Return of the Guru

Is Technology Really the Answer to Slow Insurance Market Growth?

Ara Trembly
Insurance Experts' Forum, March 10, 2011

In a recent posting by my colleague, Bill Kenealy, it was stated that insurers waiting for an economic rebound to buoy their growth prospects may be deluding themselves, according to a report from New York-based Deloitte.

The report, “Insurance Industry Outlook: High Hurdles Loom in 2011 & Beyond,” says that no matter how well-managed or financially sound a given insurer might be, none are immune to the effects of a sluggish economy.

“Business closures, millions of layoffs, the credit crunch, shrinking disposable income, the decline in new business launches and mounting home foreclosures over the past two years have made top- and bottom-line gains difficult for insurers to achieve,” the report states. “For the property/casualty sector, billions of dollars in insurable risks evaporated during the economic downturn that began in fall 2008, and the slow recovery continues to dampen pricing and premium volume growth today.”

It was also suggested that those carriers who “merely circle the wagons and try to ride the storm rather than invest in technologies that help them address these challenges” will be at a disadvantage. “Technology appears destined to play a far more prominent role within the insurance industry, beyond data management,” the report notes. “Indeed, the effective implementation of a number of technology tools and strategies might be the differentiator many carriers need to stay ahead of their competitors.”

That all seems rather sensible until you consider the reality of the technology environment in insurance. Admittedly, pundits like me have been telling the insurance industry to get up off its comfortable backside and get with it in terms of technology since the 1990s, but despite our best efforts, the industry handles technology in its own, very deliberate way. The Deloitte report may be right about the implementation of tech tools as a means to stay ahead of competitors, but such implementations do not happen overnight, and their cost—in terms of major projects—doesn’t seem to be budgeted for, at least judging by the zero to modest increase in IT spending levels that are forecast.

Yes, we pundits keep warning insurers that they need to do everything faster in order to beat their competitors to the punch on procuring or retaining business. But insurance is not a “gotta have it now” business, and I have yet to see widespread reports of consumers deserting their insurance companies for others who can execute transactions more quickly. Automation will certainly help insurers to process business more quickly and to save money internally, but when it comes to a major technology project, most insurers will think about it so long that when the decision is finally made, the technology itself could be outmoded.

To be certain, some insurers will jump in with automation projects that may well result in a competitive edge that becomes obvious to all. If and when that happens, other insurers will follow suit, but therein lies the key. It could be convincingly argued that insurers as a group all hail from Missouri, since their mantra, especially when it comes to money for technology, is “show me.” And really, that has worked quite well in the past.

Insurers will just have to suffer through this continuing economic malaise like everyone else. A sudden infusion of technology will not be the answer, because sudden moves are not something we do well. Nor are they something we wish to pay for.

Ara C. Trembly ( is the founder of Ara Trembly, The Tech Consultant, and a longtime observer of technology in insurance and financial services.

Readers are encouraged to respond to Ara using the “Add Your Comments” box below. He can also be reached at

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Comments (1)

A good consistent product strategy has always been the key to success. Technology can either increase that success or in the case of a bad product, speed the company to oblivion.

In Show-Me Missouri, we have two companies in direct competition, that both implemented technology for straight through processing. One company adhered to their age old product strategy, using tech to tighten up underwriting, and further segment pricing. The other company, used tech to significantly increase their new business, without tightening underwriting or pricing. The second company went out of business at the end of 2010. The first company has experienced consistent 10-15% growth and the poor economy has actually helped them.

Footnote, the first company also used tech to diversify risk across the state, while the first allowed tech to concentrate risk, causing extensive damage to reserves in storm season.

Posted by: Mica C | March 11, 2011 10:44 AM

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