Do insurers have too much tech?
Global insurtech funding ballooned during Q2 2024. Here, an Xceedance exec sounds off on the trends.
Global insurtech funding is at its highest level since the first quarter of 2023, according to a report by Gallagher Re.
Funding reached $1.27 billion over the second quarter of 2024, the data showed, with the average deal size increasing to $18.46 million to notch its highest mark since the third quarter of 2022.
As insurers dive deeper into the digitalization of processes and workflows, PropertyCasualty360.com spoke to Sachin Kulkarni, executive vice president and head of the Commercial, Specialty, MGA Americas division at Xceedance, about the rise in technologies impacting the insurance industry.
Kulkarni has more than 20 years of experience in technology and operations across insurance, distribution and supply chain, and other service industries in multiple geographies. His experience encompasses all aspects of IT delivery. He has held roles as global head of IT architecture at Westcon and head of IT strategy for the U.S. and Canada at Marsh.
PropertyCasualty360.com: How can insurers evaluate current workflows and decide where technology can be most effective?
Kulkarni: There are several questions insurers should ask themselves about different processes and workflows to determine if they can benefit from digital transformation.
Questions to consider are: is the process customer-facing? And do they have metrics on the current process? Organizations should also ask if adding a technology upgrade to a workflow will enable the team to focus on more value-added tasks. Another critical consideration is if the business activity is a core or a service differentiator.
PropertyCasualty360.com: What are the most common pitfalls insurance organizations experience when digitizing their operations?
Kulkarni: There are two big pitfalls insurers fall into when digitizing their operations. First is underestimating the importance of data governance and data quality.
No matter how advanced a solution is, if the data it is using is incomplete, inaccurate, or outdated, the insights it delivers will have little value. Insurers must ensure they have robust data governance procedures, such as conducting routine data cleaning, having guidelines ensuring customers’ data is protected, and creating a data migration plan to transfer information from one system to another accurately.
The second pitfall is seeking to automate or digitize a poorly designed process. Technology is not a magic solution that can solve bad processes. Technology’s value is to automate manual or time-consuming processes so team members can focus on more value-added tasks. If the process is flawed, the solution will bring little value.
PropertyCasualty360.com: How can insurers better navigate the generative AI hype and identify tools that could provide real business impact?
Kulkarni: For the past two years, generative AI has been the focus of all industries, including insurance. For insurance organizations, it can be easy to get lost in the hype and rush to implement generative AI solutions too quickly. This could lead to incorporating new technologies that add little value or don’t solve a real pain point within the organization.
Insurers should know where generative AI solutions can bring real impact, such as enhanced employee productivity and improved process efficiency in underwriting, claims, and customer service. Companies should then identify a few use cases applicable to their organization.
Also, don’t overlook the human element. Generative AI tools won’t replace people – however, people who can use this technology will have an advantage. Insurers should also have a change management plan that outlines how the generative AI solution will impact the workflow it is being incorporated into and the roles of team members within that process.
PropertyCasualty360.com: How can insurers recognize good vendor partners and create productive relationships?
Kulkarni: Another piece of the digital transformation puzzle is finding the right vendor partner. Insurers should find a vendor that will provide a solution, listen to feedback, and offer the support needed to ensure the insurance organization is getting the most out of the technology.
Questions to consider when vetting vendors include: Is the vendor partner domain-focused? How important is it for the vendor partner to accelerate technology adoption? Under what kind of pricing models is the vendor partner open to working? Insurers should consider the vendor partner an extension of their team and hold them accountable for deliverables.
PropertyCasualty360.com: If you had to point your finger at the greatest risk to technology adaptation, what would it be? What about the greatest advantage?
Kulkarni: While pinpointing the greatest risk would be relative depending on the organization’s maturity, there are some overall key themes insurers should be aware of. Some big challenge areas involve underestimating the speed of change and overestimating the time to implement.
Other risks include not defining success criteria and not taking the people who will be impacted by the technology on the implementation journey at the onset.
The most significant advantages of technology adoption are change and its benefits. Customers’ expectations and how they want to be serviced are constantly evolving. Insurers need to be agile and adapt. They can’t stand still and accept the status quo. Technology adoption enables them to enhance their efficiency and deliver the service their clients expect and demand.
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