Areas Most in Need of Improvement
The report, titled, “Insurers — Behind the Technology Curve, and They Know It,” combines recommendations and results of a survey conducted by AM Best. According to the survey, companies are focused on four primary areas they consider to be most in need of technological improvement: customer experience; administrative and claim systems; data aggregation and mining; and underwriting/ new business systems.
Only 3.5% of the respondents to the survey chose “risk management and compliance” as the area most in need of technological improvements. The majority, 33.3%, selected “customer experience” as the area most in need of tech improvements.
One reason that so many insurers are behind the technological curve is the high pace of acquisitions in the recent past. Building integrated systems to handle claims, data aggregation, and underwriting is a challenge when a patchwork of legacy systems is in place.
Upgrading those legacy systems will automatically strengthen cybersecurity, which could be one reason so many of the survey respondents chose customer experience, legacy systems, and data aggregation rather than risk management as the area most in need of tech improvements. Improvements in any one of the three categories is likely to also improve security.
Legacy Systems Are a Problem Throughout Healthcare
The report specifically states that legacy systems “lack a high enough level of cybersecurity and can be compromised relatively easily, exacerbating operational risks,” according to an article in Carrier Management, confirming the idea that both upgrading legacy systems and improving the customer experience will lead to better security.
Just as healthcare is looking toward the post-EHR world of better interoperability, the payor side of the industry is also suffering from a lack of data accessibility. The report addresses the topic of legacy systems, saying, “Having a formal process to integrate data from an acquisition is imperative.” Many insurance companies simply rely on the knowledge of long-time employees.
The next five to 10 years will be a critical period, during which organizations must learn to use that institutional knowledge to modernize their core systems and combine it with new technologies.”
Partnerships May Help with Data Aggregation and Mining
Additionally, the information stored in disparate systems cannot be easily accessed, so insurers have a virtual treasure trove of information that they cannot mine. Advances in predictive modeling and machine learning could offer untapped business opportunities to insurers — as long as the data was both accessible and accurate.
Working with insurtech companies could improve business for carriers that “already have rich troves of information about policyholders on pricing, retention, churn, uplift from analytics, policy-specific information and underwriting,” according to the report.
The associate director of industry and analytics at AM Best, Jason Hopper, told Carrier Management,
Insurtech companies will find deploying these capabilities difficult as they lack scale, while insurers may lack the depth about the power of computing and machine-learning techniques. Still, the combination of the two could be powerful and may lead to an inflection point that could change the typical insurance model.”
Automation Could Follow Aggregation
Just as updating legacy systems would naturally improve cybersecurity, tapping into the potential of the data they have already gathered would help insurance companies automate their underwriting processes and improve pricing.
The report suggests that taking advantage of tech must be part of the culture of an insurance company, and that the lead should come from the CEO’s office rather than the IT department. “They need to have an in-depth understanding of technological concepts and how they relate to specific business operations and strategy, given the potential for industry disruption,” Sridhar Manyem, director of industry research and analytics at AM Best told the publication Canadian Insurance Top Broker.
The report concludes with a warning:
Companies that continue to evolve technologically will gain a substantial competitive advantage; competitors that don’t will suffer.”
Indeed, the insurance industry has only to examine the evolution of technology in the healthcare industry to see how much new tech can improve operations, as well as how organizations that don’t invest are left behind.