Life insurers have been spending heavily on computers and software for generations, and they’re still hungry for more.
As hard as times may be, most of the 36 life insurers that participated in a recent Novarica survey said they’re planning to maintain their information technology (IT) budgets, and several said they’re on track to increase IT spending.
Srikant Venkatesh, a strategic client executive for banking, financial services and insurance at Tata Consultancy Services (TCS), helps meet that demand.
TCS is an arm of Tata Group, a Mumbai-based company that worked in the 1980s to introduce the idea that U.S. and European companies could farm some of their IT and back office support work out to companies in India.
TCS is now one of the biggest IT companies in the world, without about 446,000 employees and the equivalent of $21 billion in 2019 annual revenue.
One of the company’s major projects is an effort to help Aegon N.V. modernize the systems supporting administration of Transamerica’s U.S. insurance and annuity business lines.
Here are seven things Venkatesh said about how he sees life insurers’ and other insurers’ technology needs, drawn from a telephone interview conducted last week.
1.Banking tech and insurtech are different.
Insurance “is definitely behind the banking industry,” Venkatesh said.
That’s especially true when insurers are compared with smaller, more agile banking companies that have no legacy systems to worry about, he said.
2. Life insurers and other insurers are different.
Venkatesh said the state of life insurers’ systems is different partly because what life insurers do is different. In life insurance, he said, “all the companies are built on a promise that will be kept 70 years from now.”
3. Life insurers are made to buy insurtech companies.
Big life insurers have plenty of great tech people, and they have plenty of data, Venkatesh said.
“They’re data rich and information poor,” he said.
One reason life insurers tend to have such poor information is that they have a hard time getting data out of their old systems and cleaning up the data in such a way that it’s fit for analysis, he said.
Insurtech companies, meanwhile, may have great tools for analyzing data but little data.
When a life insurer acquires an insurtech company, that’s a often a good way to help a team with great life insurance data analysis tools get access to a big pool of life insurance company data, he said.
4. The poor state of life insurers’ may be one reason the term ‘artificial intelligence’ comes up so much.
Most current artificial intelligence (AI) systems can’t actually learn to play video games, make a good cherry pie or take over the world by talking to people.
All they can really do is find patterns in data.
But AI systems and machine learning systems can be very useful companies that are trying extract data from old, inconsistently formatted pools of data, Venkatesh said.
5. TCS can see signs of the COVID-19 pandemic’s effects on life insurance sales.
One potentially worrisome Venkatesh sees is an increase in average life insurance policy face values.
That might be a sign that life insurers are having trouble serving middle-market customers, he said.
6. Insurtech may be affecting some life insurers’ ability to adapt to the new, pandemic period normal.
Venkatesh said he thinks that life insurers were slow, as pandemic-related shelter-in-place rules took effect, but that life insurers are now getting a lot more inquiries about life insurance.
Some life insurers are prepared to follow up on those leads, and some seem to be having a hard time with handling the increased volume of inquiries, Venkatesh said.
7. The pandemic has highlighted a reason for life insurers to outsource.
Venkatesh said he continues to talk about the role outsourcing can play in helping life insurers and other companies focus on what makes them unique.
Now, he said, insurers are more conscious of another reason for IT outsourcing.
“It will help them become more resilient,” Venkatesh said. “It’s almost like a form of risk transfer.”
— Read Investor Money Is Reshaping the Insurtech Market: Idea File, on ThinkAdvisor.