Corporate “cultural inertia” is a major barrier to innovation and migration to modern, modular technology, a report from Insurtech Australia and Ernst & Young says.  

Culture plays a significant role in prioritising change, according to the annual Insurance Innovation Intelligence paper.

“There is a two-speed market, with some starting to be left behind as a direct effect of underinvesting in ‘core innovation’, a lack of execution expertise and ignoring the human element,” the report says. “Change management, organisational readiness and talent shortages are recurring hurdles.”

In Australia, there is an “ever-widening gulf between those that are succeeding and those that are not”. 

Cloud platforms and AI are being widely adopted as automation offers efficiency gains in underwriting, claims, fraud detection and customer service, the report says.

Yet some major insurers are struggling to transform.  

While mature markets such as Australia, the US, Britain and Canada are focused on integrating new tech with legacy systems, emerging markets such as parts of Asia “leapfrog directly” to digital-first models.

“Much of it is whether the foundations are in place or not – and the realisation that foundations required to enable technology-driven transformation are manifold.”

The report says innovation increasingly relies on joint ventures to leverage strengths and meet specific distribution, regional and customer needs.

“To be truly customer-centric, insurers have had to turn their operating models on their heads to go from a primarily channel/product focus to one that puts the customer at the centre.

“For many years, this wasn’t possible, with organisational structures, regulatory requirements and systems fundamentally set up differently.”

The report says customer expectations for seamless, digital and personalised experiences are “difficult to achieve on legacy operating models and technology”, and regulatory complexity and compliance requirements are increasing, often hindering transformation efforts or diverting investment.

“Focusing on an innovation plan linked to business strategy, carefully choosing whom to partner with and what outcomes to deliver, and the people skills needed to make this successful, are key ingredients,” the report says.

See the report here.