Insurers remain behind technology curve, warns AM Best
Insurers are still trying to catch up with other industries regarding technological innovation, according to a recent AM Best report.
Planned upgrades of legacy underwriting and claims systems, business processing systems and website functionality are underway at nearly every insurance company AM Best rates.
For insurers that have grown through acquisitions, the challenges of integrating claims, reserves, underwriting and pricing systems remain many years after these transactions. However, a sustained focus on modernization is necessary, as newer technologies can help insurers to become more efficient and to maintain a strategic advantage.
Companies are focused on four primary areas they consider to be most in need of technological improvement, according to a survey: Customer experience, legacy administrative and claim systems, data aggregation and mining, as well as underwriting systems.
The report notes that the insurance industry has long collected data, but despite advances in predictive modeling, has yet to tap the full power and potential of that data. The nascent insurtech industry has spearheaded these efforts, and insurers and insurtech companies have combined their actuarial analytics with the power of computing to influence key metrics. Insurtech companies have amassed a wealth of innovative analytics that could enhance insurance processes, but insurers already have rich troves of information about policyholders on pricing, retention, churn, uplift from analytics, policy-specific information and underwriting.
“Insurtech companies will find deploying these capabilities difficult as they lack scale, while insurers may lack the depth about the power of computing and machine-learning techniques,” said Jason Hopper, associate director, industry research and analytics.
“Still, the combination of the two could be powerful and may lead to an inflection point that could change the typical insurance model.”
Technological advancements have to flow throughout a company culture, much like enterprise risk management, according to AM Best.
“Industry CEOs can no longer relegate technology to their IT divisions,” said Sridhar Manyem, director, Industry Research and Analytics. “They need to have an in-depth understanding of technological concepts and how they relate to specific business operations and strategy, given the potential for industry disruption. If done properly, technological improvements and increased automation can increase efficiency and offer better insights.”
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