European insurers plan to invest more in digitalization
Two-thirds of European insurance industry executives plan to accelerate their digitalization programs to improve both customer satisfaction and operational efficiency amid the ongoing threat of recession. This is according to a new market study published by market research and consulting firm Information Services Group (ISG).
A total of 270 business decision-makers and IT managers from the European insurance industry were surveyed for the study in the fourth quarter of 2023. It revealed that two thirds of respondents plan to increase their investments in digital technologies over the next two years. The areas of payment channels (68%), cyber security (63%), augmented/virtual reality (63%) and artificial intelligence (59%) top the list of the most important areas of investment.
From the perspective of those surveyed, the biggest business challenges at present are acquiring new customers (85%) and retaining existing customers (74%). Increased investment in digital offerings and personalized services should help to maintain and gradually expand the current customer base.
"European insurers are focusing on digital-first approaches as they adopt next-generation technologies that drive core business profitability and improve companies' market position," explains Steve Hall, Chief AI Officer & President ISG EMEA. "Process and decision automation and data management will help create technology-enabled organizations where people are at the center and rapidly evolving digital technologies are used to redesign work, reduce costs and improve services. AI will undoubtedly be another driver of this development."
AI, cyber and IT security
According to the survey, the field of artificial intelligence (AI) is currently growing particularly strongly. 13 percent of respondents state that their annual budget for AI already exceeds one million euros. Six out of ten experts expect a further increase in investment in the current year. In addition to established AI methods such as natural language processing and machine learning, large language models are also increasingly being used. AI development is still in its infancy for many respondents: half of the companies (50 percent) are experimenting with prototypes, while only 6 percent are developing company-wide AI solutions. The comparable figure for augmented reality (AR) and virtual reality (VR) technologies is 18%. The high popularity is mainly due to the business customer sector. Here, AR/VR tools open up new opportunities to minimize damage through preventive maintenance.
91 percent of those surveyed see increasing efficiency in the area of customer data management as an important investment priority. ISG knows from consulting projects that only around a fifth of existing customer data is used effectively. Breaking down data silos therefore remains a major challenge.
Another area of focus is cyber security, as companies increasingly rely on digital infrastructures where assets become vulnerable to business disruption and cyber attacks. Against this backdrop, investment in digital risk management continues to grow. Cyber and AI are the main beneficiaries of this. The aim is to build "customer trust" as a key differentiator and to meet increasing regulatory requirements. 63% of respondents assume that budgets for cyber security will increase in 2024 and 2025 in order to meet the growing risks and regulatory requirements.
"The focus of insurers' investments is on AI, legacy modernization and IT security. Building strategic partnerships can improve access to digital capabilities, process knowledge and specialized talent, while expanding market access and sharing development risk," adds Hall. "The proportion of companies that see the consolidation of their service provider portfolio as a top IT priority will increase significantly from 59% in 2022 to an impressive 93% in 2023."
Given the evolving dynamics of the labor market and the need to attract and retain IT talent, a balance between insourcing and outsourcing is critical: the proportion of respondents who want to invest in insourcing (78 percent) is almost as high as the proportion of those who want to invest in outsourcing (77 percent). 68 percent of decision-makers see the improvement of talent management as an urgent business necessity.
"While technology companies and insurtech start-ups are becoming attractive employers for young, tech-savvy professionals, established insurers are facing the challenge of attracting and retaining the best talent," concludes Hall. "High-quality talent management is therefore becoming a decisive factor in meeting the transformative technological requirements."
Source: www.isg-one.com
