Technology is driving the winds of change in the insurance industry.
Insurers are facing pressures to operate more efficiently and to innovate to better meet expectations of customers used to digital convenience in many of the goods and services they buy.
In its 2020 Global Insurance Outlook, professional-services firm EY identifies six top trends likely to drive change over the next two years.
“Of those six trends, three are enabled by technology,” Chris Maiato, EY’s regional advisory leader, said in an interview. “Cost takeout, digitising distribution channels and mastering disruptive technology — and there were many more outside the top six such as migration to the cloud and growing adoption of AI [artificial intelligence].
“We see technology at the forefront of the way forward for insurance companies.”
Many insurers were going through core system and platform retooling, he said, adding that in this environment, insurers will be fighting for talent.
“You have to make sure you bring the right talent into the market; it’s hard to learn the technology for AI and machine learning,” Mr Maiato said.
Technologists could learn insurance, he added. Those fresh to the industry would not need to learn how policies have traditionally been written, but instead they would focus on the new way of doing things within new business models.
EY’s report describes the state of the insurance industry as “the best of times and worst of times”.
Challenges include low interest rates, little or no growth in many parts of the world, the increasing cost of natural catastrophes, intensifying regulation and more competition from companies offering customers a better experience.
EY argues that despite these challenges, “we believe that the industry’s best days are ahead, thanks to the compelling transformative opportunities available to insurers around the world”.
For example, new competitors could become “high-value collaborators in the development of industry ecosystems” and “new technologies that threaten to disrupt the industry will be key enablers of growth once they are embedded in insurance business models”.
The technological change sweeping the industry is happening at different speeds in different lines of business, according to David Brown, EY Bermuda senior partner and regional insurance leader. Things were advancing quickly in personal and commercial lines, he added.
“We’re working with players offering motor insurance products, using technology that allows customers to show their driver’s licence, answer four questions and then get quotes and buy insurance,” Mr Brown said.
“When you look at underwriting being done by AI, it’s something like 1 per cent now, but we expect about $20 billion of business will be underwritten by AI by 2024.”
Among Bermudian insurers, technology was already making inroads, he added, particularly in improving the efficiency of back-office processes.
Mr Brown is upbeat on the Bermuda re/insurance market — particularly with the growth occurring in the life sector. Many property and casualty insurers have also reported a broad-based increase in pricing in recent months, a trend that CEOs including Chubb’s Evan Greenberg and Axis Capital’s Albert Benchimol have said they expect to continue.
“Our clients are seeing rate increases, particularly on the casualty side, impacted by factors including social inflation,” Mr Brown said. “It’s been a generation since some underwriters have seen such increases.”
Mr Brown added that he was confident in the island’s future as a re/insurance hub, given its key attributes of a talented group underwriters and service providers, as well as the presence of brokers with global reach.
Top six trends through 2022 identified by EY
1, Achieve cost efficiency
2, Win the war for talent
3, Manage regulatory pressures
4, Digitise distribution
5, Master emerging and other disruptive technologies
6, Navigate the risks and opportunities of climate change
• To access more on EY’s findings, including a separate report on the US and the Americas, visit https://tinyurl.com/y4oeqbpt