Digital technology outlook for insurers in 2023
by Jai Kumar
The insurance industry witnessed accelerated adoption of digital technologies and unprecedented growth of digital, technology-enabled processes in 2021 and 2022. As we enter 2023 with economic uncertainty, rising inflation, fear of global recession, climate change, and organizations of all sizes facing cash-flow constraints; the new year is predicted to be uncertain and potentially volatile for the insurance space.
According to a 2022 report from Forrester, 70% of insurance software decision-makers worldwide see digital solutions as critical priorities for their organizations. Even with the budget cuts, insurers will have an increased focus on efficiency, faster ROI, speed to innovation, and business adaptation to market changes. New product launches and better use of technology will help the tech teams at insurance organizations thrive in 2023, but what types of changes and innovations should the industry be looking for? Let’s look at a few.
Underwriting is already a process going through a digital transformation and this trend is expected to accelerate in 2023. Sophisticated insurance-focused workflows, submission automation, and digital products focused on loss, exposure, and quote processing processes will streamline submission-to-quote workflows by increasing efficiency, reducing turnaround time, optimizing underwriter resource utilization, and reducing transaction losses.
Discover how digital tools are transforming underwriting
“The industry is on the verge of a seismic, tech-driven shift. AI implementations could increase productivity in insurance processes and reduce operational expenses by up to 40% by 2030,” according to global management consulting firm McKinsey.
The shift is underway already as we enter 2023, with AI’s role in the insurance industry going beyond fraud detection and rating tools into new processes involving data extraction supporting the progress toward straight-through processing; early anomalies detection in the submission process; personalization, recommendations, and predictions in workflow solutions for improving employee experience; to virtual assistance taking customer experience to the next level.
Straight-through processing is to streamline and simplify the insurance process and reduce claims and underwriting cycles by eliminating manual interventions. Insurers are already leveraging AI for discounting and risk management, but organizations looking for additional efficiency improvement and quick ROI should move towards an insurance workflow automation platform, integrated with data extraction, submission, and loss processes. Considering the AI maturity curve, the system may not give 100% straight-through processing but still will be able to show significant efficiency gains, likely in the range of 30% to 70%.
Embedded insurance driving growth
Embedded insurance, with an estimated USD 3.7 trillion market potential along with increased demand for the new-age customer and employee experiences, is a significant consideration when considering new technology choices. To support business transformation in the embedded insurance space, carriers should adopt API-driven and cloud-native technologies to support the new-age insurance distribution and participation in the third-party customer experience ecosystem at scale.
The advent of digital-first solutions, AI/ML-enabled data extraction capabilities, a growing number of distribution channels, and constantly evolving consumer needs have pushed insurers to look for advanced ways to unlock customer success, improve operational efficiency, and accelerate the speed of innovation. From introducing an AI chatbot to gather a trove of customer data to automating the complete data capture process for deeper personalization, technology-driven processes are transforming the once policy-driven industry to a more customer-focused space. By fostering a digital-first approach and adopting tech-enabled products and platforms for the insurance industry, insurers have the power to increase operational efficiency with faster speed-to-value and quicker return on investment creating a modern customer experience and expanding insurance services to the under-served and under-penetrated sectors.
Jai Kumar is VP – digital transformation unit at Xceedance.