The Internet of Things (IoT) and Artificial Intelligence (AI) are becoming focal points for re/insurance investment, after 90% of firms said they’d successfully incorporated technologies to improve digital consumer engagement and Big Data use, according to a Moody’s survey of 18 of Europe’s biggest re/insurers.
“In recent years, many groups have therefore embarked on multiyear projects to upgrade their systems. These upgrades have the potential, when complete, to reduce operating and IT expenses, supporting profit margins at a time when low interest rates and muted economic growth continue to weigh on revenues and investment income,” Moody’s analysts explained.
AI is forecast to be the growing focus for investment in technology – which remains a key strategic priority for insurers as they seek to improve in a competitive market environment.
Robots and AI in insurance combine the use of algorithms and machine learning to automate interactions and processes, transforming insurance business models.
With new digital infrastructures and improved digital access to and engagement with customers, re/insurance industry experts remain hopeful that in the long run, and as they invest more, these advances will catapult the sector into a new era of growth, although 30% of CFO’s said they anticipate ensuing industry disruption.
Over half of respondents named “rigidity” of the legal system and “complexity” of insurance operations as the greatest obstacles to successfully adopting new technology.
It’s the largest insurance groups that can appear to struggle the most with these growth barriers, with their “complex legacy IT infrastructures that are costly, inefficient to run, and difficult to adapt to new distribution channels, data sources or product lines,” the Moody’s report noted.
And with the industry still being in experimental phases of introducing artificial intelligence (AI) to improve processes and advisory purposes, overcoming the constraints of existing core insurance systems remains a major challenge.
Financial services advisory firm Celent, highlighted in a recent report that re/insurers must engage with InsurTech and AI but that “in order to meet the pace of change and integration requirements implied by a fully digital business” they’d have to step up to the complex task of upgrading and replacing current systems while moving towards “an open modular architecture, leveraging digital front ends and combining a powerful product configuration and automated back-end components.”