Why Insurance Lags Behind Other Industries with the Integration of New Tech
New technology can be daunting; there is always something new coming on the market. This makes it overwhelming to decide whether new tech is worth the money in hopes that it will improve your business processes, make your employees more efficient, and increase your bottom line. Oftentimes, new ideas, solutions, and tools are overlooked in the insurance industry, but why would an industry as a whole look the other way when technological advances could propel their business forward? Specific reasons vary from agency to agency, yet most have these common themes.
Why Insurance Lags Behind Other Industries with the Integration of New Tech
Reason #1 - Nature of the Industry
Insurance is a heavily regulated industry, causing change to happen slowly. Any changes have to be thoroughly calculated to ensure risks are mitigated and to guarantee compliancy with consumer protection laws. Recently, regulations that were designed for banks have been applied to insurance, such as the Safeguards Rule in the GLBA and the need to have more capital in reserve to survive a financial crisis. Another regulation concern facing the industry is the need for global standards. This has resulted in the reluctancy to take on changes with new products and services, so that insurers do not have to deal with the complex compliance and licensing requirements.
The insurance industry has been around for a very long time, since the 1700’s in the US. In the beginning, many insurance companies failed because of poor management, inadequate distribution systems, and little effective regulation. Over time, the insurance sector has matured and has developed into a conservative culture that is consistent and predictable. Without consistency and predictability, the industry will be in the same sinking boat as it was in the beginning. As a result of those two characteristics, change is difficult and slow-coming when everything is expected to be steady and foreseeable.
See also: Understanding the Proposed Changes to the Safeguards Rule and Who It Affects
Reason #2 - Natural Tendencies of Risk Management Professionals
The nature of the industry is to help eliminate risks and/or spread risks from individuals to the larger community, so it makes sense that those working in the industry have a natural tendency to avoid or limit risk in their lives. Having this mindset can be inferior to innovation, as innovation thrives on risk. Yet, innovation is more than just new technologies and solutions, it starts with mindset, attitudes, and behaviors. So, insurance professionals lacking in that area will likely not take on changes that could push their business forward. When you have multiple persons in a company that lack an innovative mindset, in turn your agency lacks the indicators of an innovative organization. Such as dedicated budgets to research and development, formal strategies to execute ideas, executive-level support, and the performance metrics needed. Also, many agencies are complacent with the way they do business and believe it is the correct way, as it has been for so long. Which can make it hard to alter the path to success when it has been consistent for so long.
Reason #3 - Cost
Another reason the insurance industry is slow to adopt the integration of new technology is because of cost. The high running costs of legacy systems results in a lower budget for innovation. That money must come somewhere, right? Not to mention the cost to upgrade tech can be expensive…well sometimes, see more on this below “How an MSP Can Help.” When handling technology upgrades yourself, the upfront cost will make you want to turn the other way and not look back. Consequently, this is only holding your agency back in the long-term. I.T costs for outdated technology costs nearly double to fix a system that is older than four years, if they can even fix it (Orion tech). As well as a decrease in productivity, employee retention, and customer satisfaction. Saving money initially may seem of higher importance than updating your agency’s technology, but your agency will soon face the dangers associated with using outdated technology.
More on the dangers of outdated technology here.
The Importance of New Tech
So, why should new technology be so important to insurers?
Here’s a few reasons why:
To attract customers and employees
Aid in convenience, customer experience, and customer satisfaction
Use data and analytics to target profitable customers and cross-sell more efficiently
Minimize acquisition and service unit costs
Offer more products and services
Technology is not going away and will only continue to grow. Resisting change now will only proceed to put your business further behind those that chose to invest sooner.
How an MSP Can Help
Earlier I mentioned cost as a reason for insurance being slow to adopt new technology. This is the case when paying for upfront costs yourself, but by partnering with an MSP it doesn’t have to be. With an MSP, like Omega Computer Services, your agency can get a full technology refresh every three years included in your flat-rate monthly fee. You don’t even have to worry about installing anything! There isn’t a more affordable and easier solution that that.
Learn more on how an MSP can help your agency with new technology here.
