The insurance industry is undergoing a significant transformation fueled by the vast amount of data generated from connected devices and digital interactions. According to Bain & Company, zettabytes of unstructured and behavioral data are now streaming from various sources, including connected cars, homes, factories, and wearable technology.
When utilized effectively, this data can offer substantial competitive advantages for insurers.
The primary challenge for insurers lies not just in managing the volume of data, but in effectively accessing and analyzing new types of data. To achieve this, insurers require robust AI models capable of processing diverse data formats, such as photographs of auto accidents for claims processing.
Integrating these insights into core workflows is essential for informed decision-making.
Advanced data analytics are difficult to implement with legacy technology systems that struggle to handle the high frequency and varied types of incoming data. Effective orchestration requires treating data as a company-wide asset, accessible across departments with the appropriate controls.
Despite this, most insurers face difficulties in deriving value from technology modernization, often encountering lengthy and costly overhauls. Balancing technology investments while managing cost and profitability goals remains a significant challenge.
However, successful modernization can unlock considerable value, as evidenced by property and casualty carriers who have achieved higher premium growth, lower expense ratios, and improved customer Net Promoter Scores.
“These technology leaders currently make up a small group. Our analysis, which regressed technology dimensions with business performance metrics, found that only 5% to 10% of carriers consistently capture value from their data and technology investments. The vast majority of insurers have not yet realized substantial value from their efforts,” stated Bain & Co. in their report, “Insurers Can Parlay Technology into a Competitive Edge.”
Best Practices
To succeed in technology modernization, insurers should adhere to the following principles:
- Clarity on Business Priorities: Identify and prioritize issues based on measurable value.
- Data-First Approach: Understand data requirements and models before modernizing applications.
- Investment in Tools and Capabilities: Focus on aligning data with use cases, recruiting talent, adopting cloud solutions, and developing modular platforms.
- Orchestration of Initiatives: Set objectives and track results for each initiative, modernizing technology while making productive use of data.
By following these best practices, insurers can effectively navigate the complexities of technology modernization and harness the full potential of their data.
