Insurers: Don’t Fear The Insurtechs, Embrace The Future

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Faced with increasing competition from tech companies and insurtechs, insurers are increasingly turning to process automation. However, they are blocked by inconsistent data structures and legacy systems. There is considerable uncertainty about the quality of IT systems. These are the results of surveys conducted at the Innovation in Insurance conference, attended by around 1,000 participants.

There is a widespread uncertainty in the insurance industry. Market participants expect insurers to lose control of their business. When asked what will be the most important driver of the insurance business in the next ten years, 29% of the participants at the Innovation in Insurance conference answered that it will be insurtechs. 26% believe that large tech companies will be the main driver. Insurers came in third, with approval rating of just over 18%.

“Insurers seem afraid of insurtechs and big tech companies, even though they are best positioned to lead the market. If insurers continue to drive digital innovation, the industry will avoid being driven into less profitable parts of the value chain. If insurers do not own the customer and do not have access to customer data, they risk losing control of their business. There is intense competition for the customer relationship. To win this race, companies need to provide an excellent customer experience at all touch points and increase their efficiency. We therefore expect a strong focus on business process automation. Insurers will build IT architectures that enable them to connect,” comments Michał Trochimczuk, Managing Partner of Sollers Consulting. 

Cloud: Insurers fear high transformation costs

Insurers are struggling with the challenges of digitalisation in a number of areas. They want to establish data-driven business models, but are blocked by siloed IT architectures and regulation. They realise that cloud computing will be the future and that insurers should start with SaaS-based core systems, but they shy away from transformation costs and data compliance concerns. Automation is important, with a strong focus on claims and other high-frequency business processes. These are the findings of surveys conducted during the Innovation in Insurance conference. About 1,000 participants from seventeen countries followed the sessions and took part in the surveys.

66% of insurers automate business processes

To control costs and provide better customer service, insurers are making great efforts to increase automation. 66% of respondents say they will automate certain processes in the next three years. Some 10% of insurers have no automation plans at all and 9% say they are yet to select a specific process. There is a strong focus on automation in claims processing. 35% of respondents say they will focus on this area, while 27% will increase automation only in high-volume processes. Sales, post-sales, and underwriting play a minor role in the insurance industry’s automation efforts, with approval rates ranging from 9% to 19%.

“New technologies are on the rise and offer many opportunities for insurers. But the industry needs to address the issues in its existing IT landscape,” comments Marcin Pluta, Managing Partner at Sollers.  “While digital transformation is accelerating, the industry is still struggling with many internal issues. Insurers are speeding up their activities, but they should do so in a well thought-out way,” he adds.

The surveys show that data use and optimising costs and risks are the most pressing issues. When asked what are the most important challenges for their company, 15% think it is optimising costs and risks, and 12% answer that it concerns using data. While insurance is a data-driven business, companies are still struggling to take it to a higher level. When asked about the main blockers in the process of building a fully data-driven business approach, 34% point to inconsistent data structures, 28% to data protection laws, and 26% to siloed IT architectures.

Driven by growing storage capacity, increasing computing power, and new tools, the insurance industry is at the beginning of a fundamental transformation of its business.

However, the industry is hampered by existing structures. When asked what is the biggest drag on the transformation of the insurance business, 35% say it is the outdated core systems and 33% point to leadership.

Uncertainty about code quality

There is a broad consensus in the industry that the cloud will play an increasingly important role. While in the past insurers have tested cloud in smaller applications, they are now convinced that the whole infrastructure will be cloud-based. 50% of conferees say the core system should be moved to the cloud first before smaller applications follow, with 39% preferring to start small. When asked why not every company has moved to the cloud, 27% say it is because of the expected high costs of SaaS solutions, while 23% fear compliance and data protection risks.

Due to the large number of old and new systems, there is a lot of uncertainty about code quality among insurers. Yet ensuring code quality helps insurers avoid IT failures. Clearly, there is still a lot of work to be done. 53% of respondents say financial companies need improvements in several areas and only 13% believe they are good for all product types.

“Insurance companies lose millions of euros annually due to software-related business interruptions. Software quality assurance has therefore become a critical challenge. It is crucial for insurers to develop and maintain their systems and be open to new solutions. We therefore expect them to adopt DevOps-based methods that enable faster development and higher code quality. Solid quality assurance will enable insurers to provide better service to their customers. There will also be a strong push towards the cloud, as cloud-based systems require less maintenance and are readily available,” comments Trochimczuk.   

“The insurance industry is going through a revolutionary transformation of its business. Similar transformations have occurred in many industries. All business processes are affected, including sales, claims and policy administration, as well as asset management and reporting. Key issues to be addressed include building new data structures, modernising core IT, moving to the cloud, and automation,” comments Pluta.  

 

About alastair walker 6830 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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