André Symes, Director, Genasys Technologies UK looks at the tricky business of cost perception within the insurance sector. How does any MGA, insurer or broker measure the true value of online, IT or insurtech investment?
Responding to a recent industry survey seeking views from brokers on digital transformation, an overwhelming 87% of respondents agreed or strongly agreed that UK brokerages must invest in technology that both customers and staff expect in today’s digital age.
I’d say that marries up with the view of brokers that we’ve met up and down the country over the past year, all of whom view that the continuous advances being made in technology are creating new opportunities for their firms.
However, there was one figure in report that I would disagree with. 54% of survey respondents apparently believe the ‘cost of implementation’ is the biggest barrier to digital transformation at their brokerage.
That number, in my opinion, is probably a lot higher.
The problem is that there is too much focus on the upfront cost rather than the savings that implementing any new technology solution can ultimately deliver. To paraphrase the immortal words of Rod Tidwell in Jerry Maguire, most boards want tech companies to show them the money.
I absolutely get the need to justify spend. But instead of just looking at the top level cost, a thorough cost-benefit analysis will generally reveal the exponential return of the proposed tech investment. The astute CIO knows and truly understands that system Total Cost of Ownership (TCO) extends beyond the technology silo.
For example, what would the return be on converting operational staff into more sales focused roles if the new tech absorbs a lot of the manual heavy lifting previously required? Taking out the human contact at the mundane end of the task list and freeing them up to deliver value-added service to customers can result in improved margins.
It’s tough to put a price on the perceived value versus actual cost. The latter is easy while the perceived value isn’t quite so cut and dried because perception is always in the eye of the beholder. However a proper cost benefit analysis can go a long way to helping to shape that perception.
It can make all the difference between a board understanding the decision of investing to save and turning down a funding request.