The Premium Just Got Personal: State Street Report Finds Insurers Needing to Upgrade Technology Platforms to Bridge the Digit...
September 29 2014 - 11:55AM
Business Wire
As insurers look to fuel growth, build better relationships with
customers and move into new markets, significant investment in
technology will be needed in order to keep pace with change,
according to a new report from State Street (NYSE:STT). “Platforms
for Growth: Technology Innovations in the Insurance Business,”
highlights that although insurers show an appetite for change, they
are struggling to build a solid technology foundation that will
better serve both their portfolios and customers. The report is
based on a research survey of more than 300 insurers conducted in
conjunction with the Economist Intelligence Unit (EIU).
The market for insurance products is undergoing disruptive
change with 78 percent of respondents facing growing demand from
their customers to invest in new technology, more than business
expansion, new regulations or competitors’ actions. The report
found that to meet that demand and access new customer segments,
insurers are investing in customer relationship management systems
(58 percent), social media tools (57 percent) and technology to
capture new customer insights (50 percent).
Evolving at the Speed of Technology
Meanwhile, new market entrants are changing the competitive
landscape and using data-driven technology to transform the
traditional insurance business model. However, incumbent insurers
are struggling to keep pace, with only 31 percent describing the
pace of innovation as “rapid.” Insurers must overcome historical
data silos and integrate legacy systems to retain their competitive
edge. The report found that 86 percent of insurers are still
challenged by legacy IT issues, with 93 percent saying they need a
new IT infrastructure to integrate and manage data and only 38
percent are “very effective” at turning multiple data sources into
actionable insights.
“Insurers have to focus on turning data from a liability to an
asset,” said Pete Thurmond, head of insurance sector solutions,
North America at State Street. “However, misaligned objectives may
be holding insurers back with only 28 percent of respondents
agreeing that their technology and business goals are in synch. To
access new client segments and counteract new tech and data-driven
competitors, it will become increasingly important for insurers to
focus on collecting and analyzing data to understand consumer
behaviors and deliver tailored products that match those
needs.”
From Retrofit to Future Fit
Advanced data capabilities will also provide an edge as changes
in investment strategy force upgrades in the asset management arm
of insurance companies. Respondents noted plans to expand their
investments into alternatives (21 percent) and emerging market
equities (53 percent). However, less than two thirds (58 percent)
are very confident their current technology and operating platforms
can support these changes to investment strategy and only nine
percent rank as “excellent” their ability to integrate investment
data from multiple sources to achieve a comprehensive portfolio
view.
Underwriting Starts with You
A broader problem may be structural disconnects in managing
technology overall. At many insurers, there appears to be a
cultural divide separating the IT function from the rest of the
business.
- Only 36% of respondents who identify as
business managers agree that technology managers are flexible in
the face of changing business needs and less than a quarter (22%),
strongly agree that technology managers are proactive in proposing
new, innovative solutions.
- Alternately, 26% of respondents who
identify as technology managers strongly agree that business
managers readily take advantage of new technologies. Additionally
only 18% agree that senior leaders in their company give technical
initiatives the priority they deserve.
“As insurers deliver tailored solutions driven by big data to
consumers, they must also convert investment information into
actionable insights for their portfolios,” continued Thurmond. “To
bridge the digital divide, both technology and business managers
must be proactive in proposing innovative solutions, prioritizing
technology advancements and offering actionable data and to support
these changes to investment strategy.”
On behalf of State Street, the EIU conducted a global survey of
321 senior executives at insurance companies in June and July 2014
to examine the technology challenges facing the sector. Thirty-six
percent of respondents were from Europe, Middle East and Africa
(EMEA), 34 percent from the Americas and 30% from Asia Pacific.
Eighty-two percent represent firms having $1 billion or more in
annual revenue.
To view the full report, click here.
About State Street Corporation
State Street Corporation (NYSE: STT) is one of the world's
leading providers of financial services to institutional investors
including investment servicing, investment management and
investment research and trading. With $28.4 trillion in assets
under custody and administration and $2.48 trillion* in assets
under management as of June 30, 2014, State Street operates in more
than 100 geographic markets worldwide, including the US, Canada,
Europe, the Middle East and Asia. For more information, visit State
Street’s web site at www.statestreet.com.
* Assets under management include the assets of the SPDR® Gold
ETF (approximately $33 billion as of June 30, 2014), for which
State Street Global Markets, LLC, an affiliate of SSgA, serves as
the distribution agent.
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State Street CorporationAnne McNally,
+1-617-664-8576aemcnally@statestreet.comwww.statestreet.com@StateStreet
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