Insurers are focusing on a few key areas to bring their technology up to speed with other industries, according to AM Best.

About 33% of insurers surveyed are working on technology-based ways to enhance customer experiences, the ratings agency says.

“Updating and maintaining their customer technology platforms will remain crucial to insurers’ ability to reach a customer base that is increasingly tech-savvy and expects insurers to operate on a 24/7 schedule like other service providers such as banks and online shops,” it says.

Almost 30% of respondents are prioritising technological improvements to their legacy administrative and claims systems. Insurers that grow through acquisitions find integrating claims, reserves, underwriting and pricing a challenge, and often do not recognise how vital it is or how difficult it can be.

“Outdated and disparate systems, standalone spreadsheets that rely on individual memories, duplication of data – these all create problems with data quality and consistency, and may lead to bad decisions if insurers are relying on bad data,” AM Best says.

Legacy systems also lack strong cyber security, presenting operational and reputational risks.

Artificial intelligence can increase sales while predictive analytics can lower expenses through improved claims management, fraud detection, optimised auditing, loss control and billing.

About 23% of insurers surveyed are focusing on data aggregation and mining, while about 10% are creating new underwriting models.

AM Best also says the growth of social media provides new opportunities for direct sales, meaning insurers will rely less on agents and brokers. Insurers and insurtechs could be a “powerful” combination and lead to an inflection point that changes the typical insurance model.

Insurtechs have the innovative analytics to enhance insurance processes but lack scale, while insurers have scale and rich data but lack knowledge about computing and machine learning.

AM Best says insurance CEOs must have in-depth knowledge of how technology relates to their business operation and strategy, rather than rely on IT departments.