Insurance firms racing to keep up with digital transformation

Cynthia Ezekwe

It is no secret that the insurance industry is evolving, and a new report from Novidea, a leading data-driven insurance platform, highlights just how quickly change is happening. The report found that by 2025, three out of four insurance organisations, or 75 percent, are expected to embrace digital transformation. This is a significant shift from the current state of the industry, which has historically been slow to adopt new technologies and adapt to changing customer needs.

The report’s findings are based on a comprehensive survey of 330 C-level insurance leaders across eight countries. These leaders shared their insights on how digital transformation is set to impact the industry, particularly in the London Market, where Blueprint Two, a strategic plan to transform the insurance market in London, is underway. Blueprint Two aims to build the most advanced insurance marketplace in the world, one that is more transparent, accessible, and competitive. This transformation is expected to be driven by new technologies and changing customer expectations.

Novidea surveyed 330 full-time C-level employees, including chief executive officer (CEOs), chief technology officers (CTOs), chief information officers, (CIOs), chief financial officers (CFOs) and  chief operating officers (COOs), in order to gain insight into the current state of technology adoption in the insurance industry. These leaders represented a range of organisations in the industry, including brokers, agencies, and managing general agents (MGAs).

The report, titled “Legacy Out, Digitalization In: The State of Modern Insurance Technologies 2024,” explores the current state of insurance technologies and the challenges companies are facing with these systems. It also examines the industry’s readiness for the upcoming digital transformation, which is expected to reshape the way insurance is conducted and consumed.

As insurance companies face a critical moment in their digital transformation journey, the report provides a snapshot of the industry’s readiness for change. “At this critical juncture, this report is a true snapshot of a global industry, capturing the current state of insurance technologies, the challenges companies are facing with these systems, and what decision makers are looking for as they turn their focus towards modernization, consolidation, and change,’’ the report noted.

Key findings from the report disclosed that global insurance organisations have been grappling with too many systems for too long, which poses lots of challenges, including  inefficiencies caused by managing various login details, and the sheer drain on time and resources.

The report’s findings highlighted the complexity and inefficiency of the current systems in use by insurance providers. It observed that on average, providers use five systems to manage complex processes such as claims, billing, rating, policy distribution, and underwriting. Larger organisations, with over 5,000 employees, were seen to be using even more systems. These systems are typically legacy systems, with the average duration of use being four years. 41 percent of respondents admitted to using the same system for policy administration and agency/broker management for between five and 15 years.

The report’s findings showed that the vast majority (99%) of global insurance organisations have plans to upgrade their core technology systems, with 41 percent indicating this upgrade will happen within the next 12 months and another 34 percent by 2025. This is a significant number, and it demonstrates the widespread recognition of the need for change in the industry.

One of the key challenges highlighted in the report is the security of client data. Novidea pointed out that legacy systems currently in use by many insurance organisations do not provide adequate protection for sensitive data. The report also noted that these systems can’t support the high-quality data that is required to operate effectively in today’s world, emphasising that legacy systems are a barrier to organisational growth and scale.

“It’s unsurprising that working with legacy technologies has a lot of challenges. These systems are often on-premises and come with ongoing maintenance and security challenges. In particular, respondents cite issues with data quality (41%), data privacy and security (35%), and scale (35%). CEOs are particularly concerned about the ability to scale, with 50 percent citing scale as a top challenge, compared with 33 percent for the rest of the C-suite. CEOs are likely to be less concerned with data integration and security, and more focused on the overall business bottom line,’’ Novidea stated.

The report’s findings indicate that the cost of maintaining and supporting multiple systems, the need for multiple logins, and the general difficulty of managing disparate systems have all been made more challenging by the increasing prevalence of remote work.

“Remote employees may find it difficult to access technologies which are not cloud-based, or to get support outside of the local working hours of the head office. As a result, 14 percent of respondents say accessing systems remotely is a top challenge for their business,’’ it noted.

According to Novidea, compatibility, and concerns about employee and customer adoption are the top barriers to updating legacy systems. Other concerns include the potential disruption to the business and loss of data during the transition.

Despite these challenges, the insurance industry is aware of the importance of modernising its systems. In fact, the report found that most insurance organisations have a plan in place to update their systems.

Commenting on the report, Roi Agababa, CEO of Novidea, said the data shows that insurance leaders are ready to make future-forward decisions about the technological shift required to better meet customers’ expectations of a modern, digital-first experience.

“As the survey shows, there is a clear acknowledgment that current systems are ageing, disconnected, and do not support today’s digital demands. In the market, there is now a sense of urgency due to the Blueprint 2.0 mandates set for July 2024, which necessitates significant upgrades of legacy insurance tech stacks,”  Agababa stated.