10 Insurance Industry Statistics Regarding Modernizing Operations
February 27, 2023
Earnix recently published our 2022 Industry Trends Report: Modernizing Insurance Operations, which is based on survey results from nearly 300 global insurance executives. Working on behalf of Earnix, Market Strategy Group, LLC surveyed these insurance executives in a wide range of roles and departments, including C-level, IT, analytics, product, pricing and underwriting.
The sample represented insurance companies from Europe and Australia as well as the United States and Canada, and included an even split in company size (companies with less than 20,000 employees and companies with over 20,000 employees).
To help you understand where most insurance companies stand in their overall digital transformation effort–and how your company may stack up–we present ten important research findings from this report.
#1. U.S.-Based Insurers Currently Face a High Need for Modernization–and is Expected to Grow in the Next 12 Months
North American insurers currently rate their need for modernization solutions as a 7.7 out of 10 and the need for modernization in the next 12 months as an 8.2 out of 10. Both findings were the highest for any geography surveyed (Europe or Australia).
This is an interesting takeaway since many insurance carriers today continue to rely on outdated technology as part of their overall architecture. For years, and even decades, they were able to use this technology to develop and deploy pricing and rating strategies, interact with their customers, and achieve their own objectives, but new industry developments now call for more modern solutions.
#2. Currently, Where Do Insurers Actually Stand in Their Modernization Journey?
The research survey sought to understand how much progress they think they’ve already made. Participants were asked, “If your insurance operations modernization plan is a 10-chapter book, what part of the book are you in right now?”
“Chapter 5” received the highest number of responses, including 28% of North American insurance companies. While this is a sign of real progress, it may not be fast enough. Some cynical industry insiders believe that insurers who modernize their operations today may still be at risk of falling behind the competition, while those who attempt to do it tomorrow may not catch up.
#3. Europe and Australia Are Slightly Ahead of North America in Executing Modernization Strategies
A combined 62% of European and Australian insurers reported that they have either fully executed their modernization strategy (11%) or that a fully developed modernization strategy currently exists (51%). This was slightly ahead of the 49% of North American insurance companies (13% and 36%, respectively).
Clearly, American insurance carriers have to pick up the pace or face the risk of losing business and market share to new competitors who may be a step ahead.
#4: The C-Suite Perspective: Executives Tend to Think They’re Further Along Their Modernization Journey
Yet many C-level executives may think their company is further along in the overall modernization journey than it actually may be. 36% reported that they have fully executed on their modernization strategy and another 29% claimed to have a fully developed strategy in place. In total, 65% of C-level executives believe they are fairly close to modernizing their operations.
This view was much more optimistic than the feedback from any other line of business, including IT, actuarial, analytics, underwriting, and product. For example, actuaries had the second-most positive belief that their organization already has a fully executed modernization strategy, yet the percentages still paled in response–16% vs. the 36% reported by C-level executives.
#5: Yet Modernization is Still a Short-Term Priority for Executives
A full 82% of C-level executives rate operations modernization as either a top-two priority (14%) or among the top three-to-five priorities for their company for the next two years (68%). While this may seem to be a positive response, it may represent more of the same optimism as reported above, specifically that executives may believe they are closer to modernization than they actually are.
Additionally, the response, “top three-to-five priorities in the next two years” may reflect a position that is not fast enough, or that could continue to get pushed down the list.
#6: What Stands in the Way?
Why aren’t more insurers making more progress? The top three obstacles to investing in insurance operations modernization are data security challenges (34%), overall difficulty with other IT systems (31%), and the perception that other insurance software vendors are too difficult to work with (30%).
Chances are good that these challenges will always exist in some capacity, so forward-looking insurers should find ways to partner with insurance technology vendors who can eliminate these potential obstacles. Today, new insurance technologies can address concerns related to implementation, security, composability, and more – giving carriers a much better approach than yesterday’s standard systems.
#7: Modernization’s Impact on Personalization
When asked where their company planned to accelerate investments the most in the next two years, 45% reported that insurance product personalization was a top priority. This was the top answer over other potential strategies such as usage-based insurance, immersive technologies, improving the customer journey, and other options.
Focusing on personalization is a wise choice. Today, more and more consumers are looking for more personalized products, offers, and communications from their insurer. Not only do they want insurers to demonstrate that they know them individually, but they expect discounts and better pricing based on their specific history and behavior.
#8: How Can Technology Help?
When it comes to the use of artificial intelligence and machine learning in the next two years, insurers believe they will be most effective in recommending products (33%), claims prioritization (32%), and customer segmentation to support product personalization (30%).
AI and ML are already giving insurers a valuable advantage over yesterday’s modeling efforts and outcomes. These capabilities use sophisticated algorithms to significantly increase the insights insurers have, enabling them to build much better demand models, pricing strategies, and profitability projections.
#9: What Will Modernization Success Look Like?
While different insurance companies will inevitably have many different objectives for their modernization strategies, the top three goals cited were increased product personalization (24%), increased profitability (24%), and improving employee engagement (24%).
More modern operations will help insurers improve business results. With better pricing, faster time to market, and highly personalized offers, innovative insurers will increase their odds of winning new business, increasing profitability, and retaining clients over the long run.
#10: All Parts of the Business Need Modernized Solutions
The research also showed a high need for insurance operations by role. The total response was 7.6 out of 10, which represented feedback from IT, analytics, actuarial, underwriting, product, and C-level groups.
Feedback also demonstrated a high need for modernization within sub-groups and related segments within insurance companies (also 7.6 out of 10). These include P&C (personal and commercial), life (Individual and group), and health (individual and group).
We believe all lines of business can be improved with more modern operations technology. There are already proven use cases that show how leading insurers have enhanced their business results in many different groups and in many different global markets. In an industry that is generally overdue for an overhaul, virtually every business could be made better with more modern technology.
Interested in Learning More?
These ten findings are just a small representation of many more insights and valuable responses and research. To see them all–and understand how your company stands in comparison–download the full 2022 Industry Trends Report: Modernizing Insurance Operations now.