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‘Sense of urgency’: industry steps up digital focus post-pandemic 

The insurance industry’s approach to technology has been significantly influenced by the covid pandemic, AM Best says in a special report. 

Property and casualty (P&C) insurers have long focused on data but the pandemic boosted the industry’s focus on innovation, according to the rating agency. 

Digitisation allows businesses to become even more data-driven and predictive modelling provides insurers with an edge as they seek to charge premiums commensurate with the actual underlying risk. 

“Ultimately, covid led to a sense of urgency for digital transformation,” the AM Best report says. 

Post-covid the industry’s view of what is possible has expanded, especially for lines such as home and motor, which are becoming more integrated with Internet of Things devices that track driving behaviour and water leakage in homes. 

AM Best says the need to embrace remote processes – from customer interaction to claims assessment to remote employees – has provided momentum to increase insurers’ digital literacy and initiate efforts to modernise processes and systems. 

The explosion in data, along with more advanced telematics, is transforming the underwriting capability of all insurance segments and lines of business. This is especially the case with personal motor and small commercial lines. 

AM Best says the more innovative players are looking beyond routine automation and increasingly leveraging machine learning and data sources to enhance underwriting capabilities. 

“The most forward-looking carriers are constantly experimenting in an effort to realise a future in which the majority of policies undergo straight-through processing,” AM Best says. 

“Innovative insurers have also leveraged data analytics to develop more specialised products and solutions for emerging risks, such as the evolving cyber insurance market.” 

The report says the reinsurance segment leads the industry in innovation, noting they are one or more steps removed from the ultimate policyholder and therefore have had to innovate in areas of enterprise management, portfolio construction and risk accumulation. 

“This has become evident recently with the series of losses due to significant natural catastrophic storm activity, which has been exacerbated by secondary perils and heightened inflation,” AM Best says. 

“Reinsurers are being consistently challenged by these high severity events and competitive pressures and have had to embed a culture of innovation to stay solvent, relevant and profitable.”