Innovation Needs Clear Vision
Warsaw, 31 May 2019: Insurance companies have set themselves ambitious goals for the digitalization of their business. However, IT budgets are still too focussed on the maintenance of old IT Systems. This is one of the results of the surveys conducted by Sollers Consulting among more than 300 insurance managers from 14 countries.
The insurance industry is making significant progress in digitalization. IT departments have become the main driver of change in the insurance industry. Following cooperation models with Insurtechs and other providers insurance companies apply new technologies to create intuitive applications for their customers. As part of the international conference Innovation in Insurance Sollers Consulting asked more than 300 specialists and executives of the insurance industry about the role of technology and innovation in their industry. There are three key ambitions insurers follow:
- Using Artificial Intelligence
- Open APIs
38% of insurance experts believe, that a degree of automation of 30 to 50% can be achieved in the next five years. 26% think that the level of automation will be between 50 and 70%, while for 21% that number might even reach 70– 90%. Only 11% believe that it will be less than 30%.
‘There is a strong conviction that automation will increase dramatically in the insurance industry’, comments Michał Trochimczuk, Managing Partner at Sollers Consulting. ‘Automatization is an important goal in all European insurance markets. There is hardly a project in the insurance industry that does not include automation. It often seems to be something achieved only by the most advanced insurance companies, but it happens in almost every company. In our projects we see significant progress in automation.’
Focus on Artificial Intelligence and Open APIs
There are two technology features of which insurance companies expect the highest value in the next five years. 37% of insurance executives believe artificial intelligence will be the key technology, 35% say that they will focus on Open APIs. Other technologies such as Blockchain, Internet of Things, Robotics and Cloud Computing have approval rates of four to nine percent.
‘Big data and the use of data analytics, machine learning and artificial intelligence have become one of the most important strategic goals in the insurance industry’, says Marcin Pluta, Managing Partner at Sollers Consulting. ‘Many insurers are already using artificial intelligence to assess claims, combat fraud and automate client communication. Business Intelligence and Data Analytics are areas that insurance companies have focussed on in recent years. We expect insurers to invest a lot more in artificial intelligence. Sollers Consulting has developed a use case based on Machine Learning that allows insurers to gain quick wins.”
“The insurance industry is increasingly connected to partners from other industries”, comments Grzegorz Podleśny, Partner at Sollers Consulting. ‘APIs play a crucial role in many of our projects. Insurers are seeking to have better access to new digital ecosystems and to providers of the most advanced technologies.”
As digitalization has become so important for the insurance industry, IT departments are playing a new role. Not only do they provide new tools, they also introduce new ways of working. When asked about what innovation is, 30% of respondents say it is about a new company culture, 24% view it as creating a new business model, 18% say innovation is about new products and services and 11% believe it is about changes in operations.
‘Innovation is more than just solving problems’, states Trochimczuk. ‘The majority of insurance companies are seeking a fundamental change either in its business model or even in its company culture.’
IT budgets blocked by legacy systems
However, IT departments are blocked by tight budgets. 56% of insurance professionals say that only 10 to 30% IT budgets are invested in innovation. A small percentage (13%) of respondents say their company spends more than 40% of its budget on innovation.
‘There is a willingness to invest in innovation, but it’s not free of doubts’, comments Podleśny. IT budgets are too focussed on keeping the existing business going and maintaining the status quo. It is critical to change their structure.”
The surveys conducted by Sollers Consulting show that insurance companies are not taking innovation seriously enough. Approximately 50% of insurance companies monitor their expenditures on innovation either not consistently enough or just generally. Only 17% of insurance executives say that they carefully monitor their expenses on innovation.
According to Trochimczuk the current approach to innovation is insufficient. ‘Innovation should have a clearer vision, more effective execution and monitoring’, says Trochimczuk. ‘Innovation comes from creating environments where people’s ideas can connect. And that doesn’t mean creating an innovation department or partnering with Insurtechs. Digital transformation is a long process, that requires a new culture and a clear vision.’