Legacy, transformation and collaboration

A select group of tech experts gathered at an Insurance News roundtable to discuss critical sector issues

By John Deex

What do you get if you put 11 highly experienced technology leaders in a room and ask them to debate the issues of the day? The answer: an honest, insightful and entertaining assessment of the industry’s many challenges, and how to work through them.

The group, which met following Insurance News’ Beyond the Buzzwords technology conference in Sydney, consisted of: IAG CIO intermediated Tony Craddock, Suncorp CIO of insurance Mike Wood, Steadfast CTO David Gillespie, INSTANDA co-founder and global CRO Derek Hill, Insurtech Australia CEO Simone Dossetor, 360 Underwriting CIO Niels Laaper, Blue Zebra CTO Amar Roomi, Hollard CIO Graeme Wilson, Chubb head of technology Chris Keogh, ICEYE senior VP Stephen Lathrope and Upcover CEO Skye Theodorou.

The first question: why are we still struggling with legacy technology when we’ve known for years that transformation is needed?

Participants felt a major reason older systems have survived so long is that the drivers for change just were not there, until the digital revolution came along.

Legacy – or, as some prefer, “vintage” or “heritage” – tech is cheap to run, and with the help of dedicated, hard-working staff, it has done what it needed to do.

IAG’s Mr Craddock said the insurer grew to be the biggest in the region through acquisitions – and at one stage it had 32 policy and claims systems across Australia and New Zealand. “That is a huge number,” he said.

“But the customer expectations didn’t require us to integrate, simplify and modernise, because we had great people that would be the buffer between the back-end systems and the experience they actually wanted.”

Suncorp’s Mr Wood said investment was previously directed elsewhere because legacy systems performed their duties well “for many, many years” and the focus was on “customer value-adds”.

“If you weigh up new customer experience in the front end versus, ‘Shall we spend the money instead on renovating our legacy platforms?’ the new and shiny objects often win,” he said.

But while action was delayed, it’s in full flow now – because the environment has changed.

Mr Craddock said IAG is about seven years into its transformation program, as the industry looks to make up for two decades of inaction.

“Transformation started because you had to be able to expose a degree of your business process, and your customer experience, in a way that the customer could self-serve on, and you couldn’t do that with what you had.”

Suncorp says its bank sale has enabled it to focus on its ambition of being recognised as the leading trans-Tasman general insurer, and it has a capability blueprint for what’s required to achieve that.

Its pricing engine has already been replaced, and policy, HR, finance and claims systems are next.

“We realise that to actually reach our ambition, these are the capabilities we need to have,” Mr Wood said. “So now the new functionality for customers is still important, but it’s also critically important to the business that we uplift the legacy platforms as well.”

Steadfast’s Mr Gillespie, who previously worked with major insurers, said increasing regulation has also changed the game.

“It changed products and the way products worked. If you had 80 products doing motor and 80 products doing home, it became a bit of an albatross around your neck,” he said.

“In terms of your ability to go and be nimble in the market, and also to consolidate data across all these systems, it became a bit of a disaster.

“I think the circumstances have changed, the strategies have changed and, as a result, it’s become key for insurance companies to look at how they consolidate into one or two systems.”

ICEYE’s Mr Lathrope said even the definition of legacy technology can be hard to pin down, and it no longer just applies to systems built in the 1980s or ’90s.

“Lots of money has been spent on replacing legacy with new technology that hasn’t always turned out to be quite as flexible as it needs to be to enable new things in the marketplace – be that distribution or be that product,” he said.

“And actually, for me, getting out of legacy into a new world is moving into platforms, systems that are more capable of enabling clever things in the business, rather than simplifying the headaches of the past.”

Roundtable participants were keen to stress that advancing technology is not the driver of change, but simply an enabler. Improving customer experience and addressing affordability challenges are the ultimate aims.

Upcover’s Ms Theodorou said community trust in insurance remains low – but change is now a real possibility.

“I think the real opportunity is, how can we increase trust but with technology? We can lean into advancements of tech, slowly switch out legacy tech, empower front-end staff to assist at scale, and delight as many customers as possible,” she said.

“That would be the breakthrough. It would mean that insurance isn’t one of the least trusted services any more.”

Mr Wood said the affordability challenge will push through change that technology makes possible.

The industry cannot solve the problem on its own, he said, and will need the partnership of government, but the pressure to cut costs for struggling customers keeps the focus on efficiency through technology.

“Insurance is becoming unaffordable for many Australians. I think, if anything, that’s probably the main driver for a lot of the work we’re doing. That, for me, is probably the common turning point, and we are all individually dealing with that through efficiency empowered by technology.”

Participants were asked whether the larger insurers are threatened by more nimble insurtechs that are not weighed down by legacy tech. Could there be an “Uber of insurance” that changes the customer experience so fundamentally it endangers the existence of incumbents?

Most felt that isn’t likely, primarily because such a disruptor would struggle with the demands of scale and regulation. But the possibility is still a good motivator.

“Anything is possible,” Mr Craddock said. “And the fact that maybe there’s something around the corner, if we don’t transform, just gets us out of bed in the morning.”

There’s a view that insurance purchases in Australia are based more around trust than in other places such as the UK – because Aussie homes are more exposed to frequent and severe natural catastrophes, and having to make a claim is a very real possibility. As such, people can be extremely wary of new entrants.

“A high volume of customers judge the insurance they purchase by the experience they think they’re going to get in times of trouble,” Hollard’s Mr Wilson said.

“And I think if you look at the bigger incumbents, and the companies that you trust, that’s certainly where you would look to lean to. That’s why I think a new entrant has challenges.”

Larger insurers are open to working with insurtechs, but this collaboration may be focused around the edges of core operations.

Mr Craddock said IAG’s retail business is “a scale game” with millions of retail customers across Australia and New Zealand. “Our Enterprise platform supports our four direct brands and 23 partner brands, and has over 6 million personal assets insured. That’s pretty large, and therefore that’s quite scary from a performance perspective, from an engineering perspective.

“So if you’re trying to compete or trying to provide service into that space, we’re not going to be interested. Because actually, you need to demonstrate global scale to do that. The sugar hit is around the systems that are satellites to the core system.”

INSTANDA is a global no-code policy administration and distribution platform, and Mr Hill agrees that the opportunities lie in “particular use cases” where insurers face a challenge.

“Insurtechs need to accept that, depending on the use case, they will be working within an ‘existing architecture’ that insurers have already invested heavily in,” he said.

“Our experience is that being able to confidently and successfully do that can very quickly build confidence.

“Such projects can often open discussions around other, similar or different use cases, which can become the building blocks of a longer-term partnership.”

Insurtech Australia’s Ms Dossetor believes start-ups can provide inspiration by showing what can be achieved.

“What the insurtechs can often bring is, they provide the examples, and then the insurers have to catch up to that,” she said.

“They provide examples of how you can do it faster, and then it sets a customer expectation. It brings everybody along because, ultimately, everyone wants to get there, they want the better experience.”

Blue Zebra’s Mr Roomi believes an area ripe for innovation is the customer call centre, with hours-long queues still “a real thing” in the industry, especially after catastrophes.

“I do think we can get to a no-hold-time status and that will absolutely be empowered by talking to a virtual agent, as opposed to talking to an individual.

“You’re giving the information to something that can summarise that context quickly and then hand it over to a real person if required.”

Others feel that, while digital solutions can work well during mass claim events, there are still occasions when claimants want the reassurance of talking to a person.

“They want digital for certain things,” Mr Wilson said. “If I’ve got food spoilage, I’m happy to go digital. If I’ve got a tree in my house, I want to chat to someone.

“The digital enablement, or the use of AI, should take away the high-volume, low-value components to free up the staff so that they can actually take the time and listen and care for our customers and provide the superior service at the moment that matters.”