Insurance Companies Ramp Up Tech Investments to Meet Evolving Consumer Demands
Insurance companies are increasing their technology investment significantly. This includes a focus on artificial intelligence (AI) and modern Cloud architecture. The goal is to create a better online experience for customers, employees, and distributors.
Industry estimates reveal that IT-related expenses now account for nearly 10 percent of total company expenditures. Over the last five years, insurers have seen substantial growth in technology spending. This surge is driven by digital transformation initiatives aimed at addressing changing consumer demand.
A major part of this growth involves modernizing platforms and improving online customer interactions. Expert insights indicate a noticeable rise in investments towards AI and machine learning technologies. These enhancements target underwriting, claims processing, and automating customer service.
"Tech spending currently represents about 10 to 15 percent of expenses, increasing from roughly 5 to 6 percent five years ago," stated Krishnan Badrinath, Head for Technology & Innovation at Tata AIG General Insurance. He noted, "Cloud technology is a key area of investment. Recently, AI has gained traction, with companies like ours exploring generative AI."
Insiders pointed out that integrating Internet of Things (IoT) technologies has further driven technology spending. This integration, especially in telematics and health monitoring, allows insurers to better assess risk and enhance service offerings. The shift to Cloud computing has necessitated significant investments in Cloud infrastructure and services. Such investments improve scalability and flexibility for insurers. Moreover, advanced analytics tools are being adopted to provide more profound insights into customer behaviors and risk assessments.
According to Sharad Mathur, MD & CEO of Universal Sompo General Insurance, "Technology spending in the insurance sector generally ranges from 5 to 12 percent of total expenses." He added, "Factors such as company size, technological maturity, and strategic priorities affect this percentage." Insurers undergoing digital transformations typically hover towards the higher end of this range, especially during significant investment periods.
Mathur continued, "We plan to boost our IT investments as part of our long-term initiatives. On average, we expect technology spending to increase by 15 to 20 percent annually over the upcoming years to remain competitive and meet evolving customer expectations."
Increased digital transactions also necessitate investments in cybersecurity. This ensures the protection of sensitive data and compliance with regulations. Recently, a data breach at Star Health and Allied Insurance affected 31 million customers, with sensitive data reportedly put up for sale on Telegram.
Experts have raised concerns. They contend that despite hefty investments, insurance companies may still lag in adequacy compared to dark web investments. "Cybersecurity funding is crucial, given the escalation of dark web hacker attacks. The dark web may overshadow our cybersecurity efforts," stated Amit Roy, Partner & Leader - Insurance & Allied Businesses at PwC.
Roy reported, "Recent serious incidents have prompted insurers to take data protection seriously. Major investments are now being made. Things are improving continuously."
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