Why technology is crucial for the modern insurance sector

Research by Moody’s has found the quick uptake of technology by firms and consumers during the pandemic has revealed its vital importance to the insurance industry.

According to Reinsurance News, the company’s research showed that insurers increasingly use data from social media and devices connected to the internet to gain insights into policyholder behaviour – which subsequently supports underwriting margins.

The publication added that the spread of connected devices – such as driverless cars and wearable devices – also brings new risks, such as those surrounding cybersecurity and software malfunction. However, these may be more difficult for insurers to cover as multiple interconnections between smart devices will increase event correlation, making big losses more likely.

Experts from Moody’s underlined that they expect tech-driven disruption to be ‘relatively gradual’, providing innovative players with time to adapt.

Moody’s VP-Senior Analyst Helena Kingsley-Tomkins said, “To remain competitive, insurers may seek distribution partnerships with Big Tech groups, or with dominant players in adjacent sectors such as car manufacturing.

“But insurers risk profit margin erosion if they become reliant on their partners to generate sales and gradually lose control over their customer relationships. In a more severe scenario, Big Tech players or auto manufacturers may even start providing insurance themselves, displacing incumbents from some profitable markets.”

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