Insurance IT trends for 2023
The last few years were challenging for every industry, however insurance was able to overcome these obstacles and kept on growing. Most likely, 2023 will be filled with just as many challenges as previous years, however we believe that with the right investments and adequate planning insurers can endure and even attain a better position than they might hold currently.
Keep on reading if you’d like to get an insight into our predictions for IT trends in insurance for 2023!
General trends in insurance
ESG will become an inevitable part of business
Environmental, social and governance, or ESG in short, is very important in many industries. In 2023 ESG will reach the insurance industry too, an unavoidable issue that insurers will have to address. Soon sustainability will become a topic in all industries and companies will have to show how they approach environmental and social issues. With adequate tech investments insurers can track and communicate their environmental impact appropriately. Gathering and analyzing real time data is key for such reports. In order to devise a goal and a fitting strategy insurers have to know their current and past environmental and social impact.
Security evaluation is also part of ESG. According to Debevoise & Plimpton, 2021, cybersecurity is one of the most important ESG issues for insurers. Cyber security should be considered part of ESG because breaches and data leaks are a threat to the welfare of individuals, organizations, and communities. With weak IT security and unsupported systems insurers can’t attain a desirable ESG score.
More and more insurtech companies will enter the market
It is clear that an insurance company which doesn’t invest in technology will soon be left behind its competitors. Moreover, insurtech companies have been growing in the last few years and foreseeably investments in the sector will not subside in 2023. Traditional insurance firms have two options in order to remain competitive; they can invest in technology and cater to the changing consumer demands, or they can start collaborating with insurtech companies to combine new technology with their own existing market reach.
In 2021 insurtech companies were able to grow with the aid of an all time high funding of $15.4 million dollars from investors. As people recognize the importance of such firms, investment and the will for collaboration will continue to increase.
Insurance companies will endure economic recession
Traditionally, most industries are affected by economic recession and insurance isn’t an exception either. However, generally speaking, insurance is essential for the everyday lives of many people and for companies as well. Therefore, insurers experience recession to a different degree than companies in some other industry.
In order to maintain profitability companies need to reduce all unnecessary expenses. Traditionally insurance companies spend a lot on maintaining legacy systems regardless of them being outdated and inefficient. Technology investments might seem expensive, however in the long run it is much more profitable to introduce a new system than to maintain legacy systems. Automation will also help insurers in making their processes more efficient, reducing costs and meeting the needs of their clients.
People’s needs and expectations change during a recession. They tend to favor services that cover their needs without any extra expenses and in insurance they want the claim process to be as quick as possible. Adequate IT investments can cut unnecessary expenses while improving customer satisfaction at the same time.
Home office is here to stay
During the pandemic, working from home became standard practice in many industries. As we’re trying to get back to post-COVID normality it is clear that we want to hold onto some of the new practices adopted during the last few years. Home office is one of these for many employees. According to Pew Research Center’s study on home office preferences, 61% of employees opt to work from home even though there is nothing to stop them going back to their office. In order for processes to work just as efficiently as in an office, companies have to have a good IT infrastructure. Digitized workflows are necessary, because paper based processes are too slow, inefficient and simply impractical in this new decentralized way of working.
Trends in digitization and automation
Digital transformation continues
Many traditional insurance companies have been investing in digitalization in the past years in order to keep up with demand and to optimize processes. Digital transformation is beneficial for all aspects of a firm, therefore it won’t subside in the coming years either. The drive behind customer demand might change however. Transparency and integrity is highly valued by clients and with the help of digitalization insurers can attain a better position in the eyes of consumers. Insurers who fail to recognize the importance of digital transformation and delay such IT investments will lag behind.
Automation will remain a popular investment
Automation has been a popular investment among insurers and we believe that this trend will continue for the foreseeable future. According to Deloitte’s 2022 Insurance Industry Outlook report, 63% of insurers were planning to invest in robotic process automation. Automation, among many things, enables employees to host high quality face-to-face meetings with their clients. They will have more time to focus on such because automating many routine processes increases productivity by conducting low-level, repetitive tasks without human intervention. And as we mentioned before, digital transformation has to align with customer demand.
Data driven automation is most useful during the process of underwriting which is a crucial part of business. Therefore, the adoption of underwriting workbenches will increase in 2023. An underwriting workbench is a workspace that contains all the necessary information and tools to successfully complete the process of risk evaluation.
The use of real time, third party data will increase
Even though analyzing real time data and utilizing the results in real time is still somewhat difficult, with every year we are getting better at it. There is great demand for such data, because it allows companies to quickly react to changes and even predict future trends.
With advancements in real time data analysis, insurers will start utilizing the internet of things (IoT) even more intensively. IoT refers to physical products that have built in sensors that gather, connect, and exchange usage data.
By the end of 2021 there were 12.2 billion active IoT devices, and it was predicted that this number will grow by 18% in the coming year. IoT helps insurers to simplify the underwriting process, but it can be also used for transitioning from protection to prevention. With data from these devices insurance companies can utilize predictive analytics to prepare for the types of claims a client will have in the future – or provide practical advice on how best to avoid these situations.
IoT can also help devise new services, and personalize offers. AI, machine learning, and using big data all contribute to such a transition, however it isn’t possible to successfully integrate real time analytics with an outdated legacy system.
Customers want better services and experience
Recession gives way to personalization
Consumers want services from insurance companies to live up to the quality they receive from other industries. Even though essential insurance’s popularity isn’t likely to ebb due to economic recession, insurers still need to innovate customer experience and personalized offers.
It is possible that people will want insurance policies that only cover what they actually need. On-demand coverage and buy now, pay later models will foreseeably become more and more popular in 2023. Insurers need to prepare for three things. Firstly, they need to have clear communication with their clients about their current coverage and possible changes to it. Secondly, they have to be prepared for people wanting to update their current policy. Adequate platforms are necessary for clients to easily start such processes and for employees to follow them through. Lastly, firms need to have a steady process for personalizing offers that are aided by third party data and real time data analysis.
All of these require strong data protection and advanced cybersecurity. As we mentioned before, legacy systems are not safe enough for handling such data and hosting these kinds of processes because they cannot be adequately upgraded or defended.
Customer self-service and digital channels will be on the rise
The demand for customer self-service was already apparent in 2017, when 74.8% of tech savvy clients reported that it is important for them to be able to send claim notifications for insurers. The pandemic changed many parts of our lives, and one significant outcome is that people are becoming more and more comfortable and trustful towards online services.
It is likely that customer self-service will continue to gain popularity even after the pandemic.
Insurers can introduce chatbots that help to answer basic recurring questions of clients, thus liberating employees from small tasks to focus on more complex processes. But it’s not just small adjustments like chatbots. This changing landscape of online services will give way to digitizing more complex processes as well.
The spread of trust in online contracting and signatures allow insurers to integrate more processes, or the beginning parts of processes, to their customer self-service repertoire. This way, clients can easily start or request complex products and services without help from employees.
In conclusion, we predict that insurers have a good chance of successfully overcoming the challenges that 2023 will bring, but not without changing their business practices. Some IT investments will become inevitable, like updating legacy systems, while others, like utilizing IoT and real time data analysis, will let companies stay ahead of competition.
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