Economic upheaval and innovative startups are forcing insurance carriers to replace antiquated technology, ISG Provider Lens report says
Many insurance carriers in the U.S. are updating their core technology platforms to fend off new competitors and overcome growing macroeconomic challenges, according to a new research report published by Information Services Group, a leading global technology research and advisory firm.
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“The same data can help them identify both opportunities and risks, leading to better decision-making.”
The 2023 ISG Provider Lens™ Insurance Platform Solutions report for the U.S. finds that carriers of both life and retirement (L&R) and property and casualty (P&C) insurance have begun to recognize that legacy systems, often internally developed and decades old, are major impediments to innovation. In an environment of extreme weather and climate change, inflation and related economic disruptions, they are under growing pressure to become more agile.
“Insurers are no longer deciding whether to modernize. It’s only a question of when and how fast,” said Paul Schreiner, partner and Americas Insurance Industry lead, at ISG. “The sooner they move, the more they stand to gain.”
Adopting a modern core insurance system is critical to carriers’ commercial survival, the report says. Insurers need updated technology to make almost any change aimed at improving productivity and enabling growth, including expanding product lines, locking down cybersecurity, reducing workloads and preparing for disaster recovery. As long as outdated platforms remain, IT costs and performance issues will increase.
Many U.S. insurance carriers in both sectors are partnering with service providers to digitally reinvent themselves by layering new technologies on top of old systems via APIs, the report says. These solutions deliver some quick wins but only represent interim fixes while the companies craft new operating models.
Digital-native startups with superior data and analytics capabilities are offering new insurance products that in many cases provide better customer experiences, ISG says. Traditional insurers’ legacy operating models and technology stacks often are too rigid to ingest and use the data required for new product development and successful risk management.
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“Modernization lets carriers tap into a wealth of consumer information to craft products and services for specific customers’ needs,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “The same data can help them identify both opportunities and risks, leading to better decision-making.”
The report also examines other trends in the U.S. insurance industry, including the need to shift from risk reduction to risk removal and to build more consumer trust.
For more insights into the challenges facing U.S. insurers, including skills shortages and ingrained resistance to change, and advice on how best to move forward, see the ISG Provider Lens™ Focal Points briefing here.
The 2023 ISG Provider Lens™ Insurance Platform Solutions report for the U.S. evaluates the capabilities of 38 providers across two quadrants: Life and Retirement Insurance Platform Solutions and Property and Casualty Insurance Platform Solutions.
The report names DXC Technology, EIS and Majesco as Leaders in both quadrants. It names Accenture ALIP, Britecore, Duck Creek, EXL LifePRO, FINEOS, Guidewire, Infosys McCamish, INSTANDA, Insurity, OneShield, Oracle OIAP, Verisk FAST and Vitech as Leaders in one quadrant each.
In addition, Mphasis Wynsure and Solartis are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
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