Legacy systems are often blamed for insurers' struggles to
become data-driven organisations, but ingrained company cultures
may be the real roadblock that keeps insurers from transforming
their vast data caches into effective customer strategies.
As insurers grapple with how to convert data into customer
insight, they often get bogged down in the costs and risks of
replacing legacy systems. Instead, they should focus on culture
change – as part of a journey to become data-driven
organisations – to help their people and processes turn data
into meaningful information.
The root of the problem
Insurers' struggle to employ data analytics is partly the
result of their acquisitive nature, notes Gary Richardson,
Insurance Analytics Lead, Data Insights Services with KPMG in the
UK. "Insurers often grow by acquisition, resulting in a common
brand with lots of individual companies and systems," says
Richardson. "Integration of legacy systems is often postponed
if executives prioritize preserving portfolio margins and
85% of leading companies struggle to accurately analyze and
interpret their data.
Source: Going beyond the data, KPMG
Although incompatible legacy systems make it hard for an insurer
to achieve a single organisational view of data, they are a symptom
rather than the root problem, observes Daniel Hodgkiss, Head of
Customer Analytics, Data Insight Services at KPMG. "The
underlying cause is often culture, with many insurers being
policy-centric and therefore having systems that are more geared to
a specific product, with minimal view of the customer."
This product orientation creates silos between business lines,
notes Hodgkiss. "One underwriter insists that 'My data is
special, it won't conform to your data and we shouldn't
try.' So product groups refuse to give up control of their data
or capabilities," says Hodgkiss, adding that rivalries also
exist between business lines and IT or between internal functions,
such as sales and finance, which each maintain their own views of
The end result: executives realise there is a data problem but
they accept the arguments against merging systems due to the
astronomic costs or risks of disrupting stable processes,
especially when they hear that infrastructure investment won't
immediately generate new revenue.
Tough questions drive change
In companies where status quo systems reign supreme, change
often comes only once senior leaders raise tough questions.
"When someone on the board challenges a number on a
spreadsheet, and it takes six weeks to answer the question, it
sinks in that the company can't keep operating with 'apples
and oranges' data," explains Richardson. "This can
trigger a culture change where leaders begin questioning data and
digging deeper, rather than taking numbers at face value, the
boardroom is becoming the data centre."
Fortunately, it's now easier to begin the data integration
journey, due to technologies that help companies saddled with
legacy problems, including data virtualisation and visualisation
tools that bring discordant data together.
Explains Hodgkiss, "Insurers can install data
virtualisation software that sits on top of different systems,
extract key data and create a data analytics repository in short
order. This creates a reporting system that can give a company more
access to its critical data. Then, you see what data opportunities
exist and focus on generating the metrics you want to drive your
Richardson notes that data virtualisation software provides a
very pragmatic approach for an organization. "With a limited
budget, you can set up a small data laboratory that targets key
data sets; merge these data together and derive real value, to show
your board the potential."
"Your ultimate goal may be to build a centralised company
data function that creates policy, practices and standards,"
explains Hodgkiss. "By creating virtual teams, these common
practices start to seep into the business units and break down
silos. Over time, your product people will gravitate to this group
and become more willing to share data because they start to
understand the value they will get from joining and merging
But to begin moving from a policy-centric mindset to a
customer-centric view, you have to focus on culture change, points
out Hodgkiss. "First, you have to get buy-in from senior
leaders who recognize the potential. Second, you have to allay the
fears of losing control among the people who own and manage the
data. This means selling the benefits of why you are doing this to
each group, rather than pushing it out."
Concludes Richardson, "Although the big goal of bringing
together legacy systems is a leviathan task, if leaders break it
down into smaller steps, accompanied by internal culture change, an
insurer can begin the journey to become a data-driven organisation,
and turn silos of mismatched data into profitable customer
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