Insuring against digital transformation disruption

The following is an opinion article written by David Northmore, VP of EMEA, MarkLogic.

As Woody Allen once quipped “There are worse things in life than death. Have you ever spent an evening with an insurance salesman?”

Ever since the first insurance policy was inscribed in stone as part of the Babylonian Hammurabi code stating that a debtor didn’t have to pay back a loan if a catastrophe such as flooding made it impossible, the insurance industry has been the butt of jokes. But the digital transformation and data challenges the insurance industry currently face are no laughing matter.

For an industry whose punch line is all about spreading risk and hedging against financial losses, it’s ironic that more established insurance companies themselves risk being left behind – or worse – if they don’t keep up with newer insurance players disrupting the industry with innovative applications such as peer-to-peer insurance and telematics-based services.

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From Aviva to Zurich, larger, established insurance companies have appointed chief digital officers to their top leadership teams and are beginning to ride the digital transformation wave, embracing new technologies and innovating business models to keep pace with the newer insurtech kids on the block. For example, both Aviva and AXA have introduced apps allowing users to analyse and improve their driving behaviour in real-time. Meanwhile, Ageas is keeping a watchful eye on its offshoot, Back Me Up – a British start-up which allows customers to get cover for their three most valuable items simply by signing up and sending in pictures.

Shaggy data story

To retain market share and remain competitive, insurers are adopting new IT operating models. They are seizing emerging market opportunities by embracing lean and agile DevOps principles in which business owners and the development and operations teams collaborate to deliver software in a continuous manner.

This explosion of digital information and the technology used to exploit it means insurers now have vast amounts of data available to understand consumers’ requirements and behaviours. But the data used by these new applications is more often than not residing in its own new data silo – separated from the huge amounts of historical and concurrent enterprise data locked in other multiple, unconnected data silos. For an industry that prides itself on its attention to historical detail, it’s no joke that these unwieldy silos of data are bursting at the seams.

The best digital insurers recognise that if these data silos could be easily integrated, the resulting single 360-degree view of their data will bring them valuable and potentially revenue-generating insights into their business processes and/or customers’ preferences. While innovative insurance companies are becoming more agile than ever before, the industry still relies on large and complex amounts of legacy IT software to implement their systems. They need to find a way to integrate the vital ‘mode one’ data stored in their core legacy systems with the new ‘mode two’ data being collected in contemporary business-centric applications.

Take an established general insurance firm as example. In its drive to stave off increasing competition and improve the customer experience, the company launches a new application, built using DevOps principles, to allow customers to insure any car by the hour just by entering the registration number, uploading a photo to a mobile device and sending in details. In order to realise real value from this platform, all the data generated from this customer interaction needs to be integrated with the insurer’s existing data, currently sitting in legacy silos such as CRM and billing systems.

By not utilising the wealth of information already held on file to get a 360-degree view, the insurer might miss that the caller who has just booked her temporary car insurance, previously held a life insurance policy with them before being lured away with cheaper premiums from another company. With all the rich real-time insights effective data integration can bring – such as the fact she now regularly walks to work and only hires cars occasionally – the insurer could tempt her back with the offer of a tailor-made, cheaper life insurance premium.

Opening up the data

Tempting as it may be to start from scratch and simply rip out IT systems to fully embrace the DevOps digital mindset and address the two-mode IT disconnect, wholesale modernisation is not only economically untenable, but also practically unthinkable from an IT point of view. But there’s a mid-way point. Taking a data centric approach and using an operational data hub to blend their “mode one” legacy systems with data generated in “new mode two/DevOps” IT systems gives chief digital officers a digital transformation mid-point.

An Operational Data Hub is a virtual filing cabinet that can hold a single, unified 360-degree view of all data. Because up to 80% of today’s enterprise data is unstructured or semi-structured – for example PDF contracts, social media posts, images or video clips – it makes sense to build the hub using a database that can handle all these different data types. An Enterprise-grade NoSQL database fits the bill because it can handle any data type, and also removes the need to resort to many (costly) hours of complex data integration challenges and wrangling – extraction, transformation and loading (ETL) – a major weakness of traditional relational databases.

All data from the new, DevOps-based applications is stored directly in the hub, while data from legacy applications – which reside in their own legacy database silos under, for example, the firm’s CRM and billing systems – is virtualised in the hub on demand. This aggregated view makes it easy to search and analyse ever-changing tracts of data across silos to provide actionable data insights.

Choosing the right Enterprise NoSQL database is crucial. Today a database platform that offers Google-like search is a prerequisite, while integrated semantic and geospatial capabilities are rapidly becoming indispensable too. Semantics makes it easier for insurers to discover new relationships, patterns and trends in their data
while filtering and layering geospatial data/content, such as text, imagery and video, adds an extra dimension to information analysis for customer or employee 360 applications. In the context of travel insurance cover, for example, this could mean a travel insurance provider could automatically offer refreshment vouchers to customers in the case of flights being delayed.

It’s also paramount to insure against any attempts by hackers to play high jinx with vital data assets by selecting a database that incorporates government-grade security as well as ACID capability, which means even the largest datasets are processed consistently and reliably so none of the data is ever altered or lost. And with strict regulation in the insurance sector as a possible barrier to innovation, ensuring a database meets the requirements of the EU General Data Protection Regulation (GDPR), which sets out new responsibilities for organisations to adhere to regarding personal data, is vital.

As digital transformation tightens its grip on the sector and the DevOps mindset deepens, insurers will need to find a way to leverage their digital data assets by marrying all the data from new and old data silos. An intelligent data hub is the perfect flexible data platform to solve today’s complex data integration headache and ensure the insurance industry has the last laugh.

The preceding piece was an opinion article written by David Northmore, VP of EMEA, MarkLogic. The views expressed within the article do not necessarily reflect those of Insurance Business.

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