Survey: Digitisation
Flourishing or floundering in the digital age
Digitisation may be a buzzword in the re/insurance industry right now, but there’s still a long way to go, according to Bermuda:Re+ILS readers.
As the world grapples with the fallout from the COVID-19 pandemic, many have turned to their insurers. But, with in-person meetings still (mostly) off the table in many parts of the world, re/insurers have had adjust to deal with high volumes of communication virtually.
The sudden change in the volume and channels of communication may have come as a shock to the re/insurance industry, a sector that has traditionally been slower to embrace digitisation and new technologies than other industries. Will the healthcare crisis be a catalyst for digital change forcing re/insurers to rethink their strategy?
Figure 1:
How much progress has the re/insurance industry made towards digitisation?
Perhaps unsurprisingly, respondents to the survey were not overly optimistic on the progress made by the industry towards digitisation (Figure 1). Nearly threequarters of respondents to the survey claimed that some progress had been made.
In a more pessimistic outlook, just over one in five respondents admitted that very little progress had been made towards digitisation. One respondent argued that while stakeholders across the industry recognise the need to adapt, it’s an extremely slow-moving process.
However, the COVID-19 pandemic may become a catalyst for change, pushing re/insurers forward in their digitisation plans at an accelerated speed. According to another respondent, the pandemic has forced re/insurers to adopt new technologies and speed up their plans to digitise.
Figure 2:
What is the biggest impediment to digitisation in re/insurance?
Knowing that you need to digitise your business is only the beginning, the other half of the battle is actually doing so. What’s stopping the re/insurance industry’s adaption? Well, more than half of respondents believe that a lack of standardisation in legacy systems is the biggest impediment to digitisation across the industry (Figure 2).
Moving to a new system can be challenging at the best of times, but when you’re limited by a decades-old system with its own quirks, the process is even harder. Unfortunately, new solutions won’t just fit in like a jigsaw piece to your legacy puzzle.
Approximately one quarter of respondents thought logistical challenges were the biggest challenge. Arranging for implementation of a new system and training your team, especially in the current environment, can be difficult at the best of times, and impossible at others.
One respondent, who chose the ‘other’ option, claimed that the “lack of urgency from old guard insurance professionals who are still making money doing it the old way” was the biggest logistical impediment.
With a small percentage of respondents selecting the ‘other’ option, it seems that cost and data privacy are far down the list of potential problems. This contrasts with Willis Towers Watson/Mergermarket's 2017 global survey which found that time and cost were major challenges, with respondents blaming the length of time required to commercialise new technologies (32 percent) and the size of investment required to transform (24 percent).
Figure 3:
What are the biggest potential benefits?*
* Respondents could choose more than one option
While the re/insurance industry may be approaching digitisation slowly and with great caution, the future is digital. The benefits of digitisation are obvious to readers, with all survey respondents selecting at least two potential benefits (Figure 3).
With four-fifths of respondents selecting it, enhanced analytics topped the list of potential benefits. Big data dominates the headlines for good reason—it’s very important material that presents myriad opportunities for re/insurers. Refining this data and analysing it presents valuable insights into the customer and the company more generally.
The option of enhanced analytics was closely followed by reduced costs over time and better customer service, both of which were selected by more than 70 percent of respondents. The benefits of reduced costs are obvious, as incumbent re/insurers fight for business amid a market disrupted by insurtechs.
In a competitive market, customer experience is key and digitisation can help present an offering that is both personalised and on-demand. Enhanced analytics also contribute to an enhanced customer experience, personalising the offering to meet changing customer expectations and demands.
Finally, nearly half of respondents believe that improvement in product development is a potential benefit of digitisation. Innovation is key to differentiation and, in this highly competitive market, differentiation is crucial.
