What’s the biggest tech challenge insurers have right now?
What’s the biggest tech challenge insurers have right now? | Insurance Business Australia
Technology
What’s the biggest tech challenge insurers have right now?
A solution could help another huge issue
Technology
By
Daniel Wood
“The biggest issue we see is a lack of data foundation and integration,” said EXL’s Abhi Bhola (pictured above).
Insurance Business had asked him what he sees as the biggest technology challenge currently facing insurers?
Melbourne-based Bhola is APAC vice president of insurance growth for the global data analytics and digital operations firm. He said the challenges around this issue included “easier accessibility, usefulness and being trustworthy.”
However, he said that Australia’s insurers, despite some industry stereotypes to the contrary, are keeping pace with counterparts around the world.
“Interestingly, our experience is that Australian insurers are forward thinking and leveraging advanced tech including generative AI, natural language processing (NLP) and robotic process automation (RPA) in their operations,” said Bhola.
He referred to a survey by his firm.
“Our recent 2024 EXL Enterprise AI Survey of 158 executives at leading insurance and financial services firms found that 91% reported implementing some form of AI in 2023,” said Bhola. “While this survey was focused on the US and UK markets, we’re observing very similar patterns trending here in Australia.”
Bhola said insurers need a “strong data foundation” if they are to take advantage of AI and “automation in general.”
He pointed to four areas insurers should be looking at.
Four technology strategies for harnessing AI
Developing a data-led strategy
Bhola described this as “a multifaceted endeavour” and a “significant hurdle.”
“Data silos impede enterprise-wide AI implementation for a majority of C-level executives,” he said.
Bhola said cloud and “data partner ecosystems” can help overcome the silo issue.
“Such ecosystems offer the tools necessary for managing, governing, scaling, analysing and securing data, thereby enabling the delivery of personalized and insightful solutions,” he said. “As AI continues to evolve, the strategic integration of these tools will be crucial for organisations aiming to harness the full potential of their data assets.”
Modernising the legacy tech stack
Bhola said insurers moving towards data integration need to evaluate their tech “to determine if they can handle the demands of fully cloud-based, seamless data transfer.”
One challenge, he said, can be modernising these systems without causing too much disruption to their operations.
He said industry partnerships can help smooth this process.
“Partnerships are essential for ensuring that the integration of new technologies into existing frameworks is both efficient and effective, ultimately enabling organisations to stay competitive in a rapidly evolving digital landscape,” said Bhola.
Security and data privacy
Another challenge, he said, is the “significant security concerns” and “compliance requirements” with integrating generative AI.
In Bhola’s view, collaborating with cloud providers “offers insurers a strategic advantage” when it comes to developing the “comprehensive approach to cybersecurity” that’s needed.
“Moreover, the synergy between Large Language Models (LLMs), cloud service providers (CSPs) and industry experts can empower insurers with advanced tools for anomaly detection,” he said. “These tools can serve as early warning systems, enhancing the ability to pre-emptively identify and mitigate potential fraud and security breaches.”
Putting the pieces together
Bhola said generative AI is “a transformative force in the insurance landscape offering unprecedented opportunities to harness the power of artificial intelligence to connect disparate data sets.”
He said this integration can “significantly enhance workflows, personalise customer experiences, and optimise operations.”
However, he said the complexity of integrating AI into insurers’ current technology “often exceeds the capacity of a single tech team,” and depends on external collaborations.
Data and insurer “foundations”
How well insurers can make use of this new technology could be a major factor in overcoming current issues in the claims space.
Angat Sandhu (pictured directly above) said artificial intelligence is “one of many” ways to improve claims. The Sydney-based partner at McKinsey & Company agreed with Bhola about insurers’ data issue.
“Data still has not been addressed in terms of building the foundations,” he said. “What comes in the way generally for the sector is that technology is still quite dated.”
“Crux” issue: Claims management
Sandhu said “the crux” for insurers is “a number of factors now impacting claims management.”
He said these are not new but are now having a “pretty pronounced effect.”
“There’s been more nat cats, there’s been more pressure on the system, more scrutiny from the regulators and processes are still very manual,” said Sandhu.
He suggested that a strong indication of how the industry is struggling to find answers is the rising number of consumer complaints.
“They’ve been growing at 27%, most of them are to do with claims,” said Sandhu. “Cycle times for claims from lodgement to settlement are still very long.”
This is where, he suggested, insurers can find a data “opportunity.”
“How do you start to use data? How do you start to use technology, to at least chip away at this problem more systematically?” Sandhu said.
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