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9th September 2015

Transformation progresses at IBM with the global insurance market as a focus
Interview

IBM watchers will be aware that the company is in the process of transformation. Whilst overall revenues have dipped, chairman and chief executive, Ginny Rometty, said in July that the second quarter results indicated the ongoing transformation, “with strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business.”
Recently, IBM also announced Vertical Behavioural-Based Customer Insight for Insurance(BBCI). Across all focus sectors, behaviours and patterns can be drawn from over 50,000 client engagements. This is the first tranche of solutions for all industries which will mature and evolve as they are implemented with clients, as well as new solutions being planned at the moment.
The insurance industry itself is also going through transformation, with competition getting keener, mergers & acquisitions increasing, a tougher regulatory environment emerging, and a growing need for a 24X7 global approach. Insurers are also facing the speedy growth of digitisation, multi-distribution channels, highlighting the challenge, some distance away for many, of a single view of the customer-the customer-mindset is rapidly changing.
Insurance Newslink dropped into IBM’s South Bank, London office to meet with Stephen Mills, Associate Partner, IBM Analytics-Consulting to discuss IBM’s transformation process and its potential impact on the global insurance market.
Mills explained that the IBM transformation strategy was to extend the traditional offer of hardware, software, and services to platform, solutions, and consulting. What this means is there will be more focus on constructing pre-built more specific industry business-based solutions-he used the analogy of a curry, where in the past, IBM would supply the ingredients, but now is looking to supply the finished meal. The key shift to vertical solutions is to use leading edge customer engagements to develop BBCI applications-these are fed back to a global Vertical Solutions team in the US. Mills recognises that all insurers are not the same, but having a pre-built easy-to-integrate solution covering all the major insurance business needs, regulatory changes, and utilising the latest information technology, provides a unique base from which to tailor. He added that IBM is often called in by clients to find a solution to a specific problem.
Within the analytics framework, some of the areas of IBM concentration in the insurance market include creating a customer-focused enterprise, which revolves around distribution channels, customer retention, cross-sell and up-sell-a vital need for the personal lines sector experiencing high renewal churn. This involves increasing digitisation engagement, and areas of expertise such as fraud prevention, telematics(Mills was a co-author of an excellent white paper on the subject),and in the future, for example, the growth of The Internet of Things and the impact of driverless cars on the insurance market. Underwriting optimisation and the ever-changing assessment of risk in its widest sense, such as catastrophe insight and response, using IBM’s Watson Analytics capability, is also a key solution area as part of optimising enterprise risk management. Delivery will be increasingly via the cloud-last month, IBM introduced a new platform for developers to collaborate with them on a newly released set of open source technologies.
Mills emphasized the considerable body of work involved with major regulatory changes such as Solvency II financial performance and risk analysis-the IBM offering has more than 60 reports. Countries outside the European Union have applied for equivalence status to Solvency II and others have indicated their intention to establish a similar system. Meanwhile, the world is likely to become more co-ordinated on wider financial regulation.
At the heart of all insurance challenges is the need to streamline and analyse the whole operation from the “outer office” of customer, broker, agent, and specialist services, requiring increasing flexibility from underwriting to claims and front to back office.
The strategic objective of analytics, correlating internal hindsight, insight, and foresight data with external sources, is to enable quicker, better decision making by business users anywhere and anytime. IBM, through the timing of its transformation and vertical specialisation, is synchronising with the key requirements needed to enable leading insurers to achieve differentiation in a market that is moving much quicker, is more competitive than ever before, and is increasingly global. New risks are emerging such as cyber security, and the gap between economic losses from disasters is still wide compared with insured losses, providing opportunities for those insurers with a worldwide strategy.