Accelerating Digital Transformation in the Insurance Industry: Trends, Challenges, and Solutions

Insurance companies are aware of the market demand to develop and produce customer-centric services at speed. Similar to the financial industry with fintechs, this has created a subdivision of new entrant insurance companies called insurtechs. This sub-division heavily leverages technology to create a strategic advantage for their customers; threatening traditional insurance organisations.The insurtech space has grown from $811m in 2020 to $7.87billion in 2023 and has an expected CAGR (compound annual growth rate) of 52.7% to $152.43 in 2030. In order to maintain competitiveness within the market, insurance organisations need to invest in digital resources. This is reflected as life insurers within the top quartile of total costs to gross premiums written, have increased their IT spend from 2% of gross premiums to 3% (a 50% increase) within the past four years. 

Complex regulation and market size of incumbents’ in-force books have acted as a constant deterrent for new market entrants. This is further added to by traditional organisations large capital reserves (which can enable them to reduce their tech debt) and advantageous underwriting skills due to proprietary data and years of experience. However, adopting this culture of digital due to these advantages effectively are becoming mainstream within the insurance market. According to PWC’s global financial services survey: 

• 55% insurers agree and 31% strongly agree that invest in innovative products, services and business models quicker than the previous decade’s rate
• 51% of insurers agreed and 29% strongly agree that insurers will collaborate (co-creation, partnership, acquisition) with insurtechs as one of their primary sources of innovation 

Despite the cumbersome switching process, the UK average “planned” customer churn rate in the insurance sector is 22.5%. The figure below displays the average loss per industry sector according to gross written premiums (life insurance and general insurance) and health insurance according to market size. Additionally, this does not account for unplanned customer churn rates, which was an estimated cross-industry £312m loss in 2018.

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Automation

Automation can reduce the cost of a claims journey by up to 30% with potential transformations in consumer interactions across the value chain from underwriting, claims and pricing to product design.

By building out strong foundations of CI/CD pipelines with DevOps tools, insurance organisations are able to redesign and shift away from legacy systems. In addition to increased cost efficiency, this shift ensures better operational resilience, data security and quicker performance. However, this needs to be implemented effectively in order to prevent costly cloud confusion. According to an IBM 2021 report, misconfigured cloud services are the third most-common threat of data breaches, accounting for 15% of breaches and averaging over $3.61 million in 2021.

Automation of cumbersome manual processes is a significantly beneficial aspect of DevOps. Through a variety of tools such as Kubernetes and Puppet, any repetitive actions can be configured via a running variety of automated scenarios for new code batches. These types of automated pipelines dramatically reduce the effort and time required for system administrators and developers such as complex operations to one terminal command. Additionally, once the pipelines are established with insurance’s government regulated compliance, the tools will maintain this automatically and log with faster error resolution.

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Cyber security

With a growing digital consumer industry, insurance organisations need to also grow their cyber security tools and process in line. For example, the increasing trend of homeowners who provide AirBnB services that need to switch their insurance type from residental to hoteliers. Consumers' concerns of privacy are a priority over price as only 30% would share data from home sensors with an insurer in return for a lower premium and coverage tailored to their needs. This combination of digital consumer insurance trends and insurance’s reliance on data, enhances the significance of cyber security. 

These threats can cause significant harm to an organisation’s reputation, especially if sensitive data such as health or finanical are compromised. However, prevention services that leverage security via software providers, offer insurance organisations with flexible opportunities.

An EIOPA survey, discovered that 41% of insurance organisations do not have an action plan to evaluate their portfolio within the context of cyber exposures. In order to identify and manage silent cyber risks, these organisations should focus on increased cross-team collaboration to create effective feedback loops that identify claims linked to cyber events. These identified claims should be fed back into the underwriting function. 

Cross-team collaboration is a significant element of DevOps and DevSecOps as operations and developers are required to bridge silos through strong and multidisciplinary teams. 

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Uptime

In order to produce innovative customer-centric services and products, downtime is inevitable within the insurance industry such as new features rollouts. However, there is also unplanned downtime as a result of cyber attacks. Recent research discovered how downtime costs are consistently increasing from $9,000 per minute in 2015 to over 60% outages costing over $100,000 in 2019.

Incident logs, IaC, and predictive analytics in DevOps allow to identify the issues, minimise and avoid downtime. As the DevOps talent market is scarce, this decreases insurance organisations talent acquisition capabilities.

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Solutions

WeShape is a cloud native consultancy who provide technical solutions, at pace, scale and demand, specialising in AWS, GCP and Azure cloud. Our established position in the cloud network as official AWS partners, demonstrates our capability and commitment to reducing organisational cloud confusion.

We are dedicated to the DevOps industry as demonstrated by:

• Our multi-award winning DevOps services
• Extensive DevOps network with events platforms such as a over 9k community with London DevOps held at venues such as AWS, Microsoft, KPMG and more
• Workshops and Tech Talks with DevOps professionals

This commitment has enabled us to construct a rich network of the top 5% of the technology market to create cross-collaborative teams. Furthermore, in order to create strong feedback loops and bridge silos, we provide regular communication such as biweekly cadence calls and a dedicated account manager.

To support our stakeholders’ data management, we are IS0 27001 certified which is renewed through a thorough annual audit process. One of our award-winning partner organisations, Uptime Labs, focuses on the necessary incident management required during an IT outage or cyber security attack.

If you’re interested in booking a technical call to find out more about our solutions, book a quick chat with WeShape.

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