Innovation is Key to the Future of Insurance
A discussion with Paul Tyler, CMO of Nassau Re, and Rohit Puranik, Associate Vice President & Portfolio Head, Insurance, Infosys.
The insurance industry is in the midst of monumental changes. New competitors, an emerging insurtech ecosystem, evolving customer needs and a new future of work are creating both threats and opportunities for traditional insurance carriers. Industry leaders understand the importance of reinventing their legacy technology, processes and business models to compete in this rapidly shifting marketplace, but what that will ultimately look like isn’t clear.
We sat down with two industry leaders working through these challenges on the ground: Paul Tyler, CMO of Nassau Re, and Rohit Puranik, AVP and portfolio head insurance at Infosys. They shared their thoughts about the rapidly evolving insurance ecosystem, the keys to driving more innovation in the industry, the technologies that could transform employee and customer experiences, and what carriers need to start doing to be successful.
Question: Traditionally, insurance companies only had to be concerned with competition inside the industry. Today, tech giants like Amazon, start-ups, and even retailers are offering insurance. What do you think about this evolving ecosystem, the potential disruption, and your organization’s place in it?
Paul Tyler, CMO of Nassau Re: The insurance industry is actively embracing this change. Many major carriers actively foster innovation inside their companies, participate in accelerators, and/or make investments in startups through new venture capital units. We are tapping into the innovation renaissance of Hartford, Connecticut. The University of Connecticut is investing money and putting people in educational programs that will be critical to our success going forward. We have a mayor who is focused on supporting the growth of the technology sector. Our regulators are very forward thinking as well. Within Nassau Re, we are building new digital platforms on the cloud and pushing our vendors to run harder to catch up and help us explore new technologies and ways of operating.
Rohit Puranik, AVP and head of insurance portfolio, Infosys: The disruption is happening at an exponential pace right now and it’s a big threat to the industry. But in my opinion it is also a big opportunity to innovate using new technologies to streamline and automate complex business processes and to find new ways of monetizing large amount of data that insurance companies typically generate and consume. Transformations should be executed keeping the customers’ interests in mind. Infosys’ insurance digital strategy covers all aspects of transformation and has the customer at its core.
I am very optimistic about the future, as insurtech startups and other non-traditional insurance providers are demonstrating new ways of improving customer value. There is a lot we can do with AI, data and technologies like blockchain. They promise not only short-term gains like operational efficiencies but can also change the nature of business to enhance customer experience and support long-term growth.
Question: What are the biggest challenges with this kind of digital transformation? Paul, you’ve said turning around an insurance company is not for the faint of heart…
Tyler: Yes, life insurance companies—even the smallest ones—are like aircraft carriers. If someone mispriced a product ten years ago, you may feel the effects for another 10 years into the future. Just solving the financial problems alone can require a massive team effort. Rewiring the company, at the same time, to compete effectively in a digital world adds an incredible layer of complexity to the challenge.
Puranik: The biggest challenge is the existence of legacy infrastructure and presence of disparate application systems that are not integrated. A digital transformation program has high probability of success if the enterprise digital strategy includes modernizing the existing IT and Ops. These two should not be executed in silos. Then there is data, which includes a large amount of unstructured data coming from the industry, including brokers, agents, third party administrators and government. It is important for insurance companies to have the capacity to manage and utilize this data in a way that can serve them to deliver better customer services and add to the bottom line. The workforce in most insurance companies is process driven and are change resistant. We need a mindset that is agile and open to innovation with existing processes.
Lastly, there is lack of clarity on which technology to adopt and how the digital strategy will tie in with business goals. If enterprises can manage the people and process part well, the technology change is an easier one to adopt.
Question: What needs to happen for that kind of shift to occur?
Tyler: Senior leadership at carriers must recognize the need for very deep change in their organization structure to effectively compete in the emerging digital arena. Functions that operated very efficiently in a centralized way may need to be pushed out to businesses and vice versa. Basic operating models of many functions will need to change dramatically to fully capture the benefit of machine learning and predictive analytics.
Puranik: I think it’s important to start with human capital. Employees must believe in the digital investments that the company is making. They should not look at technology as a threat but as a tool that can help them do their jobs faster and better while increasing the customer value.
Secondly, insurance companies must look at new business models. Partnering with insurtech or tying up with other adjacent industries say automobile companies to design new products that take into cognizance the new realities of a digital world like driverless cars or fully automated retail experiences can throw open new revenue streams. The IoT market is also untapped in the insurance industry and that can revolutionize how claims can be avoided.
Third – the CEO should be a key sponsor of the digital agenda and can play an instrumental role in making the transformation successful. The board has to understand and approve the digital transformation program and it should be a part of the company strategy.
Question: Nassau Re recently launched an insurtech incubator that will support selected startups and provide complimentary office space and business development services to them. Could you share your vision around this initiative?
Tyler: We founded Nassau Re only four years ago with the belief that we could create a new type of insurance franchise by reinventing the value chain. When we purchased Phoenix, we redesigned our headquarters with an open workspace environment to foster communication and collaboration. The new configuration effectively created a great deal of unused space.
We decided to give part of the space away to insurtech startups for several reasons. We want to bring innovation close to our company and employees. We want to support the growth of the insurtech ecosystem in Hartford. We want new startups and insurtech companies to view Hartford as a choice location to grow their businesses from. Finally, we hope our collaborative strategy will create jobs in Connecticut and attract new investment capital to the region.
Puranik: We’ve seen other carriers work with startups for their own needs. But in this case, it’s beyond self-interest. It’s an investment in the broader industry and the exploration of how insurtech might disrupt the value chain. It’s very complementary to what we’re doing at Infosys’ Hartford innovation hub. We have very horizontal capabilities and innovation in the areas of AI, blockchain, cloud, and advanced analytics.
Question: As you’re exploring how best to apply new technology, how do you find talent that is both tech-savvy and understands the insurance business?
Paul: I was the only person in marketing when I started. My initial hires proved very difficult because we needed people who could do not one, but five things well. In many ways, it’s easier to hire employee number 20 than employee number two. We struggled to find people in Hartford who were willing to come on board. But the more innovative work we do—like launch an incubator—the easier it is to attract the right people. We are also investing in training and education of our existing employees. For example, we have run large programs to teach our employees how to code in R. However, it's really hard to get people to want to take time out of their day jobs to learn new skills. How is Infosys dealing with this, Rohit?
Puranik: We believe in capability building. When we hire employees, we’re looking for a good attitude and an aptitude for learning. And we have a strong foundation for remolding skills. We take the same approach when we hire new graduates; we offer them 12 weeks of education on process, technology and domain knowledge that we call “finishing school.” This is a very intensive training program. These trainings are executed from one of the innovation hubs in the US, and from the Infosys Global Education Center in Mysore, India.
Question: Which technologies will make the biggest impact for insurance companies over the next five years?
Tyler: I believe that machine learning will have a massive impact on the industry. I think 80% of the jobs could be dramatically altered by the effective application of machine learning. Blockchain should also have an impact. The challenge is building a team of people who understand what the possibilities of these new technologies are and how to link them together in this complex industry.
Puranik: Historically, IT has been seen as a cost center. While there was investment in new technology—to deal with a regulatory change, to roll out a new product—the attitude was typically “If it’s not broken, why change it?” There was not a lot of investment in the future.
It will be the CIO’s role to bring out the business value of new technologies, specifically anything related to data or customer experience. There are so many information sources available, and insurance carriers need to figure out how to make the best use of that data for insights. Looking ahead, any technology that can elevate the end-to-end customer experience will be key, and data will be foundational in that transformation.
Question: What are the biggest considerations for insurance companies as they explore these innovative technologies?
Tyler: For me, the big questions are: “Why?” “Who?” and “What are the impacts?”. It’s critically important to understand the outcomes you’re trying to enable through a new technology, rather than just trying to keep up with the neighbors. You also need to know whether or not you have the right people in place to make the best use of technology. Finally, you need to have a clear picture of how the systems will fit into the organization and its infrastructure and what changes you need to make to take advantage of the technology.
Puranik: First, they must understand the technology they currently have and whether they are replacing an existing technology. 80% of companies have redundancies in technology and are paying duplicate fees because they have no visibility into their technology environments. Secondly, they must consider how the technology will impact the customer experience. Finally, they need to think about whether this new technology will enable them to become more agile or more data focused.