Impact of Covid-19 On Insurance Budgets and Investments in the US
Insurance is built around calculated risk, but even the most diligent of analysts cannot anticipate certain events. The Covid-19 pandemic completely reshaped ‘Business as Usual. As insurers come back to the office, they can take a pat on their back for how they have risen up to the challenge — some better than others. They were the ones who had already made critical investments in networks, applications, and more, it stood them in good stead when disaster struck. Still, a number of gaps and vulnerabilities were revealed last year. This was particularly in the areas of technology supporting customer experience through mobile apps and improving customer data analytics.
It is apparent that moving to more virtual operations is here to stay. While insurance CFOs are challenged by reduced budgets, technology is a vital investment. It has become evident that spending millions for just-about-average quality is a luxury not acceptable in the post-pandemic world. Stakeholders want to prioritize investment to develop services that can drive revenue.
Changing outlook towards insurtech investments
Despite insurtech gaining greater importance than ever before, US insurers are taking a different approach to technology investments. Like almost all companies across the board, insurance carriers have had to deal with budget cuts due to added expenditures. So while the percentage of budgets allocated to technology modernization might have stayed constant or even increased, there is higher scrutiny on how exactly the money is spent. As a result, CIOs have shifted their focus towards finding the insurtech solution that offers them the highest value on their investment.
It’s no longer about who the biggest player is, but how the solution can fuel long-term growth and innovation at the company. This has posed a threat to several insurtech solutions that might be following unsustainable pricing models. At the same time, it presents an opportunity for innovative insurtech companies that provide high-quality solutions at a reasonable cost.
Additionally, the COVID-19 pandemic acted as a catalyst for several planned technology investments. Pipeline process re-engineering plans of investing in a more sophisticated cloud server or ESM platform, for example, have suddenly become even more critical as companies needed to pivot to a safer and more efficient way of working. This is reflected in the way CTO’s are choosing to allocate their technology budgets. One survey, conducted by Deloitte, found that around 59% of approved budgets are being spent on technology that can improve the efficiency of day-to-day operations such as automation and remote working tools. Only 15% of budgets are reportedly being spent on higher-level business initiatives that can drive innovation in the long term.
Also read: Why CIOs Say They Will Spend 3.7% of Premium on Tech in 2021
Read more about 2021 and beyond in the blog by SimpleSolve’s founder, Antony Xavier, here…
Originally published at https://www.simplesolve.com on October 11, 2021.
