already there is not an option,” Mr Bacsu says. “Insurers need to move forward into the API economy, where closed systems are opened up to enable the building of ecosystems and connecting platforms that allow API access. This is vital to being able to incorporate the new features and capabilities being developed by the insurtech community. Closed systems lack that capability, but modernising and moving to API-enabled platforms allow these new capabilities to connect.”

APIs (application programming interfaces) work by allowing third parties to interact within a business, performing a service or providing a tool but usually secured against compromising the integrity of the wider system, or its security. Crucially, they also allow organisations to use such tools without the time and effort needed to develop their own version.

Collaboration between insurers and the partners that can provide such services will be essential in bringing about fast and effective digital change. “Insurers need the right partner that understands their industry and its specific needs and challenges,” says Mr Bacsu. “The days of doing it yourself, by hiring in experts with the right skills, have gone.”