A new report from AM Best has highlighted how companies that are placing high importance on data quality to improve efficiency and profitability are key drivers of innovation efforts that are playing a significant role in moving the insurance industry forward.
Best also cited how leadership teams that have a general understanding of the role of system and IT infrastructure upgrades are also among the key drivers in moving the industry forward too.
In March 2020, the rating agency released its Scoring and Assessing Innovation criteria which reviews the relevant progress made by its rated insurers in this regard.
However, immediately after the criteria was released, the world was struck and transformed by the COVID-19 pandemic, which changed the way how people lived and worked, and drove immense changes and innovation throughout the entire insurance industry.
Challenges due to the pandemic continued throughout 2021, with persistent low yields and stagnant growth contributing towards the many pressures that the industry was facing.
Moving forward to 2022, inflationary pressures and rising interest rates were prominent for the first time since the turn of the century.
Additionally, Best highlighted how technological changes continue to alter consumer behaviour, which ultimately is transforming the insurance landscape across product lines.
“These trends have created challenges and opportunities for insurers, accelerating the need for innovation and rewarding the most innovative insurers,” said Jason Hopper, associate director, industry research and analytics, AM Best.
“In response to the evolving risk environment, insurers accelerated their shift to digital technology and intensified their focus on product innovation and policy language modifications.”
Further, Best’s report gauges the effectiveness of a rated insurers’ respective innovation efforts by scoring its performance with respect to leadership, culture, resources, and processes and structure.
Best also explained how leadership is key with more actions being guided by clearer vision, such as more companies creating chief innovation officer positions and more frequent discussions at board meetings.
Lastly, the agency noted that while for many companies, developing an innovative culture has been an ongoing challenge, a persistent leadership focus and employees transitioning through this environment first-hand have played a major role in bolstering this innovative cultural shift.
