A survey of almost 300 insurance executives in Australia, the US and Europe has found nearly 90% of insurers don’t have full operation modernisation strategies and many depend too heavily on legacy and multiple third-party systems, creating significant bottlenecks, errors, inefficiencies and cumbersome workarounds.
Tech firm Earnix says advanced analytics can identify the most profitable segment of customers, while artificial intelligence can help develop new strategies based on customers’ behaviours and attributes. Using data modeling and simulations, insurers can segment customers, run price elasticity models and quickly make the right offer to win more business.
There is “vast potential” in embracing machine learning, personalisation capabilities and other innovations, Earnix says.
“Yet the industry as a whole has remained on the sidelines while technology, retail, and even financial services were more aggressive in their efforts to digitally transform their businesses,” it said.
“The entire insurance industry has the reputation of being slow to adopt various new technologies.”
Four out of five surveyed planned to modernise in the next two years, mostly in product personalisation, usage-based products and immersive technologies.
“Insurers realise that the current systems aren’t getting the job done,” said Earnix, which has customers in over 30 countries.
Traditional pricing and rating systems tend to be “individual siloed applications that require too much time and manual effort to attempt to make them work”. This leads to significant pricing delays and missed opportunities, it says.
Until recently, most insurers “really didn’t have to shake things up too much and their business would remain largely unaffected,” it says. Now, consumers demand faster, more personalised products and services and new competitors are willing and able to provide the experience customers crave.
“Where insurance carriers once had the luxury of relying on traditional rating, pricing, and underwriting approaches without suffering real repercussions, they now realise that many new trends will require new ways.”
New solutions can transform pricing, rating, distribution, personalisation, underwriting, and claims, though many insurers are “not quite ready” to take advantage. The greatest needs identified were pricing, fraud analytics, and personalised add-on offerings, as well as eliminating manual processes, integration with existing applications, and enhanced forecasting accuracy.
“Most insurers still use too many manual steps, especially when it comes to changing rating and pricing models. Not only are these efforts time-consuming and error-prone, but they also can’t provide the visibility insurers need to improve future strategies,” Earnix said.
“Most still rely on outdated legacy technology and third-party systems.”
While this technology once served its purpose and may still “get the job done,” legacy technology hinders insurer ability to meet customers’ expectations and create fast product offers as legacy systems lack flexibility and make it difficult to adapt offerings to individual customers.
The survey revealed that most insurers need 7-12 months to update a significant underwriting rule change – a significant disadvantage as compared to faster, more nimble competitors. More than half the insurers survey cited time savings to run models and simulations as a top reason to adopt more modern infrastructure.
“Insurers need to be able to operationalise rating updates for the specific policyholder characteristics as part of the quoting or renewal process. Yet too often it simply takes too long,” Earnix said.