Investing in the best available technology is vital for the future success of a captive. Although the best technology is not cheap, this short-term cost is likely to pay for itself relatively quickly by improving pricing, improving internal and external communication and increasing efficiency, says Sean Barnes at United Educators Insurance Company, a reciprocal risk retention group.
It’s rare that a person will attend a conference these days without hearing speakers highlight the latest technology or discuss the future of work. These technologies can disrupt both back-office and front-line functions.
Your stakeholders are likely comparing your coverage and service experience against those of large commercial carriers. This should lead captives owners to ask what technologies are right for them and what they can undertake given their resource constraints, in terms of both people and budget.
While the status quo can sound appealing for maintaining your current expense ratio, technology investments are central to your ability to deliver the best value and experience to your stakeholders.
Each technology platform offers unique value. The key technologies in the marketplace broadly fall into the following areas.
Cloud technology enables your captive to move the operating environment from your premises to a cloud service provider such as Microsoft Azure, Google, or Amazon Web Services. This shift from on-premises to the cloud should reduce long-term server maintenance costs and increase employee productivity through better access, while optimising data security.
The return on investment is straightforward, and the implementation risk is comparatively low. To leverage the move to a cloud environment, your captive should explore additional functionality to enhance staff collaboration and enable business continuity planning and disaster recovery solutions.
Most technologies in this area will enable your captive to consolidate, streamline, and enhance reporting on data obtained from internal systems and third parties. Because your information may have accumulated in separate systems historically, the data is not in optimal formats to meet today’s business needs.
Data investments focused on optimising your data structure should build a foundation for the next generation of analytical and business intelligence technologies. By combining forward-looking insights with a unified, historical view of data, you can make the shift from product-centric to customer-centric business practices.
Larger companies, as well as e-commerce businesses such as Amazon, have set a high bar for online functionality. Increasingly, users expect core interactions and information online. These expectations vary from simple requests such as downloading a policy or loss run report to complex needs such as obtaining a non-binding quote indication and submitting and checking status of claims and payments online.
Enabling these transactions requires substantial investments in a digital experience platform as well as in data and core policy administration functionality.
AI, predictive modelling and automation
Artificial intelligence (AI), predictive modelling, and the use of automation will soon become essential to keeping pace with larger carriers that compete for your customers. These technologies streamline not only pricing and underwriting, but also administrative tasks. Automation can reduce overheads and improve controls.
The data efforts described above provide the foundation for these technology efforts to be successful. Within automation, newer technologies such as robotic process automation (RPA) could allow staff to work on activities which deliver higher value to your customers and stakeholders.
This is not an exhaustive list of the technologies in the market, but it shows the significant role technology should play in your captive’s strategy. A failure to pursue these efforts will erode your marketplace advantage. From the financial prospective, these projects could represent a meaningful part of your captive’s operational expense budget. Here are some points to consider as you evaluate these potential investments.
Scope and objectives
Regardless of the nature of your project, it’s essential to collaborate with key stakeholders to define the scope and intended outcomes. This can be challenging for business users, who often have a hard time thoroughly identifying the full extent of potential use cases and possible process variations. Discussions on the impact of new technology on an existing process should provide a roadmap for needed business process modifications.
Project risks and milestones
Can your projects be broken down into more discrete milestones to accelerate benefits to the business? The sooner the project can provide business value, the sooner the organisation will realise the return on investment and gain buy-in.
Technology maturity and customisation level
A technology’s maturity level should play an essential role in prioritising a project. Newer technologies carry more significant implementation risks. Your captive should determine what investments are mission-critical and those that could benefit from additional marketplace maturity. Additionally, substantial customisations required to meet your business need increase the implementation risk.
What does this all mean for your captive? There is no doubt that adopting the latest technology is essential for driving future success. While these investments will increase your expense ratio in the near term, if selected and implemented effectively, they will also increase your pricing accuracy, enhance your stakeholder experience, and increase your captive’s organisational capacity.
Sean Barnes is the chief financial officer and vice president of finance and administration for United Educators Insurance Company. He can be contacted on: firstname.lastname@example.org
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