Insurtech Archives - Page 2 Of 2

3Cs of Emerging Risks – How Insurers Can Capitalize on the Opportunity | Blog

February 24, 2023

Insurance carriers need to transform their risk function, become more agile, and proactively create new offerings that protect against the threats of 3Cs: climate risk, cyber risk, and crypto risk. Read on to learn how this environment can create opportunities for insurers.

In today’s evolving risk landscape, insurers need to seek new technologies to improve efficiency, streamline workflow, and fill coverage gaps. Insurers must carefully navigate the detrimental effects of these volatile threats and evolve from being risk insurers to risk guardians. But are insurers putting enough emphasis on exploring the lurking threat areas that can pose imminent risks? Let’s take a look at how this will reshape the insurance industry moving forward.

Hardly anyone could predict a global crisis such as COVID-19 leading to insured losses amounting to nearly US$44 billion, making it the third most costly catastrophe to the industry. After any such black swan event, insurers need better preparedness and foresight to manage their response. The impact of unforeseen risks is becoming increasingly evident. Insurers need to foresee, pre-empt, and prepare for future risks to reduce uncertainty, and underwrite risks in a better way.

Due to spiking losses caused by emerging risks in insurance, traditional rating models are losing relevance to advanced solutions developed by InsurTechs and niche solution providers that enable data-driven decision-making powered by next-generation technologies such as Artificial Intelligence (AI)/Machine Learning (ML) and internet of things (IoT).

With insurance products being largely commoditized, carriers need to differentiate their offerings by rapidly creating newer products for emerging risk segments. We have explored three key emerging risk segments that are complex to evaluate and increasingly gaining prominence, as illustrated below:

Market landscape and challenges faced by Insurers

The pandemic forced insurers to adopt newer technologies, scale up digital-first operations, and expand data estate leading to added risk and exposure. The average data breach costs jumped about 13% from 2020 to 2022, according to the IBM Cost of a Data Breach Report 2022
The increasing frequency and costs of extreme weather events is putting a greater burden on insurers. Traditional insurer risk models are not sufficient to face the challenge of accurately capturing and testing climate-related risks
Cryptocurrency presents a diverse risk landscape. Risky investments in digital assets and unexpected losses tied to cryptocurrency curtails their viability, triggering surety claims. Product development and coverage pricing become challenging because of the dynamic nature of these assets

In response to the challenges illustrated in Exhibit 2 below, insurers need to assess the risks and create personalized products and zero-touch claims processes.

Next steps in the right direction

With rising losses, insurers can no longer shut their eyes to the devastating impact of these emerging risks on pricing, underwriting, and investment decisions. Insurers need to strategically rethink their risk function.

Carriers must prioritize investment bets across the insurance value chain and evaluate InsurTechs and specialists that bring in niche talent, industry expertise, speed, and experience to help them meet their key business priorities.

According to Everest Group research, specialist providers (illustrated in exhibit 3) can act as catalysts for value realization by quantifying the financial impact of climate change, providing comprehensive cyber risk visibility, and offering innovative digital asset protection solutions.

Contextualized solutions from InsurTechs are gaining prominence to fill capability gaps, enhance value propositions, and streamline workflows across the insurance value chain.

Let’s explore some of the solutions providers offer for addressing the 3Cs of emerging risks in insurance.

Climate risk:

The quantitative consequences of risks must be appropriately assessed and addressed to minimize the impact. Real-time analytics providers use resiliency insights, risk engineering, probabilistic hazard maps, and historical catalogs to recognize the likely risk from natural disasters across the globe
Insights on possible hazards can be conveyed via geospatial web-based applications, reports, or application programming interfaces (APIs). Using asset and portfolio-level climate risk analytics, insurers can tap into these insights that affect crucial aspects of the value chain, starting from product development and portfolio planning to underwriting and pricing

Cyber risk:

Cyber risk analytics platform providers use telemetry and threat intelligence from across customer workloads, endpoints, identities, IT assets and configurations, DevOps, AI, and blockchain. Using this intelligence, they identify and map shifts in adversary tactics and create actionable data to automatically prevent real-time threats
As insurers navigate through uncertainty, they need to tap into the plethora of data they possess along with third-party data to unlock immense value. They must infuse data analytics at every step, starting with identifying, protecting, and detecting cyber-attack risk to proactively computing the cyber control performance. This will enable early identification of weaknesses and detect advanced attacks

Crypto risk:

Storing crypto assets is creating new risks. To quantify loss exposure, actuarial teams can draw on forecasting analysis of cryptocurrency crimes to build actuarial models around cold wallets (coverage against damages or theft of the physical storage device) and hot wallets (coverage against abuse of the private key that enables access to digital assets)
Insurers need to develop the tools to implement dynamic policy limits/pricing that increase or decrease based on the price changes of these assets, enabling insurers to respond and act upon real-time market changes and ensuring the policyholder is always protected even with innumerable value fluctuations during the policy period

Insurers have a critical role in leading society to navigate these looming threats. Carriers need to change their approach, become more agile, and proactively build products while safeguarding these risks.

It has never been more important to assess and address the 3Cs of insurance risks. To learn more about them in detail, check out our Insurance Solutions Specialist Trailblazers – 2023.

To discuss emerging risks in insurance, please reach out to [email protected], [email protected], [email protected], and [email protected].

Is the Insurance Industry Seeing a SaaS Revolution or a SaaS Sprawl Challenge? | Blog

January 12, 2023

As leading insurance organizations seek to be more data-driven in their business decisions, they are looking for solutions that can seamlessly integrate with their existing insurance technology stack. Technology providers have responded by building capabilities to offer plug-and-play solutions that align with carriers’ immediate priorities to extract more value from investments. With the industry landscape exploding with multiple solution providers offering carrier customization and commercial flexibility, we are witnessing a flood of SaaS solutions across the insurance value chain. Read on to explore the issue of SaaS sprawl which is quickly becoming one of the industry’s leading pain points.

At the turn of this century, the SaaS revolution shifted the paradigm of how technology could be deployed. The triad of quick deployment, timely upgrades with little/no inconvenience, and cost-effective solutions made SaaS solutions a force to be reckoned with.

A massive influx of point solutions – tools that aim to address a single use case within a business – followed over the years. Today, an insurance technology stack has multiple point solutions assembled atop core systems to bridge gaps in existing capabilities as illustrated below:

Exhibit 1 – Technology stack in the insurance value chain

We are now seeing a massive explosion of SaaS applications in the entire insurance value chain that likely will reach a point where businesses start to see diminishing returns. Estimates suggest that organizations (with more than 1,000 full-time equivalent employees) use more than 100 applications on average at any given time.

This rapid expansion without any/sufficient oversight has led to SaaS sprawl, the unchecked proliferation of third-party applications that can impact the entire organization. Let’s look at this challenge further.

What is causing SaaS sprawl?

The huge availability of new technology solutions tops the list of contributors to this issue. The willingness to adopt newer solutions has grown exponentially in recent years with the success of cloud-based applications and services. Shadow IT is another contributor.

While the freedom for employees to use applications without explicit approval from a centralized department can boost productivity and drive innovation, it also can have undesirable complications. The growing clout of low-code/no-code capabilities is pushing this trend further.

Infusing intelligence throughout the insurance value chain requires specific capabilities in the five core areas of product development, sales and distribution, underwriting, policy administration, and claims management (as shown in the exhibit above).

Specialized players that focus on one or a few areas are emerging, making choosing from the many solutions and managing multiple applications for end-to-end technology solutions extremely difficult.

As more and more insurance companies turn to SaaS solutions to streamline their operations, they can quickly find themselves in a tangled web of different tools and platforms.

Here are some other challenges that hinder organizations:

Each platform may have its own set of features and capabilities, making it difficult for insurance companies to keep track of the applications and potentially duplicate them
SaaS providers seeking to expand their presence in the value chain can potentially dictate the overall vision of an insurance technology stack through aggressive sales tactics pushing insurers to buy more tools (potentially causing more overlap). This can drive the total cost of ownership up and make getting the most out of the technology stack an aspirational goal
3. Issues integrating systems can cause data silos and inhibit the sharing of potentially crucial information, forcing carriers to incrementally spend on integration and custom builds to gather the single view of data and systems that is lacking
Being locked into contracts with providers makes it hard to modernize or move to alternate providers because migration would be costly

Put succinctly, dealing with compatibility issues among applications and the data interplay, and managing contract and upgrade cycles becomes a precarious juggling act. As a result, the great bundling of the entire insurance technology stack is needed!

Alternatively, it does not make sense to put the brakes on the development altogether. Restricting employees’ ability to build and buy applications may do more harm than it can potentially help.

Organizations need to provide the foundation for their teams to think about software applications strategically. Below are recommendations for enterprises to seize the multitude of opportunities:

Define a target state vision and align SaaS providers to this vision through a mix of service-level agreements and continuous collaboration
Invest in cloud economics capabilities to manage the cost of cloud spend and conduct exercises to rationalize the SaaS environment every year
Educate business and technology executives on how to avoid SaaS sprawl

IT service providers have an important role to play as solution orchestrators. Working with a core insurance technology provider can offer tight integration to third-party SaaS solutions to manage integration, risk, data access, and cost challenges.

If you have questions or would like to discuss SaaS sprawl, please reach out to [email protected], [email protected], and [email protected].

Explore our upcoming webinar, IT Service Provider 2023 Forecast: The Top 5 Themes for Growth and Wallet Share, for emerging themes, challenges, and growth pockets in the technology services market.

Unpacking the Low Code/No Code Opportunity in BFSI | Blog

September 30, 2022

Low code/no code development holds promise for banking, financial services, and insurance (BFSI) firms to gain agility and cost-effectively build innovative technology solutions – without needing professional developers who are in short supply. Learn about the market potential and provider landscape in this blog.

Digital consumption demand in the (BFSI) industry has seen a heavy uptick in the past year, driven by customer expectations for enhanced experience and the adoption of flexible work options to run businesses.

BFSI firms are under pressure to achieve profitability in an already volatile market and need to be more agile, collaborative, and responsive. These firms have to build stronger ecosystems and overcome the obstacles created by legacy systems.

This has increased demand for professional developers to manage complex technology stacks. But the fast digitization pace has caused enterprises to focus their limited development talent on workflow customization and business-as-usual activities instead of innovation and core product engineering.

Low code/no code technology answers these issues.

Tapping into low code/no code technology

Low code/no code technology has paved its way through these circumstances, easing operations and optimizing costs. This approach provides a visual modeling development tool that business teams can easily use in collaboration with the IT department, reducing the need to hire professional developers who are in short supply.

The exhibit below illustrates the drivers for low code/no code adoption.

BFSI firms are successfully using this method. Let’s look at some examples:

Marex, a tech-enabled liquidity hub for participants in global commodities and financial markets, selected Genesis to fully digitize middle office workflows for its new equities market-making business
Unqork, an enterprise software company with a transformational no-code platform for financial services and insurance organizations, secured $73 million in two investment rounds from Goldman Sachs, demonstrating the shifting industry views on building enterprise technology

Low code/no code benefits

Benefits of low code/no code technology for BFSI firms include:

Reduced internal workflow processing time due to easier integrations, leading to increased efficiency
Decreased product time-to-market brought about by the simplicity of development
Increased ease to upgrade or introduce technology without affecting normal business operations because of the microservice architecture offering
Reduced cost by having internal teams for development and maintenance
Improved solutions resulting from the business-oriented development focus that combines business knowledge and IT skills

BFSI enterprises also have enhanced customer satisfaction by using low code/no code to quickly and effectively establish digital omnichannel experiences. This has satisfied customers’ appetites for remote consumption and also enabled the ability to personalize services by easily integrating other technologies such as Artificial Intelligence (AI), Machine Learning (ML), and Internet of Things (IoT.) Self-service applications for 24/7 support can be set up with less time and cost using low code/no code.

See common use cases across the BFSI in the image below.

Evolving the low code/no code ecosystem

The low code/no code technology provider landscape is made up of many players as, illustrated below. These include:

Generalist low code/no code vendors who provide solutions that can be offered to any industry
BFSI specialist low code/no code providers who offer technology products for BFSI workloads and out-of-the-box accelerators for reusability and quick access
Big tech companies and core BFSI technology providers who are investing in low code/no code through partnerships, acquisitions, or developing the technology to provide standalone and bundled solutions to their customers

Grabbing the opportunity

Many BFSI firms who have adopted low code/no code technology are reaping the benefits, while others have experienced roadblocks such as limited options to scale the technology across the organization. To achieve success, the right procedures must be set up to avoid any pitfalls. Understanding the internal and external capabilities and challenges while moving along the path is critical.

BFSI enterprises should follow our CASE framework and have a clear vision, assess internal resources, select technology, and execute their roadmap as illustrated below:

For a detailed view, read our report, BFSI Enterprise Adoption Guide for Low-Code/No-Code Technology – Market Trends and Provider Landscape, which covers the market challenges, drivers, and way forward in the low code/no code ecosystem from a BFSI perspective. To discuss this topic, please reach out to [email protected], and [email protected].

Read more about low-code adoption in our blog, Selecting the Right Low-code Platform: An Enterprise Guide to Investment Decision Making.