Lindsay Lucas, CEO, Software Solved
However, these industry-wide changes are worthless unless insurance organisations are ready to engage, consume it and unlock the benefits it presents
The Lloyds of London insurance market is inarguably one of the world’s oldest and least modernised groups and it is having to re-think the way it interacts with customers and turning to digital. This is a prime example for the rest of the sector that it is time to wake up, especially in light of Lloyds Blueprint Two– Lloyd’s marketplace transformation programme.
The insurance industry relies heavily on legacy systems and has been slower than some industries to adopt modern technologies. This makes it difficult to stay competitive and offer an experience on par with the expectations of their customers. Many insurers are functioning on outdated legacy systems, like old technology stacks and neglected architecture. While some national insurance companies have followed the direct-to-consumer trend, many insurers haven’t begun modernising or don’t know where to start.
The longer they wait, the harder they’ve found it to support these legacy systems and attract and retain large market segments with higher product expectations. Insurtech start-ups who have fully embraced a personalised digital experience are taking advantage and rapidly acquiring market share. New markets in other countries are also directly competing with the Lloyds market and like new insurance firms, these markets come digital first.
The need to modernise the insurance industry is critical. However, several challenges can prevent these companies from jumpstarting the modernisation of their legacy systems.
Talent Acquisition: To migrate from a legacy system to a more modern infrastructure, organisations that understand the legacy technology and are aware of the business logic embedded into these systems are critical. Access to talent with experience in legacy systems can pose a serious obstacle as people retire.
Failure to Adopt Remote Working: Compounding the talent acquisition problem is the fact that many legacy insurance companies are not well equipped to support remote workers, particularly since the pandemic. Because of the prevalence of on-premises legacy systems, it is difficult to securely provide seamless remote access. Moving to cloud-based systems will ease these pain points.
Hesitancy to Embrace Cloud Computing: Legacy insurance companies rarely have staff with experience and expertise in cloud computing, and therefore are hesitant to embrace it. Typically, they often believe that cloud computing cannot be properly secured or meet regulatory requirements, which usually is not true.
The impact of legacy systems
The impact of not modernising means insurers’ project deadlines will not be met. Had insurers migrated to a modern architecture earlier, these risks could have been mitigated and thereby significant increasing the odds of projects being successful. More technological challenges will arise the longer insurance companies wait to modernise, and the broad impacts of these obstacles will continue to grow.
Lloyds Blueprint Two is the third instalment in Lloyd’s marketplace transformation programme. It is expected that in two years’ time Lloyd’s and the London Insurance Market will be looking at the new beginnings of a digitally enabled marketplace, integrating risk placement with automated premium accounting and claim settlement. This is a big step towards a data-first market and huge milestone in this ambitious end-to-end transformation programme
However, since the announcement of Blueprint Two, Lloyd’s has postponed two open market milestones scheduled for Q3 – the provision of API specifications for a new digital gateway and the build of a proportional treaty system. Even though necessary, this still causes further delays.
Third-party data and software providers can help the industry to engage
Furthermore, all these industry-wide changes are worthless unless insurance organisations are ready to engage, consume it and unlock the benefits it presents, critically, in collaboration with one another. Third-party data and software providers can help release this value. Third parties are becoming a fundamental component of the sector, creating room for insurance institutions to focus on strategy, innovation, growth and development, operational efficiencies and living up to the growing demand from customers.
The whole of the finance sector needs to look at third-party software providers that focus on an adaptable approach to change so that value is released on an incremental basis, helping finance companies to tap into their full potential to remain and gain relevance in the future. The right tools, using the right third-party support, can create a new foundation of extensible data on which a new stack of flexible, agile services and tools can be purpose-built for what the insurance sector needs to do today.
Third-party data and software providers are able to help the sector to adapt to the Lloyds Blueprint Two transformation quickly, helping them to understand what their customers want and provide a trusted service ensuring that they prosper.