Insurers are breathing a sigh of relief today after the Ministry of Justice announced a softening of its drastic cut to the Ogden Rate. The original change, from 2.5 per cent to -0.75 per cent, caused dismay in the insurance industry when it was announced earlier this year. However today the MoJ said the rate will instead be set between 0 and 1 per cent.
The rising number and growing importance of chief digital officers (CDOs) is a sign of how high up digital change is on the business agenda. And as a study by PwC reveals, insurance is leading the field.
PwC strategic consulting group Strategy& has released the findings of its 2016 chief digital officer study of the world’s largest 2,500 public companies. The study showed that 19 per cent of companies have a CDO, up from 6 per cent in 2015.
Meanwhile 35 per cent of insurers have appointed a CDO, putting insurance ahead of all the industries examined in the study. In second place is communications, media and entertainment (28 per cent), followed by banking (27 per cent) and consumer products and retail (27 per cent).
The insurance market is losing ground to insurtech startups and must focus on digital business to stay competitive.
In its UK Insurance Underwriting Digitisation Study 2017, research firm LexisNexis revealed the opinions of 107 insurance professionals, most of whom spend more than 80 per cent of their time pricing and underwriting policies.
The study examined the views of personal lines motor and home insurers on issues such as whether digitisation will create stronger business opportunities, and how their organisations are embracing new technology.
- Just 4 per cent of personal lines insurers say their businesses are entirely or almost entirely digital, while 92 per cent recognise that digitisation has allowed new insurance providers to emerge and disrupt the market
- 31 per cent of motor insurers and 25 per cent of home insurers are using mostly manual underwriting processes
- 78 per cent believe digitisation is valuable for improved speed to market for new products
- 64 per cent consider policy history data as an important way to improve the customer journey
The need for speed
Profitable underwriting depends on reliable and relevant data. Today, thanks to insurtech, insurers have access to more data than ever before, which helps everyone in the insurance chain.
Data enrichment means that insurers need some way to store data, not only in huge volumes, but also in a secure format. The amount of data that insurers could gather about customers and their driving behaviour will grow with time as data-gathering technology use increases. Huge amounts of data are already being taken from telematics, GPS and dashcam devices. It is believed that by 2020 about 1.7mb of new information will be created every second for every human on the planet, meaning that data storage requirements are going to grow exponentially too.