May 19, 2016 by Canadian Underwriter
Big data and analytics, cloud computing, mobility solutions and tech start-up firms are among the emerging trends driving the insurance IT spending market in the United States, according to global technology research and advisory company Technavio.
Technavio’s report on the insurance IT spending market in the U.S. by technology (IT services, hardware and software) and by industries (life and health and property and casualty) provides an analysis of the most important trends expected to affect the market outlook from 2016 to 2020. Technavio defines an emerging trend as a factor that has the potential to significantly impact the market and contribute to its growth or decline.
According to the report, released on Wednesday, the top four emerging trends driving the U.S. market are increased adoption of big data and analytics, intensification of cloud computing, prevalence of mobility solutions and the emergence of insurance tech start-up firms. Technavio predicts that the insurance IT spending market in the U.S. will grow at a compound annual growth rate of around 3% by 2020.
“Insurance firms in the U.S. are early adopters of advanced IT solutions and are consistently investing in key technologies to enhance policyholder experience,” Amit Sharma, a lead analyst from Technavio, specializing in research on IT professional services sector, said in a statement. “The insurance IT market in the U.S. is expected to grow at a significant rate with increased shipment of smartphones, connected devices, and networking equipment.”
The report said that growing volume, variety and velocity of online data require analytics solutions such as social media analytics to understand consumer buying behavior related to insurance products. “Insurance firms are increasingly adopting social media monitoring and analytical tools to increase the sales of insurance products and also to analyze customer sentiments related to insurance products,” the statement noted.
The adoption of cloud computing solutions in the financial industry in the U.S. has increased to implement flexible, scalable and cost-effective IT solutions. Cloud-based solutions help insurance firms to decrease their total cost of ownership by reducing the upfront installation costs of IT systems, the statement noted. Firms subscribe to cloud-based solutions to shift from on premise to software-as-a-service-based deployment model. Insurance firms shift to cloud-based IT infrastructure model to increase flexibility in IT resource utilization and attain cost-effectiveness through the pay-per-use pricing model.
Increased penetration of smartphone adoption among consumers and insurers in the U.S. has revamped the insurance sector, the statement added, noting that insurers offer mobile applications to access insurance services using smartphones and tablets. The ease of accessibility and convenience factor are the major factors behind the increased adoption of mobility solutions in the insurance sector in the U.S. Mobile applications simplify insurance-related activities such as online transactions, premium payments and claim management.
Mobile app developers are adding new features such as real-time chat between policyholders and insurers to resolve customer grievances quickly, Technavio noted. “Software developers are consistently developing functionality of mobile applications to make them user-friendly for value addition,” said Sharma.
The last emerging trend – the entrance of start-up firms into the insurance industry – is helping to simplify the insurance operational process. With the advent of financial technology (also known as FinTech) in the banking, financial services, and insurance sector of the U.S., the demand for IT systems to manage operations has increased. Start-up firms dominate the FinTech industry as insurance firms sign a large number of deals to procure IT systems to manage their operational processes.