Despite enduring a global pandemic that damaged earnings, and intense pressure from upstart insurtechs to modernize, technology spending by major insurance companies has surprisingly been stable for the last eight years.
That was one finding in a sprawling look at technology trends in the industry by John Keddy, senior principal at market researcher Aite-Novarica, in a presentation at the 2022 National Association of Insurance Commissioners Summit this week.
That doesn’t mean little is going on inside the big insurers when it comes to technology upgrades, Keddy said, particularly in cybersecurity. The three biggest priorities for insurers, however, he said are improvements in business intelligence and analytics, advances in distribution and ease of doing business, and increasing the speed to market, all of which requires newer technology.
“Year to year, there are outliers, of course,” Keddy said. ”Some years, you spend a whole bunch in technology and have huge projects, and the next year might be lower, or vice versa. But the fair takeaway is that, overall, over an eight-year period, insurance technology spend is quite stable.”
"Definitely insurtech has gone mainstream. In every conversation I have with insurers, they are taking this really, really seriously." — John Keddy, senior principal, Aite-Novarica
“Definitely insurtech has gone mainstream,” he said. “In every conversation I have with insurers, they are taking this really, really seriously. Going digital has absolutely continued to be a force as we end the pandemic and move, hopefully, past pandemic, which really sped up the digital journey for multiple insurers.”
Customer expectation is driving the digital convergence, Keddy said, and is leading to major research and investments in artificial intelligence programs to improve marketing and distribution.
Insights for consumers, agents
That’s what AI is,” Keddy said. “We want to take our data and get these deep insights that we ordinarily wouldn’t see that we can use to engage with our consumers and our agents and our employees much more deeply. This is the holy grail.”
Keddy said surveys show 95% of property and casualty insurers are interested in AI, with 93% of life and annuity companies interested in AI.
“AI is real and progress is being made on every front,” he said. “It will come to financial services, it will come to insurance. But be very careful. Some people are way ahead in terms of the hype and the picture versus what reality is today.”
Looking forward, Keddy said the challenging times and economic conditions will spur even more product innovation and the post-pandemic era will require re-engagement with employees, contractors, and customers.
‘A maturity in innovation’
“These forces will cause a maturity in innovation,” he said. “There will be greater focus and emphasis on those companies that are sustainable and have business models – not good fundraising models, but business models. And people will be looking for how do we solve problems and create value? That’s not a bad place to be.”
The companies putting big bets on technology and innovation may be more likely to succeed, he said.
“Thinking about where to place your bets on innovation and to more strategic advanced technologies absolutely are going to have an impact on our industry and upon our allies in our economy,” he said. “Those companies that make the right bets on advanced technologies will be the winners and won’t have wasted money. And let's not forget why we're all here. We are here to serve consumers, the end customer, the people in our communities, and to provide services in a secure and safe manner. And I think the companies that really focus on those experiences and doing the right things will be those that prosper.”
Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].