Even though the insurance industry continues to grow and maintain profitability amidst a turbulent global economy, the 2019 report from Deloitte (“Insurers adapt to grow in a volatile economy”) asks how much longer streak can last.
According to Deloitte, insurers are facing something called the “synthesis challenge” – integrating innovation in tech, talent and business models into change-resistant legacy environments – and their ability to navigate it may prove to be the biggest determinant of industry success in the next decade.
The report identifies the most relevant fintech-focused findings from the report that the insurance industry should consider for 2020.
IT spending is finally shifting away from legacy systems
While a large part of insurer IT spending still goes toward maintaining legacy systems, budgets are starting to shift toward analytics, AI and other advanced functionality to enhance the customer experience. New products are allowing customers to start, pause or stop coverage via mobile apps, and insurers need to devote IT spending to ensuring that their core systems are equipped to handle these new technologies.
Can insurers go digital without the cloud?
As more insurers embrace technology and disruption in their businesses, increasingly they are realizing that cloud is no longer just an option for data and applications. Rather, cloud is fast becoming a necessity for insurers because it is a key building block for enabling future systems modernization and business model transformation thanks to its speed, flexibility, scalability, and operating efficiencies. I.e. embracing the cloud will make the adoption of AI, machine learning or other new technologies that much easier as the race to become the digital insurer of the future heats up.
5G and quantum computing could increase cyber threats for connected insurers
Quantum computing could weaken current encryption methods, while 5G could accelerate how quickly connected devices communicate, making it easier for cyber criminals to infiltrate systems. Since the use of smart devices is rapidly growing among insurers, especially for underwriting purposes, this is a potential weak spot firms will need focus on in 2020 as they shore up business critical data.
The report concludes by assessing the biggest success factors for the next decade as firms assessing how to integrate new tools, technologies, and techniques with legacy systems, while reconciling bold new ideas from InsurTechs, ecosystem partners, and new employees.