Emerging Challenges in the Insurance Industry

The insurance industry will reward those with agility during the next ten years. Change will be required more quickly than in previous decades due to factors such as the economy and artificial intelligence.

Fremont, CA: Working with old systems or stringent standards can make it difficult to adjust quickly to company changes. However, taking the necessary actions to advance your business can be crucial to maintaining its competitiveness.

Here are some challenges that are likely to emerge in the insurance industry in the upcoming years:

The Technical Transformation of Core Systems

The next ten years will require more significant changes to the legacy systems you employ, even if you've made little progress updating specific areas of your company. You won't be able to stay up with industry and scale if you update just a handful at a time.  

All essential systems, such as policyholder portals, claims management software, and administration and underwriting programs, should be current and cloud-based.

You won't be able to fully utilize the newest technology (like AI) if you don't complete this. Additionally, you'll lag behind rivals that have made system investments and are working more productively.

Complex Revenue Recognition Challenges

Although this problem is not new, insurance businesses still struggle with financial reporting, especially revenue recognition. That process involves unearned premiums, policy durations, and claim reserves, all of which are subject to change.  

The intricacy of the components involved in financial reporting directly impacts your bottom line; thus, they must be handled carefully and with precise estimation. Additionally, things might be more challenging if you have experienced any kind of M&A transaction.

Catastrophic Claims Management

Catastrophic claims management events, whether caused by natural or artificial disasters, can significantly burden the insurance sector. Claims in this area are on the rise due to factors including shifting weather patterns and the prospect of increased violence, so it's critical to make sure your business is prepared.

Data Silos Hindering Collaboration

You're more likely to experience problems with data integration if you've just made minor system upgrades. There may be inefficiencies if your old and new systems don't communicate well. For instance, your CRM and policy management/claims solutions don't exchange data.  

This can result in redundant or inconsistent data since different departments may gather data differently. Additionally, it may slow down data sharing because your team may not be able to utilize the new technology's features fully.

Price-Based Competition

Increasing labor, material, and other cost claims might make providing clients with competitive pricing difficult. However, the Internet has expanded the reach of insurance companies, which has only led to a surge in price-based competition.  

Many of those online competitors' value propositions have been commoditization, with an emphasis on price. When you compete with these businesses, you risk losing money if you can't support price reductions internally or ignite a risky price war.