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Insurer Tech Investment Priorities See Major Shift in a Post-COVID World

If you believe everything you read, there’s no middle ground for insurance companies when it comes to adopting new technology: they’re either complete Luddites operating on archaic systems, or they’re leveraging all the latest tech tools in pursuit of innovation. But a new study of selected insurance executives conducted by Celent finds that the reality is much more nuanced – especially since COVID-19.

In reality, there are a number of factors that insurers consider when investing in technology – including digital acceleration, growth, process optimization, and innovation.

And these priorities have shifted significantly since the COVID-19 pandemic. While innovation once topped the list, today it’s only seen as a significant driver by 20% of the Celent respondents. Post-COVID, they’re more concerned with trying to recover revenue lost as businesses slow down or go under, and are looking at ways to operate more efficiently to handle more transactions with the same number of staffers.

 

Growth was more of a tech investment driver for Tier 1 insurers (over $5 billion annual revenue), 100% of which were focused on growth as a goal.

“COVID has caused an acceleration in most types of technologies — but especially those that are needed for remote processing and remote customer service,” says Karlyn Carnahan, head of property/casualty at Celent. “The rapid need to communicate and collaborate with customers, agents, and other partners has caused a need to ‘drop everything’ and ensure new tools are in place that meet an insurer’s security and scalability requirements. Whether using video for inspections, or Zoom for court-litigated claims, insurers were rapidly faced with the need to launch and implement new technologies seamlessly and quickly.”

Celent asked insurers how much they agreed or disagreed with a variety of statements about emerging and new technologies. “In general, they feel pretty positive about the benefits of emerging technologies — but are evenly split on whether they’re ready for deployment or scaled implementation,” Carnahan says. “They’re also not equally convinced that they’ll result in increased revenue and generally see them as being expensive.”

The respondents also stated that they have been getting the most value when applying emerging technologies to transforming the customer experience and improving data decisioning — and data decisioning is where future investments are most likely to be made. Emerging technologies without a business context are least likely to earn an insurer’s investment dollar with 67% having “no plans” to adopt.

The report finds that insurers need to respond to four broad trends shifting the way they operate:

• Cost challenges and consolidation: Managing expense ratios is a constant challenge in the industry. The pandemic has exacerbated the need to focus on cost reduction as revenues continue to drop as a result of the poor economy.

• Digital consumers: Consumers and agents are demanding insurance experiences equal to more digital industries. Self-service capabilities, anytime communication, and a 360-degree view of the customer have become basic requirements.

• Digital competitors: Local presence and relationship are no longer sufficient to compete: Insurtech funding by venture capitalists reached more than $4 billion in 2019 and new competitors are pressuring insurers to transform faster.

• Resource constraints: Insurers tell us they spend more than 40% of their IT budgets on IT maintenance. “Run the business” costs absorb dollars that would be better spent for digital transformation.

To read the full report, please visit the Celent website.

 

 

 

 


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