Technology is changing the future of insurance

InsurTech. It’s everywhere. It’s inescapable. It’s all-consuming. But… is it actually innovating?

What emerged as a brow-furrowing buzzword just a couple of years ago — back when the debate still raged over whether it should be spelled “insuretech” or “insurtech” —is now a sizeable industry.

So far, much of the focus has been on transforming or disrupting insurance sales and distribution channels, as well as addressing new areas of emerging risk. In fact, insurance premiums generated by emerging InsurTech services are forecasted to exceed $400 billion by 2023, up from an estimated $187 billion in 2018.

Those are big numbers. But there’s a snag — the same study also found that while traditional insurance business models are transforming thanks to InsurTech, the adoption of these technologies has been limited due to relatively slow rates of innovation within the industry.

In fact, InsurTech is expected to represent under 10% of the global insurance market by 2023, compared to approximately 4% in 2018. This is not an impressive adoption forecast, particularly compared to the value of the premiums.

That’s interesting. I thought InsurTech was innovation…or innovating…or that the two were inextricably linked. So what’s going on here?

Better solutions for new requirements — the big four

One definition of innovation is the application of better solutions that meet new requirements. What are the new requirements of global insurers? Here are the big four:

• Agility and confidence in bringing new products to market with straight-through solutions from policy inception to claims. It’s all well and good having an idea for a new insurance product in a new sector, but can the business administer it efficiently at scale?
• Automatic compliance with local regulations and global controls in an ever-shifting regulatory landscape.
• Multi-channel capabilities that flow seamlessly, including broker channels and direct channels.
• Combining personal lines with commercial and other lines; clear pathways for cross-selling opportunities and rewarding customer loyalty.

It’s clear to me that developing new sales tools and new distribution channels only solve the front-end aspect of these requirements.

So what can insurers do to solve all aspects of these growing challenges? They can start by moving core insurance systems to the cloud and adopting a SaaS model. For long-term success, insurers need business-first, end-to-end cloud-based software that is flexible enough to meet operational requirements today and in the future.

The fast pace of change is the biggest challenge facing insurers today. Solving this challenge is the innovation that global insurers need right now. And finding ways to deploy and adopt smart SaaS architecture will enable P&C carriers to achieve this essential digital adaptability.

Bart Patrick is managing director, Europe, at Duck Creek Technologies. Contact him at bart.patrick@duckcreek.com.