CHENNAI: Amid rising cyber attacks, the toughest challenge facing insurance companies is adoption of digital technology, followed by market instability and business losses arising from natural disasters, when claims shoot up.
According to industry experts, insurers need to invest in digital technology especially in an era of narrow margins and slow growth. Indian firms, though, have been lagging its global peers in leveraging digital data.
“Global average investment in digital technologies is increasing over the years, while the insurance industry in India is lagging, both in its level of digitalisation and its ability to realise financial returns on its digital investments,” says a CII-PwC report titled ‘Evolving Considerations for the Indian Insurance Industry’.
Digitisation, though, comes with its own challenges. For one, insurance companies must be wary of new modes of fraud in digitisation. While some companies moved their businesses online years ago, many insurers, struggling with legacy technology and outmoded organisational structures. The traditional fraud management system only identifies the fraud, but the modern system also helps prevent it. However, the study noted that the modern approach has some limitations.
It requires maximum usage of data from multiple sources (customer touch points, eco-system, and industry) to derive insights. While insurers are using advanced data analytics to tap into both existing and new troves of data, poor quality data and lack of data access are the primary hindrances to realising the full potential of analytics, says a recent McKinsey report. Also coming in the way are ‘old-school managers’.
“Data access and computing power have expanded at unprecedented rates in the last two to three years, but old habits - and attitudes - die hard,” the report notes. About 85 per cent of respondents to McKinsey’s survey said that while data guides decision making, managers often discount it because they doubt its quality and integrity.
According to the report, a more collaborative work environment that includes analytics experts in business discussions can help “old school” managers understand the power of analytics and make better, more data-driven decisions.