Study: AI illuminates insurer digitalization shortcomings
'If you aren't trying to figure out how you can make your customer-service applications better, faster and cheaper... you will be left behind.'
Artificial intelligence has been operating on some level for years, enhancing such online activities as shopping, banking and entertainment, for instance.
But the recent spotlight on generative AI tools illuminated insurance-modernization challenges, according to recent research commissioned by Rackspace Technology, a cloud technology services provider.
“Insurers cite costs and security issues as two of the main reasons why they have not modernized their apps and data,” Jeff DeVerter, the company’s chief technology evangelist, said in a recent press release. “They also say two of the key benefits of modernization are lower costs and greater security, indicating that many organizations are stuck in a Catch-22.”
The Rackspace Technology research was supported by AWS and conducted by Coleman Parkers Research between April 27, 2023 and May 25, 2023. Survey results were based on the responses of 1,420 IT decision-makers. It indicated that:
- Eighty percent of insurers agree they will only benefit from AI if they modernize legacy apps and data.
- Insurance-industry respondents identified improved efficiency (65%), increased security (54%) and increased cost reduction (49%) as the leading motivators of modernization.
- About half of insurance-industry respondents (49%) are currently using cloud-based technologies.
- Such initiatives tend to be led by IT departments (68%) as opposed to executive leadership/C-suite (46%).
Prior to this year’s spotlight on AI tools, “AI was a solution looking for a problem,” DeVerter said in a recent interview. However, insurance leaders recognize the benefits of modernization, which include great cybersecurity control, increased efficiency, cost savings, the power to quickly adopt advanced technologies and speed. Respondents also noted that modernization has resulted in better data management, integration, quality and lowered data costs.
The research indicated that many insurers still face unforeseen challenges to modernization, including limited resources (30%), cultures resistant to change (21%), integration challenges (16%), lack of senior buy-in (11%), lack of a clear roadmap (11%) and communication between stakeholders (6%).
If insurers fail to modernize legacy apps and data systems, respondents believe it will result in poor security (32%), increased costs (30%), reduced speed/agility (30%), integration barriers (25%), the inability to adopt advanced technologies (22%) and lack of innovation (21%).
DeVerter said the best way for insurance leaders to capitalize on the Rackspace Technology research is to investigate business-process problems that can be solved using AI, then work toward solutions that make those processes “better, faster and cheaper.” Insurance executives also should scrutinize data management and architecture “so that external sources can consume that data in a meaningful way,” he said.
DeVerter emphasized that insurance leaders should “be in the room” as modernization strategies are determined and executed. “Virtually anything you want to do can be done either through automation or through machine learning models that are specific to your industry,” he said.
“If you aren’t actively trying to figure out how you can make your customer-service applications better, faster and cheaper by using AI,” DeVerter concluded, “your competitors are, and you will be left behind.”
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