Mark Breading is Partner, Carrier Transformation at Strategy Meets Action, a ReSource Pro company. He specializes in advanced and transformational technologies.
Insurers’ digital plans shifted throughout 2020
How did your organization’s digital plans and investments change over the course of 2020? Did they speed up, slow down, reorient, or stay the same? For property and casualty insurers, the answer is all of the above.
Throughout 2020, Strategy Meets Action tracked changes to personal and commercial lines insurers’ budgets and plans through surveys and our ongoing work with insurers around digital transformation. In this blog, we’ll dive into the big themes we discovered.
Personal lines accelerated, but later slowed
As the pandemic hit the U.S. in early 2020, personal lines insurers aggressively revised their tech plans, with 28% reshaping or reprioritizing in the second quarter. Most navigated the transition to work-from-home smoothly and experienced lower claims due to changing customer behaviors. Even with large rebates to policyholders and auto premiums down slightly, the financial picture looked positive for personal lines companies. As a result, 24% were accelerating their overall tech plans and spending and 28% their digital transformation projects.
In the fourth quarter of the year, months into the crisis, we began to see greater moderation. For tech budgets and plans, the number of personal lines insurers accelerating declined by 12%. Meanwhile, those reshaping or reprioritizing rose by 19%. As for digital transformation plans, 6% of insurers were pausing compared to zero in Q2, those accelerating their plans fell by 4%, and those reshaping increased by 6%.
Commercial lines cut back, then pivoted
Commercial lines companies were faced with much different circumstances in Q2. 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, a quarter of the companies we surveyed were slowing down or retrenching on tech budgets and plans, and 32% were doing the same for digital transformation. Others reshaped their plans without changing budget levels. And only 6% were accelerating on tech and 11% on digital.
In the fourth quarter, commercial insurers’ plans shifted again, in a more confident direction. The percentage of those accelerating jumped by 11% for tech and by 6% for digital, while those pausing or cutting back fell by 11% for tech and 14% for digital.
Digital transformation ramping up in 2021
As insurers look to the future, there is a realization that digital transformation needs to be at the forefront of their strategies. Most recognize that the world will not be reverting to the way it was pre-COVID-19. Many processes and have forever changed and shifted to digital/virtual modes.
As we continue into 2021, Strategy Meets Action’s latest research indicates core modernization and self-service capabilities will remain high focus areas for both commercial and personal lines insurers. The movement toward higher levels of straight-through-processing (STP) for both underwriting and claims will also be accelerated.
At the same time, insurers are positioning to:
- Lower infrastructure costs by reducing or repurposing physical locations
- Cut back on employee and vendor travel expenses
- Shift more to e-delivery instead of printing and mailing documents
The industry is certain to experience more unexpected shocks along the way as industries and society adapt to events and movements borne 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.
Are you a carrier who agrees with these trends, or are you seeing something else? If you’re a broker, how will these trends impact your business?
Need help navigating your digital transformation? Contact Strategy Meets Action today.