Insurers are reluctant pursuers of innovation, cautious about disruption that new technology and systems can cause, even as they see the need for such changes.
A new A.M. Best survey found that most carriers are pursuing some kind of technology upgrade or innovation plan, but they’d prefer not to be risk takers themselves. Only 25 percent of insurers said they were willing to significantly disrupt their current processes for new innovation initiatives. Just under 60 percent “were willing to tolerate minimal disruption,” according to the study.
Interestingly, 16 percent said they would wait and see, pledging to pursue innovation initiatives themselves if other organizations were successful first.
Part of that caution comes from the nature of the beast: Insurers, by nature, are risk-averse and are more familiar and comfortable with their business than the technology that will help transform it.
“Insurance companies recognize that their expertise lies not in technology but in insurance,” Edin Imsirovic, A.M. Best senior financial analyst, said in prepared remarks.
According to Imsirovic, insurers see that technology can transform the industry on a large scale, even as their expertise lies outside of the newer technology. In seeing this, they’ve devised a workaround, either partnering with or investing in InsurTech companies more adept at translating new ideas for the industry into action.
Nearly half of respondents said they have either formed a partnership with a research group, university or technology incubator or else invested in an InsurTech fund to help them keep up on new technologies even as they keep their focus on core competencies. As well, 44 percent said they have participated in pilot programs “involving new technologies, devices and processes,” according to the survey.
Here’s a sampling of some additional responses:
A.M. Best said that 459 insurers participated in the survey in August 2018. Out of that number, 64 percent were from the property/casualty industry, and 20 percent came from life/annuity companies. About 5 percent of respondents were health insurers, and 9 percent were reinsurers.
The full report is titled “Insurers Agree Innovation is Critical for Future Success.”
Source: A.M. Best