Editor's note: This article has been excerpted with permission from KMPG's 2020 CIO Survey: Insurance Industry insights report. The full report can be found
Like all sectors, insurance businesses face a different landscape in the wake of COVID-19. A surge in customer inquiries and claims due to the pandemic, at the same time as the need to move staff and operations to a remote footing, put significant pressure on systems and ways of working. Although the sector proved itself adaptable, traditional insurers have historically lagged behind other sectors in digitization efforts. Evidence shows that a faster response during COVID-19 overcame many of the typical barriers (risk adverse, capital constrained, legacy systems) traditionally associated with the sector.
More recent entries, such as insurtechs, who had already invested heavily in technology that enabled better customer engagement, were better positioned entering the pandemic, however potential claims costs and increased competition through direct to consumer channels could reduce capital and profitability, meaning cost management is a top concern and producing new products for top line growth is an imperative. With the need for operational efficiencies, the ability to deploy new productsatmarket speed, and customers’ expectations for digital channels, the appetite for large-scale, impactful innovation has increased.
The IT priorities for the future are clear with 45 percent of companies in this sector planning to accelerate transformation to re-emerge as a result of COVID-19. Insurers need to drive up efficiencies through increasing digitization and the automation of manual processes such as claims, payments, and assessments (a focus for 41 percent of organizations) —in a way that also improves customer engagement (a priority for 52 percent).
Another crucial focus is to leverage data & analytics for sharper insights into market trends, customer behaviors, fraud detection, underwriting risks and the profitability of different insurance lines as insurers create new products to improve the bottom line and maintain liquidity. In the post-COVID world, there will be much for insurance CIOs and their teams to deliver on the digital transformation agenda due to the high level of disruption to the sector.
For insurers of all types (carriers, brokers, agents, MGAs), operational efficiency (68 percent) is the standout priority that leaders are looking for IT to help address —and so perhaps it is no surprise that automation (41 percent) is a higher investment priority compared to the cross-sector average (29 percent). Organizations will need to invest in connected platform technologies and automation throughout their front, middle and back office for their digital transformation. Areas where automation is likely to be a focus include call centers and claims handling —there is potential for these to be reimagined through AI as customers become more comfortable (and expecting of) digitized interactions and greater degrees of self-service. While it may vary in degree across personal and corporate lines, customers are also expected to increasingly be demanding greater flexibility, optionality, and personalized service. Digital investments can improve agility and speed to market and provide data insights fornew insurance products and services such as cyber threat coverage, gig-worker policies, usage-based insurance, and disruption policies. Digitization is mission critical —and must be at the heart of the strategic vision in the new reality.
