The majority of global insurers recognise that innovation is critical to their organisations’ success, according to a report from A.M. Best.
More than 80 percent of the 459 insurers across 48 markets that provided responses for A.M. Best’s 2018 special report on innovation believe that innovation is moderately to extremely critical to the success of their organisation.
A.M. Best believes innovation is becoming more and more critical to the success and long-term financial strength of an insurer and that innovation may play a more direct role in its ratings process in the future.
A.M. Best wrote: “Historically, A.M. Best has capture innovation indirectly through the building blocks of its rating process.”
“However, A.M. Best will be reviewing its Best’s Credit Rating Methodology (BCRM) to consider including innovation explicitly in the rating process.”
The report showed that 22 percent of respondents felt that addressing customer needs was the primary reason why innovation is important to their organisation, while 21 percent said it was to gain a competitive advantage and 16 percent said it was to realise operational efficiencies.
The majority of insurers (61 percent) suggested that the lack of human capital or specialised talent is the biggest challenge to innovation.
The report noted that as technology evolves, “insurers will need to create a culture that motivates younger people to join and help them innovate and create new products to address changing demographics”.
According to A.M. Best, the needs of insureds are changing and insurers will have to continue to adapt and innovate to remain relevant.
The ratings agency commented: “Technology is the driving force behind many innovative developments.”
“Advances in the Internet of Things, blockchain, machine learning, artificial intelligence, and big data are playing increasingly significant roles in insurance.”
“Regulation also has its role to play, not just in establishing ground rules that protect both insurers and consumers, but in encouraging innovation as well.”
The report concluded: “Given the accelerating pace and diversity of technological and societal changes, it’s critical that all stakeholders–insurers, consumers, and regulators–keep abreast of developments.”
“A deeper understanding of these changes will allow all of us to reap the myriad benefits of innovation.”
