Though they’ve been late adopters, they’ve done well
While other industries have been successfully adopting new technologies, technology workers in the insurance industry have been watching impatiently.
Insurance industry observers have been critical of companies for being too conservative and all-too-willing to stick with what is admittedly a comfortable status quo.
But now, the insurance industry is finally adopting those technologies years later. This industry, dealing with the future, should be part of the leading edge of technology.
It is important to realise that insurers actually have some good reasons to have a backlog on technology advances.
First, there’s the old culture about not fixing what has not broken. As early adopters of mainframe technology, insurance companies saw a huge increase in productivity that they frankly expected to last them for years to come and that promise has been realised, with so-called “legacy systems” still in place today.
This leads to a false positive comfort that they are technology experts rather than technology followers.
In the US, insurers made a mad rush for customer relationship management, now more popular as CRM. CRM was considered as a technology that would help insurers focus their sales and marketing efforts, while at the same time maintaining positive relationships with their most profitable customers.
CRM made a world of sense for business, and certainly for insurance, but it proved to be a miserable failure in the insurance industry.
Of course, critics like Ara Trembly, who runs an IT and insurance advisory publication, were quick to say that CRM was an impractical and useless bit of nonsense that had cost insurance companies large money and yielded virtually no benefit.
No doubt, CRM was a failure in insurance, but it was the humans who failed, not the technology. The more unfortunate fallout was that the technology took the blame, and insurers were all the more reluctant to sink money into new tech initiatives. But, fortunately, the negativism about CRM has not yet entered into blissfully indigenous insurance decision makers of India. Still, they are investing in CRM software and humanware.
The potential benefits include cost reductions, flexibility for processes and rules modification; help with compliance and support of legacy systems. Ara Trembly may smile to hear that Indian insurers are directed to undertake a BPM exercise of sorts, which may be implemented, circa 2008-09.
Research has shown that most insurers will pass on implementing BPM. While there are some industry-specific issues, and while there is certainly a considerable cost, one wonders if the main reasons insurers are saying no is that they just don’t want to get burned by technology again. May be they even have confidence in the technology, but lack faith in their human resources to interact profitably with that technology. This state must change for the survival and growth of individual companies.
All of this mean that vendors of BPM and other technologies that could benefit the insurance industry need to step it up a notch in educating, selling and assuaging the fears of a sensitive buying insurance industry.
In India, the situation is multi-layered. First, the insurance company looks for a know-all strategic advisor without any implementation responsibilities, but having the god-given right to identify the failures. Then, the company mandates a business-consulting firm to rationalise what is obvious.
The insurance industry, particularly the PSUs, has done so well in India in spite of the fact that they don’t have the IT standards for a service-level to fall back upon.
By: K.C. Mishra, Director, National Insurance Academy, Pune
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