Is the insurance industry undergoing innovation? Does the innovation have anything to do with the latest technologies? An SMA research is being carried out to study this issue. Although the results are expected to be published in the second half of September 2012, preliminary results show that technology is indeed taking root in the industry.
A few insurers have started using technology beyond the level of optimization and modernization, effectively creating transformation and innovation. While almost all insurers currently use technology in one way or another, a few are aiming at delivering differentiation to have a competitive edge.
SMA uses a unique Business Value Maturity Matrix that helps describe different IT investment levels and how they relate to approaches and attitudes. The maturity matrix has four levels into which NJ insurance firms are grouped.
Replace Plus
Fifteen percent of insurers invest in technology at the Replace Plus level, which means they replace all existing functional capabilities and add some new ones. They usually implement the first-release software to address the critical pain points. They realize minimal gains in their operational efficiencies and align their operational expenses to the rest of the insurance industry. However, the insurers do not experience real innovation or differentiation from their investments.
Modernize
This level accounts for 49 percent of insurers, which is the highest percentage. The insurers leverage software capabilities to improve different business processes, including paperless customer communications and straight-through processing.
This level involves the implementation of the latest software releases meant to deliver improved efficiency. The insurers are implementing measures that take them a step ahead of the mainstream industry.
Optimize
The optimize level is composed of 23 percent of the insurers. They use sophisticated technologies to help in both acquisition and retention. The insurers leverage different technology assets, including software, to improve both their bottom and top lines. They aim at enhancing their operational efficiency by improving their policy quotes, counts and premiums without increasing their expenses or resources. This is the level of the market movers.
Innovate
The true transformers in the NJ insurance industry are at the innovate level. The 15 percent of insurers at this level leverage next-generation technologies. They take full advantage of their software assets to extend their capabilities beyond the original purposes. This helps them drive innovation to grow beyond mere volumes and facilitate development in the types and complexities of their services and offerings. The insurers use a variety of technology assets throughout their value business chains, including mobile technologies, social media and collaboration.
The innovation of these insurers allows them to achieve operational excellence that puts them in the market leader position. The NJ insurance firms get new ideas from various sources instead of simply relying on employee suggestion boxes. They take enterprise views and encourage their workers to change their thoughts at all business levels.
The innovators combine new information with creativity to spearhead the innovation process.
According to SMA, insurance innovation is a reality in the present market. The use of next-generation technologies helps to increase the pace of innovation. Changes in the overall insurance industry help to transform individual companies. Although the firms in the first three levels improve their business operations, the innovators are still poised to take the largest market share because of the competitive edge that puts them ahead of the pack.
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Derek is an active blogger. The following article is for nj insurance.