Artificial intelligence, automation, lightweight cloud systems – insurance technology is at the dawn of an exciting new era. With most investment and innovation to date having traditionally taken place in advanced economies, emerging market reinsurers can now take advantage.
Even amid the challenges of the pandemic, ongoing conflicts, energy-price volatility and high inflation, the outlook is very positive for emerging market reinsurers who, excluding China, enjoy world-leading forecasts for premium growth rates in both life and non-life and continue to attract traditional and alternative capital and foreign investment.
By investing wisely in the latest technologies and learning lessons from reinsurers in more advanced economies, emerging market players can fast-track their evolutions and potentially outperform. Here are five advantages emerging reinsurers have over carriers in developed economies when it comes to optimising technology:
1. Less shackled by legacy systems
One of the biggest drags on performance among reinsurers in developed economies is dependency on outdated core systems. Many are weighed down by the technology debt of on-premise legacy technology as opposed to latest cloud systems or employ a hybrid approach.
Over the years, millions have been spent by established reinsurers on tech transformation projects with mixed success. Emerging market reinsurers have observed what works and what doesn’t and can take these learnings into their own digital transformations using the very latest tools available. By investing in modern cloud-based systems, they can work agile and seamlessly, take advantage of emerging ecosystems, capture data and automate more elements of their business.
2. Cost of change is less of an issue
Traditional reinsurers in advanced markets have often been held back because the cost of change is such a barrier to innovation. Emerging markets do not have this burden of sunk investment and can therefore adopt today’s digital best practices and take advantage of tech which some advanced markets may struggle to through custom, inertia or previous investment.
This includes, for example, tech that enables them to participate in emerging placing platforms and ecosystems to share risk information and capture data from distribution partners, as well as disruptive technologies that leverage AI to support, gather and analyse data more efficiently, send and receive data more accurately and reduce costs.
3. Local knowledge can drive innovation
Emerging market reinsurers have detailed knowledge in their local markets and technology can enable them to build products and services around their customer needs. While the advanced markets have developed technologies and processes, these are based on the histories of those markets and may not always be appropriate in local circumstances. Many are also entrenched in legacy systems and processes that are ripe for automation by more nimble local competitors.
4. Equipping a flexible workforce
Established carriers in developed economies are embracing a ‘work from anywhere’ approach to technology. Emerging market reinsurers can learn from this. As many do not have to worry about legacy systems, they can use tech that supports a hybrid working model to grow rapidly, adapt their workplace and lower fixed costs.
5. Increased appetite for new products
Rapidly expanding populations in emerging markets are embracing online and remote working, driving growing appetite for new products, such as cyber. Fitch Ratings predicted the health insurance protection gap in emerging markets may close in light of the pandemic, while demand for mobile and tablet-friendly solutions continues to soar in rapidly modernising emerging economies. These products are all well-suited for flexible, cloud-based technology systems that can be tailored to fit local customer needs.
In summary, technology is driving reinsurance more than ever and can be the bedrock for a successful decade of premium growth in the emerging markets. By learning lessons from advanced markets and partnering with the technology providers, emerging market reinsurers could be poised to deliver exceptional returns if the risks can be successfully navigated.
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