December 13, 2017 by David Gambrill, Editor-in-Chief
For all of the discussion about artificial intelligence, big data and the Internet of Things (IoT), in the real world of IT, Canadian property and casualty insurance companies are currently investing in projects that will allow their core legacy technologies to provide more consumer-centric services in the future.
“We always look to the future to find the most interesting topics that the insurance companies are seeing right now,” said Sven Roehl of msg global solutions Canada. “But when it really comes to the money that an insurance company has to spend over the year in IT, in technology, it’s usually 90 to 95% is going to what we call ‘the basement’ — it’s literally going into the legacy environment.”
Roehl facilitates The Cookhouse Lab, Toronto’s first insuretech open innovation lab, a forum in which Canadian property and casualty insurance companies to develop IT solutions. And so what kinds of tech are insurance companies working on right now?
Insurance companies are primarily looking into cloud services — application programming interface (API) services that can be embedded into the existing landscape, for example. In several Cookhouse Lab projects, multiple p&c insurers are working together to explore industry tech solutions for particular opportunities.
“They are looking into commerce solutions so they are ready to compete with organizations like banks, for example, that have created a very good online experience for their customers,” Roehl said.
While working on cloud-based solutions doesn’t really sound cutting-edge to people reading all about the latest and greatest technologies, it’s a necessary first step to providing more customer-centric services in the future, Roehl said of the insurers’ long-term strategies.
“Instead of always building your own or having big databases, you try to get information from third parties by integrating them with the cloud,” Roehl said of the insurer’s strategy. “This requires a lot of work on the IT side, and this is everything that is necessary to get ready for the future.
“All of the work that the insurance companies are doing right now might not seem so significant or visible for the policyholder, but it’s the important steps you need to take to be ready for the future.”
In terms of future opportunities, Deloitte in the U.S. projected in its 2018 Insurance Industry Outlook that insurer spending on cognitive/artificial intelligence technologies is expected to rise 48 per cent globally on a compound annual growth basis over five years, reaching $1.4 billion by 2021.
It’s easy to look at insurers’ global IT budgets and presume the company will be making large investments into the latest and greatest technologies. But a lot of that money is tied up into fixing issues with current legacy systems, which are still in many cases operating in separate silos created for home insurance, for example, and auto insurance.
“It sounds like an insurance company has an IT budget of $100 million and you would say, ‘Wow, they can invest so much in blockchain and other technologies,’ but realistically, they might have only $5 to $10 million, max, to really invest in the new technologies.”