In 2021, there looks to be a major increase in overall tech spending and a rapid acceleration of digital transformation plans.
When will the COVID-19 pandemic end? Will it end? P&C insurance, like all other business sectors, is faced with a time of unprecedented uncertainty. There are always multiple external factors to consider when developing strategies and adjusting plans. Now, layer into the traditional elements all the fallout from the pandemic, restrictions on economic activity, work-from-home, virtual schooling, social unrest and political/legislative uncertainties. How are all of these developments affecting P&C insurer technology strategies and plans?
SMA has been tracking changes to budgets and plans since the pandemic hit the U.S. hard in early 2020 via Market Pulse Surveys and our work with insurers. This blog summarizes some of the big themes regarding overall tech plans and digital transformation.
In the spring and moving into summer, personal lines insurers were aggressively revising tech plans. Most navigated the transition to #WFM smoothly and experienced lower claims due to changing patterns. Even with large rebates to policyholders and auto premiums down slightly, the financial picture looked positive for personal lines companies. As a result, many were accelerating their overall tech spending and digital transformation projects.
Commercial lines companies were faced with different circumstances during that time frame. Pandemic-related claims were rising, and riots across the U.S. generated a whole new set of claims. Many commercial lines companies were setting aside large reserves in anticipation of more difficult financial times ahead. As a result, tech budgets and plans were mixed for commercial lines companies. A quarter of the companies were slowing down or retrenching, while others reshaped their plans without changing budget levels. A small portion were even accelerating plans.
Fast forward to September and a look at fourth quarter plans. In some ways, the plans for personal and commercial insurers have flipped. Personal lines companies have moderated their plans, while commercial lines are now speeding up. Digital transformation is still a big driver of activity for personal lines, and a quarter of the respondents continue to accelerate their plans. However, there is a decline in the number of companies that are accelerating overall tech spending. Meanwhile, fewer commercial lines companies are pausing projects or cutting back budgets. As the industry settles in for the long haul, there seems to be a balancing out of plans for the remainder of the year.
An early glimpse into 2021 is fascinating. As insurers look to the future, there is a realization that digital transformation needs to be at the forefront of their strategies. Plans and budgets are just being developed now, but it appears as though there may be significant increases in overall tech spending and a rapid acceleration of digital transformation plans for both personal and commercial lines insurers.
Most recognize that the world will not be reverting to the way it was pre-COVID-19. Many things have forever changed and shifted to digital/virtual modes. Self-service capabilities will continue to be a focus. And the movement toward higher levels of straight-through-processing for both underwriting and claims will be accelerated. At the same time, insurers are positioning to lower infrastructure costs by reducing or repurposing physical locations, cutting back on employee and vendor travel expenses, shifting more to e-delivery instead of printing and mailing documents and more.
The industry is certain to experience more unexpected shocks along the way as industries and society adapt to events and movements born out of the global COVID-19 crisis and significant shifts in the economy, demographics, politics and other external factors. It will be a wild ride, but insurers are pushing the envelope on digital transformation to become more agile and responsive to changes during this volatile time.
Source: Insurance Thought Leadership
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