The last eighteen months have tested traditional business practices and shifted them forward in a way that many industries haven’t seen in generations, insurance included. To maintain or improve competitiveness in the market, insurance companies are turning to technology. From shifting to digital payments, moving customer relationship management systems to the cloud, and adopting artificial intelligence solutions, insurers are investing in delivering a better and more secure client experience.
However, insurers are also adapting and investing in challenges that consumers may not see on the backend but are as important, if not more so, to the industry as a whole. Risk and solvency models have been tested over the last year. Insurers are preparing themselves and their modeling capabilities to ensure they can weather the next global storm, according to FIS’ 2021 Readiness Report, which included 200 respondents from insurance firms around the globe.
The COVID-19 pandemic is not the first and won’t be the last, and the chances are that other, potentially more extreme events will occur in the future. As an industry, insurers must upgrade and rethink their risk models to future-proof themselves and ensure they are prepared for the next inevitable event. Exposing a need As governments went about doling out funds for individuals and businesses to keep the economy from crashing, fraud ran rampant, as did insurance claims and payouts, testing the industry’s means of working and the technology that allows it to flourish.
The pandemic created an unforeseen number of additional risks for insurers to navigate and left many scrambling to run and amend solvency models. Over three-quarters of insurers said the crisis exposed an immediate need to upgrade their risk and solvency modeling capabilities, with over half acknowledging that an insufficient amount of computing power kept them from enhancing their modeling through the pandemic.
With future extreme events lurking and ready to disrupt at nearly any moment, insurers’ models need to be even more adaptable to ensure that even in worst-case scenarios, insurers remain solvent.
In the next twelve months, it appears that this is where the majority of insurers will be investing heavily, according to the FIS report. Risk management will be a top investment for most insurers, ahead of even customer and employee data protection. Over half or 62%, of insurers, say they will invest in risk management over the next year, with 55% saying they’ll invest in customer and employee data protection.
Looking to technology providers and the cloud Insurers are also beginning to look to the future for ways to modernize processes, modeling capabilities and improve operational resiliency—and they are turning to their technology providers to do so.
The pace at which technology is being transformed is, quite simply, too much for a single company, no matter how large, to manage on its own. As such, insurance providers are looking to get additional value from their technology partners to help scale their growth, enhance their capabilities and manage their risk.
Over the next 12 months, 43% of insurers will be turning to technology vendors to strengthen their risk management, ranging from fraud mitigation, cybersecurity and surveillance. More than a quarter or 34% will look to support a distributed workforce, indicating that at least some level of remote work is here to stay. And 24% will be looking to their tech providers to deliver more advanced technology solutions, such as artificial intelligence and machine learning. Not only are insurance providers turning to technology providers to modernize, but they are also increasingly moving parts of the business to the cloud. On the customer-facing side, insurers will be deepening their reliance on the cloud for customer management and future-proofing their payments systems. About half or 53% of insurers say they will begin increasing dependence on private clouds for their customer management systems, with 39% increasing reliance on private clouds for digital payments.
These upgrades in tech capability are essential to meet the need of a digital client experience while mitigating risk.
Insurers will always face risks. It is the very reason they exist, but events like the pandemic can seem to heighten risk to an alarming degree. If, however, insurers properly plan and upgrade legacy systems to modern solutions, their modeling capabilities for both risk and solvency can withstand such tests. Now is the time to do so, before the next storm is upon us.
Martin Sarjeant Head Of Risk Solutions Management And Strategy, Insurance, FIS