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The Actuary The magazine of the Institute & Faculty of Actuaries

Insurers lag behind other financial services in adopting digital technologies

It has been found that 58% of senior-level executives in the insurance industry believe they are behind other financial services on implementing digital technologies, according to Willis Towers Watson (WLTW).

Digital transformation as an objective is 'crucial' ©Shutterstock
Digital transformation as an objective is 'crucial' ©Shutterstock

Their New Horizons report shows that life insurance firms are the most likely to think they are behind other sectors when it comes to adopting technology, which is reflected in them having the fewest dedicated chief digital officers (CDOs).

WLTW senior mergers and acquisitions (M&A) consultant, Waheeda Narker, said: “It is crucial that someone in the c-suite has digital transformation as an objective which is measured on how it will contribute to the value chain.

“They need to have specific measurable targets for how they will improve digital engagement, because that’s when the business begins to take these challenges seriously.”

The latest research involved surveying 200 senior-level executives in the insurance industry across the Americas, Asia and EMEA regions.

Health insurance companies are the most positive about their digital transformation, with 20% of respondents believing they were either moderately or significantly ahead of other sectors. 

In total, only 1% of those surveyed believe their company is significantly ahead of other financial sectors, and 10% think they are significantly behind.

The feelings of senior-level executives towards their company’s adoption of digital technologies in comparison to other financial service sectors are summarised below:

Source: WLTW
Source: WLTW

It was found that complex regulatory requirements are the biggest barrier to digital adoption, with 42% of respondents citing it as their most significant obstacle.

However, customer resistance and low frequency of contact between firms and their customers are also seen as significant barriers, with 32% and 22% of executives citing it as their biggest challenge respectively.

“Organisations such as banks have just had more contact with customers and that’s given them a head start,” WLTW EMEA life insurance M&A leader, Fergal O’Shea said.

“The quality and frequency of the information exchange between insurers and customers, who may simply be renewing a policy once a year, just isn’t the same.”

In addition, there are a significant percentage of insurers who feel uncomfortable with the idea of taking the lead on adopting new technology, with 74% of insurers believing the sector is reluctant to show leadership in digital innovation.

However, despite the risks of a digital transformation, 42% of respondents now have a dedicated CDO, which rises to 60% for health insurance firms, with more than half of CDOs now reporting directly to their CEOs.

“Technology has historically been viewed as a risk to successful execution rather than an enabler, but that risk is now starting to be seen differently,” O’Shea added.