Although most insurers anticipate major industry changes in the next couple of years and have begun diverting company resources for additional technology research that focuses on better and cheaper ways to do business, the industry lags behind other industries when it comes to technological innovation.
Re/insurers are revving up for change with increasing investment in InsurTech and firms are exploring ways to collect and manipulate customer data in an effort to improve their marketing and sales efforts, however, A.M. Best highlighted in a recent Special Report, that most firms remain at the initial stage of data maturity.
“Big data can provide a foundation for accurate pricing through predictive modeling and can allow a company to precisely target customers. However, according to Gartner, 70% to 80% of insurance companies are at the lowest level of their data maturity model. According to our survey, most companies are at the initial stage,” the rating agency stated.
The InsurTech revolution is expected to usher in new underwriting models, disrupting traditional insurance distribution methods after many decades of stability.
And although surveys respondents cite sales and distribution as the area advanced analytics are most frequently being applied to, A.M. Best believes it’s likely to be a mixture of old-fashioned methods and new tech-driven protocol that will win the day; “the death of the traditional agent force in the 1990s was greatly exaggerated— independent and captive agents still comprise the dominant distribution channel.
“However, the explosion of social media provides great opportunities for direct sales to consumers. Insurers will thus not have to rely on only agents and brokers, but will be able to reach consumers directly through alternative channels.”
To bring the industry up to speed with the pace of innovation and change apparent across global industries, insurers need to prioritise a sustained focus on modernization.
“Newer technologies can help insurers to become more efficient and to take advantage of technology, to maintain a strategic advantage” noted A.M. Best; “companies are thus focusing on four areas they consider to be most in need of technological improvement: customer experience; legacy administrative and claim systems; data aggregation and mining; and underwriting systems.”