Insurance has been slower than other industries to adopt and incorporate technology, and while the gap is closing, those that fail to keep pace risk being marginalised – that’s according to Fitch Ratings.
“The insurance business has always utilised large volumes of data and sophisticated actuarial analysis to assess risk and project claims experience,” Jim Auden, managing director of Fitch Ratings’ insurance team, said on a press call on Wednesday.
But while improved computer processing capabilities, along with the proliferation of internet use and the development of smart devices, has created new opportunities for insurers, compared to other sectors the industry has been falling behind.
However, competitive pressure from external technology disrupters is spurring insurers to close the gap, which in many cases has meant modifying their systems investment strategy – with some insurers turning to unique investments and partnerships with technology disruptors.
Want the latest insurance industry news first? Sign up for our completely free newsletter service now.
But the news isn’t all bad.
Technology presents a major opportunity for insurers across three areas – risk analysis, pricing and risk management, Willem Loots, senior director at Fitch Ratings said.
“We believe that non-life insurers have made the most progress so far, as the scope for quick wins is more significant compared to life insurance,” Loots said on the call, which expanded on Fitch’s Disruptive Technology Big Data in Insurance report.
Telematics and smart devices for the home are a key example of areas of opportunity for the non-life industry, but insurers should also harness analytics to improve sales and retention strategies.
Using data analytics to understand policyholder behaviour in buying and renewing policies “offers significant cost saving potential” across all lines of business, Loots said.
However, while the model is easy to apply, it requires substantial investment in new systems, processes and analytics, he added.
What does the future hold for car insurance claims?
Brokers need changed claims role