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Each year members of our Gartner insurance team speak with hundreds of clients. Gartner surveys CIOs globally on an annual basis as well. Our team also tracks public announcements of IT initiatives by the world’s largest insurers. What’s on the mind of insurance CIOs and business leaders? Three major themes have emerged.
First, InsurTechs continue to be top of mind for insurance CIOs. However there has been a noticeable shift in focus. Insurers are less fearful of their business models being disrupted by InsurTechs, and are at the moment looking to them as a means of innovation and as a source of new capabilities that can complement their internal systems. Second, there is a wide range of engagement models with InsurTechs including direct investment, creation of venture capital funds, co-development, and participation in incubators. This provides options for CIOs to engage with InsurTechs based on their company’s size, risk tolerance, and availability of capital and skilled resources. Insurance CIOs should grow their sources of potential innovation by establishing a process to engage InsurTechs. For beginners, participate in a local incubator or attend an InsureTech industry event. Identify startups who look promising and develop a relationship with them to learn, first hand, how they interoperate with insurance companies.
Second, as Kimberly Harris-Ferrante mentioned last month, investment in analytics and in the use of artificial intelligence is heavy and growing. There has been an uptick in publicly announced AI and analytics initiatives. Initiatives are shifting from planning to actual experimentation and deployment. There is growing adoption not only within InsurTechs, but with incumbent insurers as well. This is a good sign that AI is moving, even slightly, up the adoption curve. Discerning the hype from the reality of AI is a continuing challenge for IT leaders. As a start, CIOs should be actively monitoring the InsurTech and pure play AI vendor markets for emerging solutions that might align with your mission critical priorities.
No. 1 Topic
Third, legacy modernization is the number-one topic of Gartner clients. Spurred in part by the growing cost of running IT and the increased publicity around InsurTechs and how they might be integrated into insurance company value chains; CIOs have a renewed sense of urgency regarding legacy modernization. Legacy modernization and core systems replacement is increasingly viewed as an essential foundation for digital transformation. This points to a close relationship between the need for legacy modernization and digital transformation. Gartner sees these trends continuing.
Emerging technologies such as AI are at the very beginning of adoption by insurance companies, and the InsurTech phenomenon is still in its early phases. At the same time, according to Gartner’s digital insurance maturity assessment, 52 percent of insurance IT executives are still running more than half of their core insurance applications on legacy technology. As InsurTechs provide more off-the-self capabilities in the cloud, insurers deploy modern core systems, and both look heavily to emerging technology such as artificial intelligence, Gartner expects to see these themes blend together in new and exciting combinations that we are only beginning to understand.