Less than 40% of the world’s top insurers and reinsurers have significantly digitised the insurance value chain, despite increased levels of digitisation being seen to drive greater premium growth and earnings, according to a study from nonprofit, re/insurance industry organisation, ACORD.
The ACORD organisation has now released the findings of its study into the digital maturity of 100 of the world’s top re/insurance carriers with relation to their performance, which offers some interesting insight into the re/insurance industry’s ability and willingness to embrace the digital revolution.
ACORD states that, for the purpose of the study, it defines digitisation as “capabilities which rely on data, analytics, and communications technologies — not only in business processes and infrastructure, but also strategic intent.”
The study looked at different factors within the industry, such as line of business, geographical reach, and branding, for example, and analysed how they relate to successful or unsuccessful digitisation, “with interesting, and sometimes counterintuitive, results.”
The report finds that less than 40% of companies examined have significantly digitised the insurance value chain, with roughly 50% of carriers remaining in the “early stages” of looking at how digitisation could be integrated within their business model.
Furthermore, 10% of companies explored are failing to leverage any digital technology within their current business models, which although low, is perhaps somewhat surprising given the rapid pace of the technological and digital change sweeping through the global re/insurance industry.
“The results of the analysis were clear: increasing levels of digitization do indeed drive material improvement in value creation. Insurers which have successfully digitized achieved twice as much growth in premiums and earnings as the average over the period studied, and the most digitally mature tier of carriers also saw their share prices double,” explains ACORD.
Discussing the study, which is the first to be conducted by the ACORD Research & Development team, ACORD President and Chief Executive Officer (CEO), Bill Pieroni, said; “We’re uniquely positioned with over 900 members globally. I believe there is an opportunity to conduct provocative, insightful and actionable research that has no agenda beyond helping the industry. This was the motivation behind the digitization study, which includes a tremendous amount of actionable insight.”
“There’s been a lot of hype about digitization, but very little quantitative insight compelling carriers to actually implement it throughout their operating models. The industry needed the application of rigorous research techniques to find out: are there measurable outcomes which warrant the cost, time, and risk associated with the digital journey?”
As the digital revolution continues to filter through to all industries of the world, increasing efficiency and ultimately reshaping business models and potentially entire industries, the insurance and reinsurance sector needs to embrace the changes to remain relevant. Furthermore, with profits on the underwriting and investment side of the balance sheet under pressure in the re/insurance industry, utilising digital technology to streamline processes and cut costs is one way to offset the challenging landscape.
Some firms are clearly further ahead than others with regards to digitising the value chain and their business models, but the need to adjust and apply digitisation will only increase as tech continues to advance across the space.