Insurance Business ReviewDECEMBER 20258By Martin Thormählen, Member of Staff, Munich Re[ETR: MUV2]The insurance industry will only harness the power of digitalization, including AI, when organizations start to embrace the technological opportunities, get the priorities right, and rigorously invest in it ­ including keeping the company's data and IT assets safe. The digital opportunities in insurance are often seen from the outside through the lens of our customers: And there, the world has changed decisively in the past decade. Apps open up via facial recognition, the cover is bought when needed and easily mobile paid, image recognition helps in claims dialogues, and customer service is optimized via speech-to-text, ChatGPT, or other large language models. But the technologization of our business model does not stop at the customer interface. Rather, what is digital is expanding insurers' capabilities far into core processes. But it also brings new challenges to it. Insurance in many lines of business comes with high competition while margins are relatively low. Markets are saturated, and customer acquisition costs are high. Being able to attract the right customer with the right risk profile is paramount to staying profitable. With demographic change, this challenge will inevitably become critical to the success of all insurers. While the senior generations are more unlikely to switch their insurance provider, insureds who have grown up in a digital world, such as Millennials and GenZs, want convenience when buying insurance as they do when shopping for shoes online. They care about value for money and want products they clearly understand. That revolution in how insurance is sought after is why the digital distribution model, besides tied agents, will continue to grow, why pricing excellence and exposure management must be improved, and why a new data function is essential for the above and to be a trustful source for machine learning use cases. New digital channel partners, brokers, agents, and TPAs continue to invest in back-end automation and API-driven business models. The underlying architecture of the insurers needs to fit in, as three examples show: Price Comparison Websites (PCW) Price is the decisive criterion for many customers. Hence the ability to react immediately to market changes is the most important aspect for insurers when working with PCWs: once competitors change their rates, insurers need to react within hours - to avoid losing sales or, conversely, to avoid CREDO OF A CTO: ONLY RELEVANT TECHNOLOGY LEVERAGES INSURER'S CORE COMPETENCIES IN MY OPINION
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