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Technology

Why the need for insurance firms to innovate cannot be overstated

iStock 1409298844 - Global Banking | Finance

Why the need for insurance firms to innovate cannot be overstated

Piers Williams - Global Banking | FinanceBy Piers Williams, Global Insurance Manager at AutoRek

For firms operating in the insurance industry, transactional volumes and associated data is growing year-on-year. But managing this growth with spreadsheets presents an operational inefficiency as the industry continues to expand. This is worrying, with more than one-third of firms still relying on spreadsheets for their data matching and reconciliations. In today’s rapidly evolving landscape, the insurance market is increasingly turning to insurtech solutions to streamline operations, enhance customer experiences, whilst also remaining competitive.

Insurers are recognising the imperative to innovate to meet the changing needs and expectations of customers, which is partially being driven by a new generation of clients that have greater technology literacy. Many are actively seeking partnerships and collaborations with insurtech startups to leverage innovative technologies such as artificial intelligence (AI), data analytics, intelligent process automation, and machine learning. Not only does this allow insurers to stay ahead of the curve, but it also increases profits and provides enhanced insurance solutions to their customers.

What innovations are being driven by fintechs in the insurance space?

When considering how to embrace digitalisation, there needs to be a holistic approach with integrated technology. We have seen a notable shift away from one-size-fits-all solutions to engaging with best-in-breed solutions for each business area and use case. Insurers must begin thinking outside the box to stay competitive in the digital age.

Fintech and more specifically insurtech firms are playing a key role in transforming the insurance industry by offering innovative solutions that address various pain points and inefficiencies. For example, fintech companies are leveraging intelligent data analytic tools to analyse large amounts of data and extract valuable insights. By harnessing data analytics, this allows insurers to understand customer behaviour better, assess risk more accurately, and personalise insurance offerings. Furthermore, fintech firms have developed automation technologies that streamline the premium and data processing workflow, reducing administrative overhead and accelerating cash flow. With features such as real-time reporting, connected workflows, and advanced rule sets, insurance firms can unlock capital and recognise revenue quickly and accurately.

Technology is also transforming the ways financial data flows are managed, overcoming challenges with data volumes, quality and varying formats. Effective financial data management can help finance operations functions streamline their processes whilst increasing efficiency and control. For financial reporting functions, effective financial data management can ensure the accuracy of reporting and enable real-time reporting, facilitating data-driven decision-making.

Aside from implementing the latest technology, there has been a wave of insurtechs innovating the operating model of insurance organisations, actively challenging the incumbents in the market. They directly compete with insurance firms and are targeting the same market share. This is notable on the distribution side of the market, with the emergence of new technology-enabled Managing General Agents (MGAs) and Managing General Underwriters (MGUs). Many of these newer firms have built their businesses off the back of shortcomings of traditional market players, particularly within the personal lines and SME commercial risk space. To ensure success and longevity, it is important organisations embrace – rather than compete with – these firms.

How to accelerate your insurance innovation journey 

Increasingly insurers are leveraging digital ecosystems where complimentary technology vendors work together and excel in their area of focus, whilst providing a connected environment that streamlines data, breaks down silos between teams and enables a truly digital operating model. If insurance firms can deliver a modern, market-leading back and middle-office infrastructure they will be well-positioned to better serve their customers and fend off digital competitors with comparable offerings while using the considerable capital resource and reputation in the marketplace.

No-code, flexible, rules-driven solutions are crucial for any organisation’s medium to long-term objectives. Firms need to innovate and evolve in line with changing market conditions rather than standing still and getting left behind. Therefore, it’s vital that technology is flexible enough to accommodate these changes and adapt over time. This is where the power of no-code comes in, enabling business teams to evolve their solutions and financial operations processes.

As well as this, AI has been a game-changer for the insurance industry. Mainly because firms are able to deploy the technology to real-world business scenarios. AI will present many opportunities to insurance firms such as streamlining operations, most of which are still to come. However, in the short term, AI can enable skilled staff to complete more tasks in less time, driving increased productivity and efficiency.

Another way for insurers to remain competitive in the digital age is through e-trading platforms. While these platforms have been present for some years within specific distribution chains, a significant portion of the market uses legacy operating models, which can result in many challenges and operational inefficiencies. Fortunately, there are many solutions entering the market to assist with streamlining both the business-to-consumer (B2C) and business-to-business (B2B) distribution processes, facilitating the connection and streamlining of premium and claim payment processing operations.

What does the future hold for insurance firms?

The insurance industry is undergoing a significant transformation driven by technological innovations and consumer expectations. To ensure longevity and success, it is important for organisations to embrace partnerships with insurtech startups and leverage the capabilities that they offer, rather than competing with them. This will ensure insurers stay ahead of the curve and meet evolving consumer demands. It is no longer an option for insurance firms to avoid leveraging innovative technologies. Instead, it is a necessity.

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