Most insurers plan to once again invest in emerging technology in 2021. “Business as usual” isn’t usually headline news, but given the challenges of 2020, insurers’ plans for innovation speak to their collective belief that technology is at the heart of generating value in insurance.
Insurers reviewing their upcoming emerging technology plans are doing so while mitigating the ongoing pandemic and are therefore anticipating more difficulties this year. In mid-2020, most insurers pivoted to cost controls and digital enablement in response to extended work-from-home and uncertain premium revenues. Heading into 2021, many insurers have returned to traditional priorities like business intelligence and distribution, especially on the property/casualty side.
Some insurers believe 2021 may be a more difficult business environment than a typical year. Technology budgets are within historical norms, however, and there is no industrywide trend toward reducing investment in IT. On the whole, insurers’ emerging technology pilot plans look fairly comparable to those of prior years.
Novarica’s insights on insurers’ plans for emerging technology are drawn from our annual Research Council study. This year’s report includes technology activities and plans for more than 100 insurers.
As for the individual technologies themselves, a few major trends emerge:
- Chatbots and RPA: rapidly rising. More than half of all insurers have now deployed robotic process automation, and one in four have deployed chatbots. For both these technologies, that’s more than double 2018 deployment rates.
- Low-code/no-code platforms: already in use by many insurers. These platforms are relatively new but have already achieved substantial penetration. Early signs indicate they can become a common tool for insurers.
- AI and big data: continued investment. More than one in five insurers are planning 2021 pilot programs in these areas. Development is incremental, as these technologies take time to understand or train, and the best use cases aren’t always immediately apparent.
- Drones, Internet of Things, and telematics: steady activity. These technologies have clear value but can be complex to deploy and slow to grow. Some insurers are indicating less interest in 2021 and are likely to focus for the moment on other technologies.
- Smart assistants (e.g., Alexa) and wearables: still being understood. Deployment rates for these technologies are comparable to prior years. Some life insurers are using smart assistants for digital engagement.
- AR/VR and blockchain: still seeking clear use cases. Both these technologies have reduced deployment compared to prior years and are in need of a use case that demonstrates clear value over other technologies.
These trends are comparable overall to prior years, but insurers seem less interested in technologies that are still being established this year, especially those with less clear use cases like blockchain, AR/VR, and wearables. Other technologies, like IoT and telematics, might be difficult to kick off this year due to up-front costs.
Even with these priority changes, it’s clear that insurers understand the ongoing value of investment in emerging technologies, even in difficult conditions.
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