ITD Research: IT trends in Brazilian insurance

The Brazilian insurance industry is experiencing an IT renaissance to respond to growing customer demands, as well as fierce competition and the interest of potential foreign buyers. IT Decisions analyzes key IT trends in the sector.

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Despite the fact that Brazil emerged from the global recession relatively unscathed, firms across all industries have adopted a cautious approach in preparation to a possibly more severe impact in the local economy. IT functions followed that trend, until late 2009 and early 2010, when new transformation projects began to re-emerge.

Similarly to many other countries around the world, insurance companies in Brazil are playing catch-up when it comes to their core systems and this is an issue that precedes the downturn. Many still have a plethora of legacy systems including mainframes and Informix-based databases and are now pushing an agenda of back-end improvement.

CIOs in Brazilian insurance companies also have to deal with increasing pressure to deliver customer-facing solutions, through mobile platforms as well as social media. However as simple as this may sound, this is also proving to be a real challenge to IT leaders in the sector.

The social media monster

A common issue most insurance players in Brazil is facing is around adapting a sound social media strategy. Some companies do not allow the use of web sites such as microblogging tool Twitter or even Facebook and Orkut – Google’s social networking web site, which has been losing members to the former of late.

However, with social media use soaring in Brazil, there is little CIOs can do apart from providing appropriate channels for customer interaction through these web sites.

Most companies are looking into governance for social media and also defining the security and data protection implications, but not many seem to have managed to get it right yet.

“CIOs in insurance have not mastered the management techniques needed to introduce effective social media channels to the enterprise”,  says Gartner analyst Cassio Dreyfuss. He added that these are also immature technologies and everyone sees the potential, but people also see the risks.

Niche retailers and businesses active in the leisure sector, as well as banks and media companies including TV channels, newspapers and magazines are among the types of Brazilian companies who managed to exploit social media to further engage with customers and win more business.

Shouldn’t the insurance sector be taking a leaf from the book of similarly regulated sectors, such as financial services, to create social media channels focused on customer service and upselling?

The desire for setting up such strategies often originates in the marketing and public relations departments, but concerns around offering such channels range from organizational complexities in terms of execution to possible legal “traps” regarding customer service levels.

Making effective use of the information generated through social media is also in the minds of IT decision makers, as is measuring the effectiveness of the company’s communications, as well as sales conversions and query resolutions through such channels.

Seizing mobile opportunities

Smartphone sales in Brazil are predicted to double the 2010 levels this year, with wealthier, tech-savvy people hungry for devices such as the iPad. The increased spending power of individuals who were previously positioned further down the social spectrum and more accessible mobile data plans poses a golden opportunity for those in the insurance business.

While mobile services have already been popular in the US and Europe for a few years, the trend has only gained momentum in Brazil in 2010. Some insurers capitalized on their existing geo-positioning set-ups to introduce applications that, for example, can track tow-trucks for an automotive insurance customer after the service has been requested, also via mobile.

However, since most in-house IT departments at insurance companies are often engrossed in ongoing transformation schemes, it becomes a challenge to source qualified staff and platforms that can translate products into the various mobile platforms the most popular devices are based on.

A handful of Brazilian IT suppliers – be it niche or larger-sized companies – have managed to deliver mobile-based, tailor-made offerings to insurers with some success.

Foreign vendors with specialist alternatives are also targeting the Brazilian insurance market, mindful of the rising customer demand and the relative business immaturity when it comes to mobile.

Out with the legacy

Another common trend across other sectors which insurance is now catching up on is the consolidation of multiple systems that have proliferated over the years and constitute what is now the core IT of these firms.

On average, the systems at the main insurance companies in Brazil are largely bespoke and have been in place for 25 years.

Such core platforms cover areas such as policy and contract management, as well as assistance monitoring and customer claims; this depends on which products the company in question is strongest at.

Insurance businesses in Brazil have sought to move to a more modern set-up in relation to these systems, moving on to off-the-shelf packages from niche suppliers.

However, limited vendor choice led sector companies to continue developing in-house instead in languages such as Java and .Net for anything related to the areas previously covered by the legacy applications.

IT Decisions says

The insurance market is changing fast in Brazil and the largest companies have been quick to notice that many of the biggest changes in the industry are being driven almost exclusively by technology:

• Core systems are increasingly being sourced off-the-shelf from specialist insurance vendors.
• Mobile platforms are increasingly being exploited to improve the customer experience, particularly in areas where the technology can create a step-change in service, such as geo-location becoming an accepted/expected component of breakdown services.
• Social media is becoming a critical tool for the industry. Prices are being compared and shared. Recommendations from friends have long been a powerful tool in selling services like insurance – with social media it’s easy for a customer to tell thousands of ‘friends’ about the great car insurance deal they just received.

None of this is unique to Brazil, but Brazil has a fast growing consumer market and is experiencing the transforming effect of over half the entire population now becoming a part of the “consumer class”. With consumption comes the desire to buy insurance to protect health, vehicles, and other possessions.

IT Decisions has talked to some of the leading insurance CIOs over the past few months and from what they say, it seems that some of the most innovative insurance technology is being developed right here. Brazil is rapidly becoming the insurance technology skunk works of the world.

Photo by Thomas Hawk licensed under Creative Commons