Yet with the pace of change gaining momentum, Yates says those who fail to take steps to develop a long-term investment strategy now may “cease to exist”.
“I don’t know any insurance company here in Australia that isn’t investing in technology to some degree,” says Yates. “Some may be focusing more on building internal capabilities, while others focus on investment into external partnerships. It’s important for insurers to have a mix of both in their strategy.”
Vast opportunities, but challenges remain
The fact a certain piece of technology exists to solve a problem is not the end of the matter. Rolling it out can be monumentally difficult, due to the existence of decade-old tech platforms known as legacy systems.
“[Legacy systems] hold a lot of data and most insurers have multiple systems that are interconnected in complex ways," Yates says. "You can’t just turn off one system and turn on the new one. It’s a very complex problem to solve and there is no short-term fix."
Another challenge will be changing customer mindsets, McCafferty says. There are pervasive and widespread concerns about personal data being collected surreptitiously and used without consent – particularly in the health insurance industry.
“Insurance is an industry with low trust levels, and it’s a product that consumers don’t enjoy purchasing,” McCafferty says. “Even if you have fantastic technologies available to you, you still need customer buy-in. Convincing them to share their data is going to be difficult.”
In his experience, customers are reluctant to allow data to be collected in an ongoing way, preferring instead to retain control over what is shared – even if that means filling in a cumbersome form.
Trust is an issue for financial services companies themselves. Our survey found privacy and security concerns are the biggest challenge for greater organisational technology adoption, with 55.8 per cent of respondents citing it as an issue.
Yates points to long-term funding as another challenge, as funding tends to exist for pilot projects rather than long-term ones. This is partly due to the way incumbent insurers typically measure a return on investment. It too tends to be short-term.
This is also reflected in our survey of more than 750 executives in eight countries. It found more than a third (31.1 per cent) of executives at financial services firms find it difficult to determine return on investment in technology.
The same number found a lack of relevant skills in its personnel to be a barrier to adopting new technologies, suggesting an investment in training will be required.
Fighting insurance fraud
Technology has the potential to play a hugely significant role in tackling and preventing insurance fraud. Data analytics can spot irregularities and identify fraud before a claim is processed. This will in turn improve the customer experience for the “99 per centof people who do the right thing,” Hatherall says.
However, the use of technologies may give rise to new opportunities for dishonesty, McCafferty says. He cites studies that have found a depersonalised experience such as using a chatbot makes some people more disposed to being fraudulent.
“If you’re going to bring in lots of AI into the insurance space, this is something that will need to be tackled,” McCafferty says .
One thing is for certain: the new technologies currently being leveraged by the insurance industry are only the tip of the iceberg. Both exciting changes and complex challenges are on their way.