Insurers who embrace modern data digitization will maintain smooth operations and experience less disruption when world events create a challenging business environment.
That’s a lesson our industry is learning during the global COVID-19 pandemic. It is clear that companies carrying too much “technical debt” in the form of legacy, siloed systems are having a hard time keeping things on track.
Digitization has been a longtime trend in many industries. It is a transformational process in which records and data pertaining to our businesses are converted from paper-based to electronic, thus enabling business processes to migrate to electronic workflows.
Unfortunately, many digitization projects in the insurance industry have had a very narrow scope, addressing only a tiny set of functions or processes in our companies.
And that has created a “technical debt,” the accumulation of legacy systems for data management which, if unaddressed, can make operating in today’s new environment much harder. That’s because remote data access, virtual workplaces and process continuity plans work best when broad, universal digitization has been implemented.
I think it is fair to say that the insurance industry did not set the leading pace in the race for universal digitization over the last number of years. That’s mainly because of the industry’s huge amount of data residing in systems that have been in place for a long time.
Stored within these systems are billions and billions of customer data records and other information amassed over 50 years of business operations. The data often is limited to a few systems and can’t be shared easily across different systems. It may even be duplicated in siloed systems that cannot talk to each other.
These systems and duplicated data represent an insurance company’s technical debt. You pay interest on that debt every time your teams run reports, have to manually reconcile data points, or have problems verifying data accuracy. In other words, you waste time and money and make decisions using bad data.
Transforming this mountain of technical debt into agile future-oriented systems was — and still is — a task that many CIOs will try to avoid if possible. That’s because they might seem to have nothing to gain, except the possibility of catching the blame if anything during this massive transformation goes wrong.
This was the situation when the COVID-19 pandemic hit the world hard. Literally from one day to the next, the world turned upside down in terms of how we conduct business and operate our companies. Suddenly unaddressed problems like technical debt had to be confronted overnight.
Now every one of us has experienced operational changes and process workarounds in our environments in a very short time. The “new normal” for how we do business is still being sorted out. But I believe some behaviors have surfaced that will remain. Some examples in our daily work routine include the need for effective work-from-home arrangements, including the need to effectively access and process accurate data remotely using electronic and highly integrated business processes.
But most importantly, we are being forced to climb to a new plateau from a digitization point of view. This means what used to be a gradual transformation in the insurance industry is now more of a “flash-cut” — an immediate need to get our digital house in order.
We will describe in our next blog how insurer can turn themselves into a data driven powerhouse and how we all can convert this challenge into an opportunity.