Tony van Niekerk, editor and chief, COVER
In an era marked by rapid technological advancements, the insurance industry is on the cusp of transformative change. The 2024 Earnix Insurance Trends Report sheds light on the challenges and opportunities confronting insurers today.
Marcus Looft, Strategy Director at Earnix, in conversation with Tony van Niekerk, offers insights on how insurers are adapting to new demands and navigating the ever-evolving technological landscape.
Addressing the Urgency for Change
There is a growing urgency within the insurance industry to adopt modern systems, cloud technology, and artificial intelligence. The competitive nature of today’s markets, coupled with the complexity of legacy systems, creates an environment where incremental adjustments are no longer enough. As Marcus explains, “Insurers feel the need to upgrade, but these upgrades are like ‘heart surgery’—they need to be done carefully and at the right time.”
The report found that more than two-thirds of insurance executives plan to deploy AI models capable of real-time predictive analytics within the next two years. This represents a dramatic shift in mindset, with insurers expecting AI’s impact on their operations to triple year-over-year. However, this enthusiasm for AI’s potential is tempered by current reality: less than one-third of carriers presently have such models in place.
The rapid evolution of technology and the rise of cyber risks have forced insurers to rethink their approach. As more businesses and individuals turn to digital platforms, vulnerabilities increase. Marcus points out that newer systems not only provide operational efficiencies but also bring heightened security, making them essential in today’s cyber-aware climate.
The Role of AI and Data Analytics
One of the most significant opportunities in insurance lies in the use of AI and data analytics. Insurers are beginning to leverage AI to enhance decision-making, streamline claims processing, and provide accurate pricing. “AI and analytics are game changers,” Marcus notes. “They bring enormous speed and decision-quality improvements. We see this in pricing, claims management, and even in document scanning.”
However, Marcus emphasises the importance of a human-centered approach to AI, warning against complete reliance on machines. “These tools help in speeding things up and improving quality, but we should maintain control over our processes and decisions.” This balanced approach—using AI to enhance operations without replacing human judgment—reflects the industry’s commitment to responsible innovation.
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Overcoming the Barriers to AI Adoption
Despite the clear benefits, adoption of AI in insurance has been slow, with several factors creating barriers. “The process is more than just implementing a tool,” Marcus explains. “It involves rethinking data management, processes, and even company culture.” Successful integration of AI requires companies to be strategic and selective, focusing on areas with the highest impact before scaling across the business.
Marcus’s advice to insurers is to adopt a phased approach: “Pick one or two priority areas, validate the business case, and implement AI there. This gradual adoption allows insurers to gain insights and refine processes without overwhelming resources.”
Navigating Regulatory Compliance
As insurers adopt new technologies, they must also manage an evolving regulatory landscape. The research reveals a troubling trend: 51 percent of insurance companies had to pay fines or issue refunds due to errors in the past year. This may explain why 70 percent of executives expect to spend more time on regulatory compliance next year, continuing a two-year trend.
Marcus acknowledges that while compliance can be burdensome, it serves a valuable purpose. “Regulation ensures transparency, which is crucial for an industry that operates on trust. Insurers must be ready to adapt to these standards, as they ultimately benefit both the industry and the consumer.”
In Marcus’s view, modern technology can be instrumental in meeting these regulatory requirements. By investing in advanced IT systems, insurers can streamline reporting and manage complex data demands, minimising the risk of non-compliance and strengthening trust with regulators and customers alike.
Fostering Collaboration and Innovation
Many insurers operate within large, multi-division companies, where collaboration across units can be challenging. However, Marcus sees modern technology—particularly cloud-based systems—as a key enabler of cross-functional collaboration. “With cloud technology, teams have shared access to data and tools, fostering a collaborative environment. This helps avoid the silos that often hamper innovation and efficiency.”
Cloud-based systems allow for real-time access to data and streamlined processes, promoting unity within teams and improving organisational agility. By enabling seamless collaboration, these technologies support innovation and speed up decision-making, essential for competing in today’s fast-paced environment.
Opportunities and Ethical Considerations
Looking forward, Marcus is optimistic about the insurance industry’s trajectory. Insurers who are willing to embrace change and modernise their systems are already seeing the rewards, both operationally and culturally. “Those who take the risk to modernise and reinvent their business can feel the benefits—there’s a visible sense of satisfaction in their teams. It’s about gaining control over decisions and fostering a sense of ownership.”
However, Marcus also raises an ethical consideration regarding data collection and AI usage. “Insurance is built on trust. Clients expect us to act responsibly with their data. It’s not about gathering as much data as possible but about collecting what’s relevant, with the client’s consent, and using it to enhance the collective value of insurance.”
Getting the combination right
As the insurance industry continues to evolve, staying ahead of technological and regulatory demands is essential. The 2024 Earnix Insurance Trends Report and insights from Marcus Looft reveal that while challenges persist, the right combination of technology, strategy, and ethical responsibility can lead to a more resilient and client-centric industry.
Embracing this change will not only enhance operational efficiencies but will also build stronger, trust-based relationships with clients—a fundamental goal for insurers navigating the future.