As insurance firms adapt to maturing markets and economic turbulence, in the long run, their ability to integrate technology, talent, and business-model innovation into legacy environments may be the key to success.
The global insurance industry is scrambling to grow and maintain profitability amid maturing markets and volatile economic conditions, all while reinventing their products, operations, and business models to cover evolving exposures, satisfy rising consumer expectations, and integrate new technologies.
While the vast majority of insurer IT spending still goes toward maintaining legacy systems, budgets are starting to shift away from core applications toward analytics, artificial intelligence, and other advanced functionality to enable more flexible, customized products and enhanced customer experience.
InsurTech funding hit record levels with a full quarter still to go in 2019 despite the dearth of new launches. However, only 25 percent of first-half 2019 InsurTech investments came from insurers, most of which continue to treat startups as vendors rather than partners or codevelopers in innovation.
Insurers should be upgrading not only their technology systems and operating models, but talent capabilities and workplace policies to resolve an expected exodus in baby boomers and a widening digital skills gap.
Regulatory changes are coming that will likely require significant investments and fundamental changes by insurers in sales standards, accounting, tax policy, cybersecurity, and privacy protection—although some new rules may also create opportunities to bolster sales in challenging markets such as annuities and flood coverage.
How well insurers resolve the “synthesis challenge”—integrating innovation in technology, talent, and business models into change-resistant legacy environments—may be the biggest success factor for the industry in the decade ahead.