Majority of survey respondents look to strengthen and expand their customer base with digital offerings and personalization
Payment channels, AR/VR, AI and cybersecurity are top investment areas
FRANKFURT, Germany–(BUSINESS WIRE)–$III #AI–With the threat of recession still looming, two-thirds of European insurance industry leaders plan to expedite their digitalization programs to improve the customer journey and enhance operational efficiencies, according to new survey research from Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.
The ISG “Pulse Check – State of the European Insurance Industry” survey, conducted in the fourth quarter of 2023, surveyed nearly 270 business decision-makers and IT leaders in the European insurance industry and found 66 percent plan to increase their digital investments in the next two years, including 68 percent who say they will invest in payment channels, 63 percent each in cybersecurity and augmented and virtual reality, and 59 percent in artificial intelligence.
Survey participants said their two main strategic priorities are acquiring new customers, identified as a top priority by 85 percent of respondents, and leveraging digital channels to develop new business opportunities (74 percent). Increased investments in digital offerings and personalized customer services will help drive customer acquisition and retention, the ISG report noted.
“’Digital first’ is the focus as European insurers implement next-generation technologies that promise the quickest return on investment for their core businesses and to improve their market position,” said Steve Hall, president of ISG EMEA and the firm’s chief AI officer. “Process and decision automation and data management will help create human-centered, technology-enabled businesses that leverage rapidly evolving digital technology to reshape work, lower costs and improve service. AI will undoubtedly be an additional accelerator.”
The survey found demand for artificial intelligence (AI) is experiencing particularly strong growth. Thirteen percent of respondents report their annual budget for AI is already set at more than €1 million, and six out of ten expect to receive additional funding in 2024. Enterprises indicate they plan to leverage large language models alongside established AI methods such as natural language processing and machine learning.
AI development is still at an early stage for many respondents, with half of companies (50 percent) experimenting with prototypes and only 6 percent actively developing enterprise-wide AI solutions. Eighteen percent of respondents say technologies such as augmented reality (AR) and virtual reality (VR) are being used to reduce business insurance losses through preventive maintenance.
Ninety-one percent of respondents consider improving the effectiveness of customer data management a critical investment priority. Data silos remain a challenge, with only about one-fifth of existing customer data being effectively utilized, according to the ISG research.
Cybersecurity is another area of focus as enterprises increasingly rely on digital infrastructure that may expose assets to business interruption and cyber-attacks. Investments in digital risk management will continue to increase, particularly in cybersecurity and AI, to offer “customer trust” as a key differentiator and meet increasing regulations. Sixty-three percent of respondents expect their cybersecurity budgets to increase between 2024 and 2026 in response to escalating risks and regulatory demands.
“Insurers are prioritizing investments in AI, legacy modernization and IT security. Strategic partnerships can increase access to digital capabilities, process knowledge and specialized talent while expanding market access and sharing development risk,” Hall added. “The share of organizations that see consolidation of their service provider portfolio as a top IT priority is growing significantly, from 59 percent in 2022 to 93 percent in 2023.”
Striking a balance between insourcing and outsourcing is critical given the evolving dynamics of the labor market and the need to attract and retain IT talent, the report said. The percent of survey respondents who plan to invest in insourcing (78 percent) is almost the same as the number who plan to invest in outsourcing (77 percent). Sixty-eight percent of decision-makers see improving talent management as a pressing business imperative.
“As tech companies and insurtech startups become more attractive employers for young, tech-savvy talent, traditional carriers are challenged to attract and retain top talent,” Hall concluded. “High-quality talent management is becoming a critical factor in meeting transformative technology demands.”
The ISG “Pulse Check – State of European Insurance Industry 2024” report is available for download on this website.
ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.
Will Thoretz, ISG
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Philipp Jaensch, ISG
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