ISG Survey: Inflation and Recession Will Accelerate Digital Transformation in the European Insurance Industry
Three-quarters of European insurance industry leaders say geopolitical tensions, persistently high inflation and the threat of recession will drive their companies to accelerate their digital transformation programs in the coming year, a new survey from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm, finds.
The ISG “Pulse Check” survey, conducted in the third quarter of 2022, surveyed 200 business decision-makers and IT experts in the European insurance industry.
Europe’s insurance companies are facing a “perfect storm“ of declining premium income, growing operating costs, emerging competition, rising climate and cyber risk and an ever-tightening regulatory environment, ISG says, forcing them to accelerate changes to their business models.
“Insurance companies are investing aggressively in digitally focused business models to create more opportunities for growth,” said Anna Medkouri, ISG partner, insurance, for EMEA. “Our survey results found insurers are turning to technology solutions and partnerships in the technology sector to help achieve this goal—a trend we anticipate will continue for the foreseeable future.”
Attracting new customers, improving customer retention and optimizing pricing and technology are the top initiatives for insurers, the survey found. Ninety-four percent of survey respondents said winning new customers will be a priority in the next two years, followed by improving customer retention (79 percent), improving customer pricing (78 percent) and developing digital business channels (77 percent).
Cutting costs and simplifying existing infrastructure is also a priority for European insurers, with 67 percent of respondents highlighting the urgency of replacing legacy systems for future readiness. Many insurers are decommissioning legacy systems, rationalizing application portfolios, heavily streamlining products, and migrating workloads and systems to cloud-based solutions and digital platforms.
Almost six out of 10 respondents (59 percent) are actively pursuing vendor consolidation for improved performance, and 74 percent said they will increase outsourcing to add value, improve agility and lower costs, by expanding the scope of outsourcing to cover primary business processes, such as underwriting, claims settlement and third-party administration agreements.
“Insurers are looking to specialized providers to help upgrade legacy technology ecosystems that hamper their ability to compete with disruptors and born-in-the-cloud insurance providers,” Medkouri said. “The next three years will be critical for insurance companies as more technology penetrates the value chain and customers expect digitally evolved experiences.”
For the first time in this survey series, sustainability was among the top five priorities for insurance companies.
“European insurers are pursuing ESG strategies and mobilizing technology investments and strategic alliances to minimize the impact of climate change, enhance their reputation and increase their shareholder value,” Medkouri said.
Four out of five insurers say they have plans to take advantage of the emerging world of the Metaverse and Web 3.0. However, the scale of this investment is expected to remain small in the next few years, the survey found.
The ISG “Pulse Check – State of European Insurance Industry 2022” report is available for download on this website.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 800 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,300 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
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