FIS report backs industry innovation to tackle ongoing risks
A new report from fintech firm Fidelity National Information Services (FIS) flags insurer confidence to take on current industry challenges and marks the importance of new technologies such as Artificial Intelligence (AI) as part of their mitigation tactics.
The Global Innovation Report found that 61% of insurers cited financial risk as their top concern, as the impacts of ongoing market volatility and inflation continue to impact operating costs of repairs, as well as customer behaviours.
FIS VP Capital Markets, APAC Nick Aronson says that financial risks, while not unique to the industry, “continue to shape” how insurance companies will respond to issues.
“Australian policyholders struggling with the cost-of-living crisis are continuously prioritising value through lower-priced policies and avoiding those with high premiums, which have significantly increased due to recent catastrophes such as flooding and bushfires,” Mr Aronson told insuranceNEWS.com.au.
“These behaviours could translate into less customer loyalty, more competition and a negative revenue impact for insurers as well.”
Mr Aronson says the industry faces “big challenges” relating to exposures from climate risks and transitions to greener technologies, with 63% of insurance respondents reporting concerns that they are “losing value” on investments heavily dependent on fossil fuels.
He also notes challenges from worsening natural disaster risks, as well as liability exposures from changing regulations.
“General insurers, in particular, are more exposed than ever to liability risks as parties that suffer loss from climate change make claims against those they believe are responsible,” Mr Aronson said.
“As this kind of climate litigation will only increase, general insurers need to understand their potential liability for future claims.”
But Mr Aronson says the report found that 96% of insurers are confident they can manage and overcome ongoing challenges, with 97% – more than any other industry – attributing innovation as critical to mitigation strategies.
He says the key to the push for the industry to manage and mitigate issues should be a continued pursuit of upcoming and new technology.
“Despite macroeconomic pressures, it’s more critical than ever for insurers to invest in innovative technology and drive digital transformation across their business,” Mr Aronson said.
“Our research shows that insurance firms are turning to RegTech (56%) and cloud computing (52%) which currently see the highest adoption.”
He notes tools such as Generative AI are a prioritised area of growth in the coming years, with 71% of insurers marking AI a critical investment strategy.
“As technology advances, the use of AI could become more widespread within the insurance industry and transform processes such as underwriting, pricing and claims,” Mr Aronson said.
“Using data to assess risk levels and make recommendations could help drive down loss ratio. AI could also be applied in a cybersecurity setting as further insulation against risk.
“Insurers who encourage AI applications in the workplace could see increased productivity and experience quality touchpoints with their consumers.”
The report found that a lack of in-house expertise was a primary obstacle for insurers when implementing innovative technologies, with 68% reporting it as the top challenge, with a lack of internal technology/data also noted as an issue.
“Ensuring that we have local expertise and talent training to understand the complexities of new innovative technology alongside strong internal data is going to be essential for insurers moving into the future,” Mr Aronson said.