Canada Insurance Market Intends to Invest in Technology in 2015
A majority of property/casualty insurers in Canada expect to invest in technology in 2015, according to a joint survey conducted by Xchanging plc, a business process, procurement and technology services provider, and Insurance-Canada.ca.
The survey, which found that 65 percent of respondents plan to increase spending on tchnology, was designed to gauge the overall health of the Canadian insurance market, as well as companies’ planned investments, business priorities and growth strategies for 2015.
As the commercial insurance industry consolidates and the competitive and customer landscape shifts, survey results suggest that insurers understand the need to invest in data-driven resources and technologies.
When asked for the biggest priority from a resource standpoint, technology was selected by 49 percent of respondents, which was more than double the next highest category (underwriting, cited by 23 percent), making it the clear top priority.
When asked about specific technology categories that would receive more investment in 2015, respondents further underscored the importance of underwriting, with 31 percent quoting/underwriting portals as the top priority, followed by Big Data/analytics (28 percent) and mobile applications (20 percent).
When asked about their companies’ most valued claims-related technologies, more than half (54 percent) cited predictive modeling/analytics.
Only 14 percent of respondents said cyber security solutions were the most valued technology. This is surprising given the October 2013 Cyber Security Self-Assessment Guidance which was made applicable to all financial institutions in Canada due to the increases in sophisticated cyber attacks.
The results show that the top business challenges and goals mirror one another, primarily around besting competition to increase market share and using technology to better reach customers.
When asked about the top three challenges of 2015, modernization of core technology infrastructure (23 percent), increased competition (23 percent), and developing innovative products and services (20 percent) were cited most.
Increasing market share (41 percent) and reaching customers in new ways and through multiple platforms (23 percent) were cited as the top two business goals, affirming the value placed on technologies like mobile applications.
Surprisingly, breaking into new insurance markets was ranked as the least important goal with less than one percent choosing it as the top business goal.
Based on this survey, 2015 promises to be a healthy year in terms of overall IT spending and BPO investment.
65 percent will increase IT spending, with 18 percent saying they will do so by more than 10 percent.
Nearly 40 percent say their company’s level of BPO engagement will increase, primarily in IT and back-office services.
Only three percent said IT spending would decrease by any margin in 2015.
The survey results make clear that Canadian insurance market participants are most worried about home-grown competition and non-traditional sources of competition.
When asked who would be their biggest competitors in 2015, respondents indicated by a wide margin (42 percent) that local insurance companies and non-conventional insurance sources (i.e. banks and Google) pose the biggest threat to their businesses.
Only 11 percent cited foreign-backed insurance companies as the biggest threat.
The survey identified mixed views from insurers on their current usage and future plans for quoting and underwriting portals, which is interesting given they were highly rated in terms of overall investment3.
Nearly as many respondents said that quoting and underwriting portals were well understood and widely deployed (27 percent) as said their companies did not think they applied to their business (23 percent).
However, 18 percent of respondents said their companies are still trying to understand the value, and 19 percent have a pilot underway or planned, suggesting a desire to further explore how the technology can add value.
“With approximately $46 billion in direct premiums written, it’s clear that the Canadian market is growing exponentially,” said Sean Allen, vice president of Sales, Xchanging Insurance Services, North America. “It’s encouraging to see the market making a concerted and dedicated effort toward investing in modernizing its technological infrastructure to better serve its growing customer base, capitalize on growth opportunities and ward off rising competition.”
Source: Xchanging plc