Tag Archives: transformational technologies

Crucial Technologies for P&C During COVID

Technologies like machine learning, the Internet of Things (IoT), robotic process automation (RPA) and natural language processing (NLP) were already hot topics in P&C insurance before the world was turned upside down in 2020 due to the pandemic. These and many other “transformational” technologies have great potential for insurers in the rethinking and optimization of distribution, underwriting, claims and many other parts of the business. So, it is important to ask the question – how have the initiatives that leverage these technologies changed due to the pandemic?

Are personal and commercial lines carriers still moving forward with projects in 2021? Do executives still have the same expectations about the potential of these technologies to transform their business?

We answer these questions in detail for 13 specific technologies in two new SMA research reports, one covering personal lines and the other covering commercial lines.

However, I won’t leave you hanging in this blog, wondering about the answers to those questions. The short answer is yes – P&C insurers generally plan to move forward in 2021 with projects that leverage various technologies that have the power to deliver significant results and competitive advantage. The technologies we follow closely and have profiled in our reports have been organized into three strategic planning horizons: short-term, near-term and long-term.

For both personal and commercial lines, technologies in the AI family play heavily in the short-term category. Machine learning, NLP, RPA, computer vision and new user interaction technologies all rank high in terms of their potential to transform and in the level of activity underway or planned by insurers. Technologies that fall into the near-term or long-term horizons include wearables, blockchain, voice, AR/VR (augmented reality/virtual reality), 5G and autonomous vehicles. All have potential in insurance and will likely be incorporated into projects by innovators over the next couple of years but will not make it into broad, mainstream application until midway to late in the decade.

Our research on transformational technologies, when viewed in concert with our SMA Market Pulse surveys, shows that in some cases proofs of concept (POCs) and new projects have been put on hold in 2020, but all indications point to full steam ahead in 2021. Major projects already underway are continuing, and insurers state that they do not want to lose momentum for foundational projects like core systems. Projects that include transformational technologies needed to address digital gaps that were exposed during the pandemic have been raised in priority.   

See also: AI in a Post-Pandemic Future

In many ways, the pandemic is accelerating digital transformation across all industries, including insurance. Transformational technologies will play an outsized role in that transformation and look to be important components of insurers’ plans for 2021 and beyond.

Foundational Tech for Personal Lines

The personal lines segment of the insurance industry is quite active today, with many initiatives and projects underway across the value chain. For many, the objective goes beyond incremental improvements to positioning the company for fundamental transformation. The many projects planned or in progress fall into three categories: Digital Enablement, Core Transformation and Data/Analytics. A newly published SMA research report, Foundational Technologies in Personal Lines Insurance, details the projects and initiatives underway in 2019 and beyond.

One of the major challenges we observe in personal lines is the struggle to balance the need to establish a modern, competitive foundation with incorporating new technologies to position for the future. Most insurers have very long lists of projects for things like enhancing portals; replacing or upgrading policy, billing or claim systems; and modernizing business intelligence solutions. These are the types of projects that SMA terms “foundational,” precisely because modern solutions in these areas are table stakes for success today. Incorporating innovative solutions from insurtechs and incumbent tech providers that leverage machine learning, the IoT, wearables, virtual payment technologies and more are highly desirable but difficult to build into operational plans. These advanced types of solutions are what SMA calls “transformational technologies” and will be the subject of a SMA research study and report.

See also: Emerging Technology in Personal Lines  

All the excitement and visibility tend to center on the transformational technologies, and there’s no question that there is tremendous potential for innovation that can create competitive advantage. Yet the No. 1 task for insurers today regarding technology is to ensure that the foundational technologies are in place to provide the levels of efficiency and effectiveness needed to compete while establishing a flexible base to build on. This is not to imply that insurers should wait to engage in any activity related to transformational technologies. On the contrary, it is imperative that insurers monitor, learn and experiment with new technologies that are most relevant for their business. Thus, the challenges of finding the right balance!

One other aspect of technology strategy and plans should be explored: the need to implement foundational technology solutions that already have some embedded transformational tech. Policy systems can leverage chatbots and AI. Billing solutions can begin to accommodate more advanced payment methods. Claim systems should already be leveraging solutions that use machine learning for fraud. Many other examples could be cited, as well.

Over time, the various transformational technologies will become foundational as many in the industry begin to incorporate them into their organizations. One by one, the advanced technologies will become table stakes, only to be replaced by a new set of transformational technologies, or at least by new, more sophisticated levels of the existing technologies.

See also: Insurtech and Personal Lines  

There are a wide variety of strategic choices that senior leadership teams must make today. Allocating scarce resources and budget dollars is as difficult as it ever has been, if not more so. However, the successful personal lines insurers in the digital age will be those that find the right blend of technologies of all manner to create flexible, responsive organizations.

For more information, see the SMA research report, Foundational Technologies in Personal Lines: Investment, Adoption, and Business Areas.