Property and casualty information and technology leaders cite shifting market needs as the biggest potential disruptor over the next five years, a recent survey states, but insurers can get ahead of the issue by making investments in data and analytics.

In a January study, “Top Five Disruptors in the Next Five Years for Insurers,” Novarica says shifting consumer expectations, including a “diminished customer tolerance for delay and complexity,” mean insurers will have to rethink how they offer their products.

A survey accompanying the survey shows the issue is a top-of-mind concern among 57 P&C IT executives polled. Of five factors presented by Novarica, 42 percent of the chief information officers say “shifting market needs” is the biggest potential disruptor to their business.

“Insurance IT leaders are looking at the potential growth of usage-based insurance, simplified products and underwriting processes, channel proliferation, and, especially, a general lack of tolerance for complexity by consumers in either communications or product,” Novarica says.

Insurers predict more direct-to-consumer sales as a result of shifting customer expectations, the Novarica study says, which could cause disruption to the broker and agent community.

Novarica says insurers also have to adapt by incorporating third-party data, including telematics, into their modeling. “They will need to refocus on customer experience in mobile, tablets and social media, and balance regulatory risk with customer preference,” the study states.

Insurance IT leaders also have their eyes on regulatory changes, which was cited as the top potential disruptor by 16 percent of the 57 P&C CIOs polled by Novarica. The concern was even greater among the 15 life and annuity insurer CIOs questioned, with 47 percent of them stating that regulatory changes are the top potential disruptor over the next five years.

Regulatory concern was greatest regarding the implementation of the 2009 healthcare law and the potential actions of the Consumer Financial Protection Bureau. But Novarica says IT executives were also wary of “increasingly assertive state regulators operating in a tight financial environment where insurers can be seen as a potential revenue source.

As far as an insurer response, Novarica says, “Given all of the uncertainty, insurer IT leaders are focusing on the agility of their systems environment to make sure that products and practices can be brought quickly into line with whatever new requirements are imposed by regulators.”

Big Data/analytics placed third on the survey among P&C IT leaders, 14 percent citing this issue as the biggest potential disruptor of the next five years. “Dealing with massive volumes of structured and unstructured data is a considerable technology challenge for which most insurers' IT infrastructures were not designed,” Novarica says.

While Big Data has the potential to re-shape the industry by allowing insurers to compete by processing vast amounts of information better than their peers, Novarica says most of the insurers who view data as the biggest potential disruptor are only in the evaluation and planning stage of how to address the issue and leverage data.

Interestingly, P&C IT leaders were least concerned with increased catastrophes and the financial environment as potential disruptors, with 11 percent and 9 percent of CIOs respectively citing these issues as their top concern.

Special Reports /

Shifting Market Needs Seen as Biggest Potential Business Disruptor, but Challenge Brings Opportunity

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