Like many industries, insurance is currently undergoing a seismic shift, largely driven by three key factors:
Firstly, increasing pressure and rapidly changing customer expectations. In short, customers are demanding more and they’re demanding it now driving the competition for insurance firms to differentiate the customer experience more than ever before. High quality, hyper-personalised products and services are becoming the norm and large customer-centric businesses, such as Amazon and Google, are redefining the customer experience – it’s no wonder almost one third of people globally would consider buying an insurance product from a large tech firm as opposed to a traditional insurer .
Secondly, the global health pandemic. COVID-19 has accelerated the world’s digital transformation – what would have previously taken several years is taking months instead, and businesses of all shapes and sizes are having to adapt rapidly to keep up with the new digital workplace. This rapid shift to address challenges of legacy IT infrastructure which cannot accommodate requirements of digital innovation, such as real-time data analytics, AI and ML enabled intelligence requires a data centric architecture that is agile and fast.
Lastly, the rising prominence of agile Insurtech start-ups. According to a recent report, global Insurtech market revenue is expected to reach $10.14 billion by 2025, up from $5.48 billion in 2019, demonstrating exponential growth, which has consequently turned an industry once perceived to be archaic into a hotbed of innovation.
The $6.3 trillion global insurance industry's drive to digitise is leading incumbent insurers across the world to grow their IT and tech spend to power their digital transformations. According to recent research, more than half (59%) of insurers are planning to increase digital transformation spend in 2021 . Historically, regulation, product complexity, and insurers’ large balance sheets have kept digital attackers from incumbent insurers’ gates . However, that’s all now changing, in a way that incumbents should embrace.
There are countless examples of how digital transformation is revolutionising the insurance industry. But beyond the smaller, more tactical advantages, digital transformation has much broader benefits. Incumbent insurers are embracing hybrid IT and adopting cutting-edge technologies, such as artificial intelligence (AI), machine learning (ML) and blockchain, to boost efficiency, agility and improve product personalisation. Legacy technology stacks cannot accommodate evolution to self-service capabilities that require integrated and interoperable physical and virtual infrastructure, standardised security and compliance controls, and data interconnectivity between digital communities.
To achieve this more than half (54%) of insurers in the UK are looking to invest in AI over the next few years. Technologies like AI and ML will undoubtedly continue to evolve and create more advanced opportunities for years to come; therefore, the digital foundation that is being laid will help insurers grow and adjust with new insurance technologies and capabilities.
While the insurance industry – particularly the large, incumbent insurers – are aware of the need to digitally transform, they’re often limited by the realities of their size and sheer scale of operations, constant regulatory pressures, legislative demands and even their external environment. Experts estimate there will be approximately 50 billion connected devices by 2030 – that’s a lot of data being produced. And as the amount of data continues to grow in complexity and size, so will the requirement for apps, services and technology that help make sense of that data. We call this the Data Gravity effect, where the creation and aggregation of data exponentially attracts more and more data to regions and businesses around the world. Data gravity barriers in legacy infrastructure prevent insurers from delivering distributed workflows at centers of data exchange residing in physical and virtual environments that enable real-time intelligence sharing between customer, employee, and partner digital communities.
If managed correctly this new avalanche of data will allow insurers to understand their clients more deeply, resulting in the creation of innovative new products and more personalised pricing. Cutting-edge technologies, such as AI and ML, will play their part in this process, adding structure to the impending data deluge, allowing insurers to use it to their advantage instead of their detriment.
The challenge for the insurance industry is managing this growth in data. Today more than ever, regardless of what industry you’re in, harnessing the power of data to create and deliver innovative services and personalised products is mission critical. For an industry like insurance that has relied on data since its very inception, it becomes a matter of sink or swim. In order to do this effectively, incumbent insurers must embrace digital transformation. That means taking a step back and evaluating whether their current underlying infrastructure is fit-for-purpose and able to accommodate a tech-forward world. Insurers in the UK are already starting to do this, with three quarters (75%) taking proactive steps to move legacy technology landscapes to more dynamic and ‘flexible as a service’ models, according to a report by PwC . By adopting more flexible, global infrastructure models, like PlatformDIGITAL®, insurers will be able to level the playing field and evolve their infrastructure to meet the rapidly changing needs of today’s digital world.
If incumbent insurers are to thrive in the digital age, they need to throw yesterday’s traditions to the wayside and focus on looking like the modern technology companies of tomorrow. The successful, efficient and productive insurer of 2030 will be one that has technology at its core, embraces change and harnesses data in a way that fosters continuous innovation.