Investment Rating - The report emphasizes the necessity for insurance companies to modernize their core systems to remain competitive in a rapidly evolving market, indicating a positive investment outlook for companies that successfully implement these changes [4][8][10]. Core Insights - The insurance industry is experiencing a significant transformation driven by the need for customer-centric services, operational efficiency, and the integration of advanced technologies like AI and cloud-based systems [4][10][12]. - Legacy systems are a major barrier to innovation and efficiency, with many companies facing high operational costs and inefficiencies due to outdated technology [8][10][12]. - Successful transformation requires a comprehensive approach that considers business strategy, technology, data, and personnel, rather than solely focusing on technology upgrades [12][14][15]. Summary by Sections Current State of the Industry - Many insurance companies still rely on complex legacy systems, which are costly and inefficient, highlighting the urgent need for transformation [8][10]. - The report discusses the challenges faced by companies in modernizing their core systems, including high costs, project delays, and the risk of failure [13][22]. Drivers for Change - Key drivers for core system replacement include the need for agility, operational efficiency, risk management, and improved user experience [17][20][21]. - The report identifies that modern platforms can enhance flexibility, data management, and customer service, while outdated systems hinder innovation and increase costs [8][20]. Transformation Framework - A structured framework for core system transformation is proposed, emphasizing the importance of aligning business strategy with technology and operational capabilities [14][38]. - The report outlines the critical components necessary for successful transformation, including enterprise architecture, product strategy, and change management [39][50]. Market Trends - The shift towards cloud-based solutions is highlighted as a significant trend, with many vendors moving to offer scalable and flexible platforms [46][48]. - Integration capabilities and the use of AI and automation are becoming increasingly important for optimizing underwriting, claims processing, and customer service [48][49]. Strategic Considerations - The selection of core systems should be based on a strategic framework that considers organizational needs, risk tolerance, and the ability to integrate with existing systems [50][62]. - The report stresses the importance of developing a strong business case for transformation that quantifies financial benefits and aligns with broader digital transformation goals [28][29].

Investment Rating - The report does not explicitly provide an investment rating for the insurance industry Core Insights - The insurance industry is undergoing significant transformation driven by the need to modernize core systems, particularly in response to the rise of artificial intelligence (AI) and customer expectations for digital solutions [3][4][7] - Legacy systems are a major barrier to innovation and operational efficiency, with many insurers facing high costs and inefficiencies due to outdated technology [7][9][10] - Successful transformation requires a holistic approach that integrates business strategy, technology, data, and people, emphasizing the importance of selecting the right core system and system integrator [14][24][44] Summary by Sections Industry Context - Insurers are increasingly reliant on cloud-based core systems to enhance agility and meet modern business needs, as legacy systems hinder speed to market and customer service [3][7][21] - The shift towards AI technologies is reshaping the insurance landscape, necessitating the integration of modern systems to remain competitive [3][8] Transformation Drivers - Key drivers for core system replacement include the need for agility, operational efficiency, risk management, and improved user experience [17][18][20][21] - Insurers face challenges in justifying the business case for transformation, often struggling with the complexity and costs associated with modernizing legacy systems [26][27][28] Implementation Challenges - The transformation process is often likened to "open heart surgery," requiring careful planning and execution to avoid pitfalls such as extended timelines and cost overruns [11][13][14] - Many insurers have experienced varying degrees of success in their transformation initiatives, with some projects facing significant hurdles or even abandonment [13][15] Framework for Success - The report presents a comprehensive framework for successful core system transformation, focusing on business strategy, enterprise architecture, and change management [14][34][37] - Best practices for selecting a core system and engaging a system integrator are highlighted, emphasizing the need for a tailored approach based on organizational needs [14][44][66] Key Trends - The insurance industry is witnessing a trend towards cloud-based platforms, AI integration, and user-friendly interfaces, which are essential for enhancing operational capabilities and customer satisfaction [41][42][45] - Insurers are encouraged to adopt a strategic approach in selecting core systems, considering factors such as functionality, cost, and vendor stability [44][60]

Investment Rating - The report does not explicitly provide an investment rating for the insurance technology industry. Core Insights - The collaboration between insurance companies and insurtechs presents both challenges and opportunities, as both entities have fundamentally different operational styles and goals [2][9]. - The insurtech sector has seen remarkable growth, with approximately 1,700 companies globally and significant investment influx, totaling $7.4 billion in the first half of 2021, surpassing the $7 billion raised in all of 2020 [4]. - Successful partnerships between insurance companies and insurtechs can lead to significant innovations, such as improved fraud detection and risk management processes [5][9]. Summary by Sections Introduction - Insurance companies are attracted to the innovative technology solutions offered by rapidly growing insurtechs, while insurtechs seek partnerships to ensure their growth [2]. Growth of Insurtech - The insurtech industry has experienced astonishing growth, with a notable increase in funding, indicating a strong interest from traditional insurance companies in leveraging new technologies [4]. Partnership Dynamics - Since 2017, around 180 insurtechs have formed partnerships with insurance companies, with 20 to 30 new partnerships emerging quarterly [6]. - The differences in corporate culture and operational practices between traditional insurance companies and insurtechs can create challenges in collaboration [7][8]. Best Practices for Collaboration - Insurance companies must clearly define their innovation needs and avoid focusing solely on technology without aligning it with business objectives [12]. - Establishing a connection mechanism, such as dedicated innovation departments, is crucial for effective collaboration [13]. - The procurement processes of insurance companies can pose challenges for insurtechs, necessitating faster technology reviews and legal setups [14]. Long-term Value Assessment - Evaluating the long-term value of insurtech partnerships is essential, especially if the technology is critical for business development [21]. - Assigning a relationship manager to oversee the partnership can help ensure its success and value generation [22]. Importance of Software Platforms - The significance of common software platforms is increasing, as they facilitate seamless integration between insurtechs and insurance companies, accelerating deployment and reducing training needs [23]. - Guidewire's ecosystem exemplifies how a unified platform can support collaboration and innovation in the insurance sector [30][36].

Investment Rating - The report indicates a growing demand for insurance due to climate change, suggesting a positive investment outlook for the P&C industry as it adapts to new risks and opportunities [2][16]. Core Insights - Climate change is causing an increase in the frequency and severity of natural disasters, leading to a significant rise in insured losses, with global insured losses from natural catastrophes reaching US$89 billion in 2020 [5][9]. - The protection gap between economic and insured losses is widening, driven by a retreat from the market in response to rising losses, which could lead to an unacceptable level of "uninsurable risks" [11][14]. - Insurers must embrace nontraditional data and modeling techniques to better assess risks associated with climate change, as reliance on historical data is becoming less effective [20][21]. Summary by Sections The Protection Gap - Natural disasters are occurring four times more frequently than in 1970, with secondary perils causing the majority of insured losses in recent years [4][6]. - The protection gap for global weather-related catastrophes has been increasing since 1980, indicating a growing disparity between economic losses and insurance coverage [12]. Insurance Demand and Market Response - The demand for insurance is expected to rise as individuals and businesses seek protection from extreme weather, creating both opportunities and responsibilities for insurers [15][16]. - Insurers are responding to the challenging environment by increasing premiums and exclusions, with a trend of non-renewal for high-risk perils [10][14]. Data Gaps and Challenges - The industry's reliance on traditional models limits its understanding of future climate risks, with estimates of exposure to natural catastrophe risk potentially underestimated by 33% to 50% [21][24]. - There is a need for granular data to assess secondary perils effectively, as current data sets are often inaccessible or outdated [19][25]. Steps for Improvement - Insurers should leverage existing data more effectively, invest in new types of data, and enhance their infrastructure to process and analyze data in real-time [25][34]. - The adoption of nontraditional data sources, such as drone and satellite imagery, can improve risk pricing and product development [30][32]. Conclusion - The insurance industry has a critical role in mitigating the impact of climate change, with small improvements in coverage potentially leading to significant reductions in disaster costs [38]. - A proactive approach to closing the protection gap is essential for maintaining relevance in a changing market, as demand for insurance is expected to grow [39][42].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The insurance industry is experiencing a shift towards hyper-digitalization, with consumers expecting seamless digital interactions and insurers seeking to innovate and optimize operations [2][4] - Claims management is identified as a critical function, with a focus on creating a frictionless experience for all stakeholders involved [4][19] - Digitalization and advanced technologies such as AI and machine learning are essential for enhancing claims processes, improving operational efficiency, and increasing customer satisfaction [5][14] Summary by Sections Introduction - The digital environment is evolving, leading to heightened consumer expectations for service interactions [2] - Insurers are motivated to innovate and engage customers while optimizing their operations [2] Claims Management - Claims management is complex and involves multiple stakeholders who desire a seamless process [4] - Policyholders expect transparency and quick settlements, while claims adjusters seek efficient workflows [4][6] Technology Integration - New technologies enable proactive risk management and streamline claims processes, enhancing customer experiences [5][14] - Integration of service providers into the claims workflow is crucial for efficiency [9] Customer Expectations - Policyholders demand speed, convenience, and transparency, particularly during claims [6] - A survey indicated that quick claims payment is a top priority for consumers in the UK (40%), France (63%), and Germany (70%) [6] Claims Adjuster Insights - Claims adjusters require access to comprehensive data and insights to make informed decisions [8] - Automation of simple tasks allows adjusters to focus on more complex claims, improving overall efficiency [8] Connected Claims Management - The goal is to create a connected claims management system that integrates various stakeholders and services [19] - Guidewire's platform offers a marketplace for insurers to access innovative solutions and streamline operations [20][21] Future of Claims Management - Guidewire's Claims Autopilot aims to automate claims handling, enhancing customer experiences and reducing operational costs [22][23] - The future of claims management emphasizes a digital, smart, and connected approach to improve satisfaction and efficiency [28][29]

Investment Rating - The report indicates a positive investment trend in greenfield insurance operations, with over half (51%) of innovation practitioners in insurance firms expecting to increase their investment in greenfield initiatives [4][5]. Core Insights - The greenfield model allows established insurers to create separate entities that leverage modern business models and technologies, enabling agility and innovation without the constraints of legacy systems [2][7]. - Successful examples of greenfield insurers, such as FRIDAY and BeeSafe, demonstrate the potential for these ventures to connect with customers in new and profitable ways [3][8]. - The report highlights a significant shift in customer perception of insurers during the pandemic, with 26% of UK customers feeling that the industry did not provide adequate support, indicating a need for improved customer engagement [9][10]. Summary by Sections Greenfield Concept - A greenfield insurer is defined as a separate entity created by an established insurance company to develop and sell new products, distinct from the parent company [2]. Investment Trends - A study by Celent shows a marked increase in insurer investments in greenfield operations, with a shift from 70% not planning to increase investment in 2015 to 51% expecting to do so in recent surveys [4][5]. Customer Engagement - The report emphasizes the disconnect between insurers and customers, with many customers perceiving insurers as overpriced and unresponsive, highlighting the need for innovative approaches to customer service [10]. Operational Efficiency - Greenfield operations can achieve significantly lower administrative costs, averaging half of those of traditional insurers, by adopting digital-first strategies [11]. Strategies for Success - Successful greenfield initiatives require careful planning, a balanced team with diverse expertise, and the right technology choices to ensure scalability and customer-centricity [19][21]. - The importance of collaboration with technology providers is emphasized to mitigate risks and enhance operational capabilities [25][36]. Guidewire's Role - Guidewire provides a scalable platform that supports greenfield insurers in launching and managing their operations effectively, offering tools for rapid development and customer engagement [27][30].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Social inflation is defined as an industry-wide rise in insurers' claims costs beyond economic inflation, driven by societal shifts in litigation attitudes and legal interpretations [4][12] - The report emphasizes the need for insurers to better understand and manage social inflation to maintain profitability and market stability [11][51] Summary by Sections Introduction - Social inflation has become a significant concern for insurers, impacting profitability through increased claims costs [2][3] Definition and Causes - Social inflation arises from changes in societal views on litigation, leading to higher claims costs without a corresponding change in underlying risk [4][6] - It is influenced by both institutional and societal factors, including new legal practices and shifts in public attitudes towards corporate responsibility [6][18] Trends and Evidence - The report highlights a notable increase in claims pursued through courts, with the US litigation rate rising to 8.9% in 2019, compared to an average of 3% from 1997 to 2018 [13] - The number of multi-million dollar verdicts has significantly increased, with a 300% rise in verdicts of $20 million or more in 2019 compared to the average from 2001 to 2010 [13] Impacts on Insurers - Social inflation can lead to a misalignment between pricing and risk, potentially affecting insurers' capacity and availability in the market [11][12] - A 2% rise in claims inflation could increase liabilities by approximately 16% for long-tail claims [12] Market Imbalances - The report identifies two key imbalances: inadequate pricing mechanisms for social inflation and insurers lagging in analytics compared to the legal system [28][29] - Insurers have historically focused on economic and cost inflation but have not adequately addressed social inflation [29][30] Framework for Action - The report proposes a framework for addressing social inflation through diagnosis, treatment, and prevention strategies [39] - Insurers are encouraged to invest in nontraditional data and advanced analytics to better understand and respond to social inflation [41][51] Conclusion - Social inflation is a significant risk that requires proactive management to ensure the sustainability of the insurance market and protect policyholders [47][49]