Insurance IT must always ­keep an eye on the insured!


"The customers are where the music plays," said Karsten Schmitt, Head of Business Development at adesso insurance solutions. In an interview, he explains the consequences the pandemic has for insurance companies, why InsurTechs are coming more into question as partners and not competition and why insurance companies are having problems on the job market.

Portrait Karsten Schmitt adesso

After nearly 1.5 years, it seems as if the pandemic is slowly being contained. What impact did the corona virus have on insurance companies and what future tasks have grown out of this?

The pandemic has demanded a lot from us and will stay with us for some time to come. But it also has a good side: the entire insurance industry was already aware of the urgent requirement for modernization and digitalization before corona, but now they were confronted with this in a striking manner. Not only in terms of technology, but also in terms of "new work", sales models and customer orientation. Insurance companies that were previously restricted to on-site agency business before the pandemic have now recognized that they have to rethink their ways! At the same time, companies that were already digitally well-positioned are profiting, whether it be through digital customer interfaces or collaboration modles that allowed the abrupt change to remote work.

Keyword "legacy IT": what does the current situation look like regarding IT systems in the insurance industry?

In light of considerations and customer requirements, the old systems are becoming more aIn light of considerations and customer requirements, the old systems are becoming more and more of a burden for insurance companies. To put it more bluntly, I would say that customers are forcing digitization! The speed at which customers in other industries are receiving help has set new standards. E-commerce also has amazing advantages compared to the insurance industry when considering customer orientation, individual offers and "next-best-offers". A new way of thinking is needed here, which puts the insured individuals into the foreground. A true modernization regarding new products, sales models and customer experience must begin in the backend systems. And there is still a lot in a sorry state with traditional insurance companies! But something is happening: we are currently receiving a lot of inquiries to modernize complete application landscapes. The goal is to automate processes and achieve both digital application paths and dark processing. Insurance companies are particularly hurting from the fact that legacy IT requires modern, new sales channels and is connected with high expenses. The majority of insurance companies, in my opinion, have come to the realization that 20 to 30-year-old host systems can no longer handle current requirements.

If IT systems are so outdated, companies must surely have a hard time on the job market as well, right?

Right! Let's stick with software: many insurance companies still have their backend software based on COBOL, for example. A programming language that is actually out of date and is no longer used in the life and training of young software developers. Most COBOL developers are therefore veterans in the business, some are even brought out of retirement. Young people who specialize in COBOL are virtually non-existent.

Are InsureTechs really serious competitors or do they take on the important role of a "challenger" for insurance companies?

There are exceptions, such as Wefox, but most InsurTechs are considered technical challengers as opposed to competition for the business. I also do not believe that the goal of an InsurTech is to compete with traditional insurance companies, but rather to work together with them and to offer them innovative digital solutions. The core of insurance companies' DNA is in insurance and that will stay that way. You could count how many times actuaries are employed at InsurTechs. Nevertheless, they should be taken seriously because they provide a completely new perspective on insurance. Be it the focus on customer experience, fast processes, flexibility, agility and gamification.
In the medium and long term, I see the bigger challengers for the insurance industry more in the large digital corporations such as Amazon or Google.

What do insurance companies need to do to make their IT is fit for the future - buy InsureTechs?

Buying an InsureTech will do nothing to help the backend IT. On the contrary - as long as the backend system is not modern, the potential of a purchased InsureTech will not be exploited. Instead of competing with these digital natives, insurance companies would be well advised to work together with them; to form partnerships. The big tankers in the industry can learn from the digital skills and young mindset of the speedboats in areas such as customer approach and user experience.
Basically, the appeal to insurance companies remains: Modernize your IT - position yourself technologically so that the core insurance processes run and use the resources gained to develop new, digital business models and implement them technically. Align yourselves with the needs of the insured individuals.

How does standard software specifically help insurance companies with digitalization?

The "make or buy" question is ubiquitous in insurance. Above all, because many of them have been using a self-developed application landscape for decades, which has been constantly expanded and adapted. Basically, the IT decision-maker is now confronted with two questions: "Is our software still able to meet the new requirements?" and "How do I use my limited resources in such a way that I can successfully meet the challenges after the pandemic?"
Of course, we at adesso insurance solutions have a clear opinion on this: insurance companies should concentrate on what differentiates them from the competition and not invest resources in the development of backend software. There are tried and tested solutions for this on the market. The use of standard software for core back-end processes frees up IT capacity that can be used elsewhere, for example, to create innovative digital processes for addressing customers. Because that's where the music plays, with the customers!

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