As the new decade dawns, insurers are focusing more heavily on technology that can help them sell more, manage risk better, and cost less to operate.
Novarica tracks insurers’ interest, pilot activity, and deployment of 16 key technologies in our annual Emerging Technology in Insurance report, which has been newly updated for 2020. This report covers technologies from big data to blockchain at their varying stages of maturity using data provided by more than 100 property/casualty and life/annuity insurers.
Year over year, most emerging technologies tick up a few points across each category as insurers become aware of cutting-edge technologies, design pilot programs to test their value, and move successful pilots into deployment. Emerging technology deployments tend to fall into three broad categories:
- Wide deployment, approaching table stakes. This category includes technologies like APIs, which are becoming required technologies for communication and sales, as well as robotic process automation, which many insurers are using to improve legacy processes. Many insurers have deployed these technologies, and those who haven’t are usually piloting them.
- Moderate deployment. This category includes technologies like AI and big data, which have clear value to insurers but can be difficult to implement or integrate to existing processes and environments. It can also include newer technologies like chatbots that are rapidly gaining traction among insurers but haven’t yet reached wide deployment.
- Low deployment, use case TBD. This includes technologies like blockchain, where the use case is unclear or where the technology doesn’t provide clear value over existing tools.
Maintaining awareness and understanding of emerging technologies, as well as of their potential values and limitations, is critical for insurer leaders across all business units. IT and innovation groups inside insurers can play a critical role in educating their colleagues on emerging technology, but pilot programs and deployment strategies need to focus directly on the creation of business value.
Over the past year or so, Novarica has found that the Three Levers of Value can be a helpful framework to develop a use case for technology deployments, including emerging technology. In order to create value, technology should help insurers either (1) sell more, (2) manage risk better, or (3) cost less to operate.
Technologies that have achieved wide deployment, like RPA and APIs, have a clear value. RPA deployments reduce operating costs in ways that can be demonstrably measured, while the use of APIs to connect with distribution partners can help insurers increase sales by streamlining communications and speeding processes. Other technologies with less clear benefits, like blockchain or augmented/virtual reality, are lower priority for insurers.
As the 2020s begin, the pace of technology evolution is only increasing. Insurers should continue to actively monitor developments in individual technologies as well as the synergies that related technologies create across the ecosystem.
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