The barriers to insurtech and the industry’s efforts for digital transformation

The barriers to insurtech and the industry’s efforts for digital transformation

“The insurance industry is traditionally risk-averse, which can create a barrier to the adoption of new technologies,” according to Thoughtworks domain specialist Davnit Singh (pictured above). In conversation with Insurance Business’s Corporate Risk channel, Singh summed up some of the key barriers between insurance companies and digitalization and how the resistance of some insurers to digitalization can be tackled with the right mindset from the industry at large.

With over 16 years of experience in the IT space of digital transformation, Singh, as the principal consultant for the global insurance industry for Chicago-based IT solutions provider Thoughtworks, is familiar with the rapidly changing landscape. He has seen firsthand the many barriers to insurers’ adoption of insurtech, found certain areas to prioritise for adoption given the state of the market, and ultimately seen opportunities to bring more firms onboard as the industry tackles more and more risks.

“With the rapid pace of technological change, traditional risk management methods may no longer be sufficient to address new and emerging risks,” Singh said. “By adopting modern insurtech platforms and tools, insurers can enhance their risk management capabilities and make more informed decisions based on data-driven insights.”

Staying competitive and relevant is the key, Singh said, as insurers that fail to modernize may ultimately be left behind. That said, there are some within the space reluctant to take the digital plunge, a phenomenon that has many factors behind it.

Not keen? Here’s why

Singh said that there are several reasons why there are insurers that are still not keen on modernizing their systems with insurtech platforms. One of these is legacy systems, which many insurers still rely on and are deeply ingrained in their business operations.

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“These systems may be difficult to replace or integrate with new insurtech platforms, leading to reluctance to modernise,” he said.

There are also insurers that are resistant to changes, in particular with regards to modern technologies. Singh said that these companies would prefer “to stick with traditional processes and systems that have worked for them in the past,” seeing the adoption of insurtech as a risk.

“Some insurance companies may not fully understand the potential benefits of insurtech platforms or may not be aware of the latest advancements in the insurtech industry,” Singh said, citing a lack of awareness towards modernisation and how it can improve insurers’ businesses. He also called cost a potential barrier, one that could end up being the biggest hindrance of them all.

“Some insurance companies may not have the financial resources to make these investments or may be hesitant to spend money on new technologies,” Singh said.

Finally, there’s also the issue of regulatory challenges and compliance requirements for insurance companies. Although it is a daunting list of reasons as to why insurers are not adopting, Singh said that this perception towards insurtech and its supposed “barriers” will change over time.

“As insurtech platforms continue to demonstrate their value in improving efficiency, enhancing customer experiences, and reducing costs, we are seeing more insurance companies begin to embrace and invest in modernisation efforts,” he said.

Getting insurers on board

Hurdles like these are meant to be overcome, and for insurers hesitant to get on board with the program, Singh said that a lot can be done.

“It’s important to showcase the benefits and potential outcomes of insurtech platforms and technology advancements. This can be done through education and training sessions, proof-of-concept projects, and pilot programs that demonstrate the positive impact of modernization,” he said.

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While the industry as a whole looks at insurtech and modernisation as a big positive for the growth of the sector in challenging evolving risks, Singh stressed that the process to get there may not be without its hitches.

“It’s also important to address concerns and challenges that may arise during the modernisation process and work collaboratively with stakeholders to ensure a smooth transition. Additionally, industry-wide initiatives and partnerships can help drive adoption and create a culture of innovation and progress in the insurance sector,” he said.

Where to start?

Onboarding is only the beginning, as there are still aspects to consider in a firm’s journey to becoming a more modern company that looks forward to the future. Risk managers who know which technology to prioritise and know what trends to follow will ultimately have the edge, regardless of the state of the market.

“In today’s fast-paced digital landscape, it is crucial for businesses to keep up with technology trends and remain adaptable in order to stay competitive,” Singh said. “However, with over a hundred technology trends available, choosing the right one can be overwhelming, and it’s easy to get lost in the sea of options.”

Singh listed a few steps that companies can take in order to identify and prioritize insurtech trends:

Identify the company’s business objectives. “Risk managers should start by identifying the company’s business objectives and aligning them with the potential insurtech and technology trends, which can meet the changing customer expectations and solve the current problems in the Insurance industry,” Singh said. Citing the improvement of customer experience as a sample, he said that insurtech solutions which offer a more seamless user experience may be a good priority to have.
Evaluate the potential benefits. “After identifying potential trends, risk managers should evaluate their potential benefits. They should consider how the technology can improve their company’s operations, increase efficiency, and reduce risk,” Singh said.
Assess the risk of adoption. “Risk managers should assess the risks of adopting new insurtech and technology trends. This assessment should include factors such as the technology’s maturity level, its impact on the company’s operations, potential regulatory hurdles, and cost-benefit analysis,” he said.
Prioritize based on impact and feasibility. “Based on the research, evaluation, and assessment, risk managers can prioritize the insurtech and technology trends that are likely to have the most significant impact on the company and are feasible to implement. They should also consider the company’s resources and determine which trends align with their current capabilities,” he said.

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Keeping up with the challenging market

The endgame of adopting a modern platform will vary in a lot of areas for different insurers, but the bottom line will remain the same: to keep up with the challenging market and its ever-evolving risks. Singh said that modern platforms will always have an advantage over older ones, as modern platforms provide more robust risk management capabilities through new technologies. The growth of artificial intelligence and machine learning, for instance, has proven to be integral to identifying and analysing risks in real time.

“Modern platforms also enable insurers to improve their underwriting accuracy and speed, which is critical in the current market,” he said. “With more accurate underwriting, insurers can offer customised policies that meet the specific needs of their customers, which can improve customer satisfaction and retention.”

The ever-changing landscape of market conditions demands agile and flexible insurers, and a modern platform achieved through insurtech solutions could be the vehicle for a firm to be just that.

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