Insurance

Perspectives

2019 Insurance Outlook

Faced with competition from new entrants and evolving consumer demands, the insurance industry is sharpening its focus on operational efficiency, productivity, and costs while leveraging new technology and talent to develop innovative products and services in the digital economy.

Technology is to the fore in Deloitte’s 2019 Insurance Industry Outlook which identifies the trends that will impact insurers over the next 12-18 months. From an Irish perspective, we have experienced a significant ramp up of Irish insurers engaging with us on how technology will be a key enabler driving their business forward, both from a cost out and growth perspective. Unlike 18 months ago, when many insurers were having discussions about the need to invest in new technologies, we are now seeing a move to executing with budgets being allocated and programmes being activated. While spend and investment will continue to be needed to support regulatory and financial standards such as GDPR and IFRS 17, insurers — both at group and local level—are turning their attention to areas such as cloud, blockchain and cognitive applications to enhance speed to market. 

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Technology Trends 

Cloud is high on the agenda

 In Ireland, as elsewhere, insurance carriers have already embarked on the journey to cloud.

 Market pressures on premiums are driving carriers to leverage the power of the cloud to deliver scalable on-demand digital services while reducing time to market. The focus on DevSecOps and cyber means that organisations are really looking at how they can balance the need to get new, more relevant products out the door faster while ensuring they have the right tools in place to secure both development and operations. 

Using cloud storage and computer power to deliver business insights and enhance fraud detection, risk modelling and financial reporting will have a significant impact on carriers’ ability to scale to meet the needs of their businesses and customers.

A balanced and considered move to cloud is now a key topic of discussion at Board level. Requests from our Irish clients to present to Executive Boards on this topic have greatly increased in the last 6 months. There is a growing recognition that moving to the cloud comes with many benefits; flexibility, shifting from asset ownership to services and removing legacy and technical debt.

To maximise benefits, carriers should develop a multiyear cloud strategy and give cloud a higher priority when deploying new applications. At the same time, carriers should utilise the advanced capabilities of cloud to gain access to better analytics for business decisions.1

For legacy systems, carriers should apply scoring rules based on business value, application complexity, and system criticality to identify which applications to migrate to the cloud and when. The result will be a phased cloud migration path based on the carrier’s specific requirements.2

 The insurance industry is actively working with Blockchain as a transformational technology to address a number of established issues, pain points and costs.

 The general approach is to re-engineer or entirely reimagine broken processes rather than to draw out marginal efficiency benefits. Many of the major carriers and reinsurers are participating in consortia. RiskBlocks in North America focuses on FNOL, proof of insurance, fraud, agent and broker licensing, and regulatory reporting. In another example, B3i in Europe has created a ‘Property Catastrophe XOL smart contract’. Elsewhere, individual insurers are testing a plethora of blockchain innovations in areas such as automated settlement, usage-based motor insurance, KYC, trade finance and much more.

 While many value-creating concepts have been demonstrated over the past 3-4 years, the major question facing insurers is what is the right approach to developing Blockchain applications: does an individual carrier have the network of participants required to launch and scale a Blockchain platform, should they join an established consortium, or is there an opportunity to form a new consortium?

 2018 was mostly about assessing where the most immediate value of distributed ledger technology may lie for insurers, determining what processes to upgrade initially, and figuring out how to collaborate with competitors. This year will likely see the industry move past basic education and proofs of concept to preparing for the launch of an increasing number of realworld blockchain applications impacting day-to-day operations

To maximise benefits, carriers should develop a multiyear cloud strategy and give cloud a higher priority when deploying new applications. At the same time, carriers should utilise the advanced capabilities of cloud to gain access to better analytics for business decisions.1

For legacy systems, carriers should apply scoring rules based on business value, application complexity, and system criticality to identify which applications to migrate to the cloud and when. The result will be a phased cloud migration path based on the carrier’s specific requirements.2

The insurance industry is actively working with Blockchain as a transformational technology to address a number of established issues, pain points and costs.

The general approach is to re-engineer or entirely reimagine broken processes rather than to draw out marginal efficiency benefits. Many of the major carriers and reinsurers are participating in consortia. RiskBlocks in North America focuses on FNOL, proof of insurance, fraud, agent and broker licensing, and regulatory reporting. In another example, B3i in Europe has created a ‘Property Catastrophe XOL smart contract’. Elsewhere, individual insurers are testing a plethora of blockchain innovations in areas such as automated settlement, usage-based motor insurance, KYC, trade finance and much more.

While many value-creating concepts have been demonstrated over the past 3-4 years, the major question facing insurers is what is the right approach to developing Blockchain applications: does an individual carrier have the network of participants required to launch and scale a Blockchain platform, should they join an established consortium, or is there an opportunity to form a new consortium?

2018 was mostly about assessing where the most immediate value of distributed ledger technology may lie for insurers, determining what processes to upgrade initially, and figuring out how to collaborate with competitors. This year will likely see the industry move past basic education and proofs of concept to preparing for the launch of an increasing number of realworld blockchain applications impacting day-to-day operations

1. David Linthicum, “Finding the killer cloud-based machine learning applications, ”Deloitte on Cloud Blog,

August16, 2018.

2. Katherine Noyes, “Insurers take to the cloud,” Deloitte Insights for CEOs published in the Wall Street Journal, 

April 30, 2018.

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