A live take from ITC Vegas 2024: Connecting the ideas, scaling up the innovation
October 22, 2024The annual ITC Vegas insurance conference has just ended, and once again it was a bustling, huge event with more than 9,000 participants covering the full range of the insurance world, including carriers, investors, start-ups, agents, brokers, solution and tech providers, consultants, and others. This year, there was noticeably a broader cross-section of the community than in the past, at a time when investor interest in insurance is again picking up after a post-pandemic lull.
Amid all the excitement and noise, ITC Vegas (where McKinsey was once again proud to serve as Presenting Partner) is a great place to take the pulse of the insurance industry globally. Here are four of our main takeaways. Together, they suggest a sector bubbling with ideas of how to make the industry better, but at times struggling to connect all the dots and effectively scale up and integrate the innovation that is needed to achieve that goal.
1. Few ideas, many start-ups, and the need for an ecosystem to integrate them
At an industry gathering of this sort, it’s no surprise to find start-ups in the Insurtech space eager to market their big new idea. In Vegas, there were hundreds of such start-ups, and the solutions they proposed ranged from accessing and mining better data more effectively to streamlining core workflows. When you dig a little deeper, it turns out that the ideas themselves fall in a relatively tight range of perhaps about 15 categories, with dozens of companies focusing narrowly on one or other of these categories, such as payment processing, document summarization, or extracting insights from images and video. The overall effect is a patchwork of ideas that, on their own, are of limited value. For many, the true power of these ideas comes when they are integrated into the larger insurance ecosystem, especially the world of the major carriers. That said, the carriers have an agenda of their own, and in some cases have not realized the promised value of new technology offerings and business models that proved hard to integrate into their operations. For carriers, the persistent question is whether they might be better off developing similar solutions in-house or using more tried and tested providers. However they decide the ‘buy vs build’ question, carriers and at-scale tech and service providers are the integrators the industry needs.
2. Everyone is talking about gen AI…..but very few are scaling it
Generative AI (GenAI) was everywhere at ITC Vegas—no surprise there, since it is now top of mind for companies in all industries ever since ChatGPT burst onto the scene nearly two years ago. The big tech players were all out in force at the convention, talking up the productivity and personalization benefits of gen AI alongside their search for opportunities to sell cloud-based solutions for a range of insurance-relevant platforms, from claims processing and underwriting platforms to customer call centers. Conversations about AI this year were noticeably more advanced than at ITC Vegas 2023, when GenAI was more of a slogan than a reality. Use cases range from automated billing to enhanced fraud detection, and some start-ups are focusing on gen AI agents able to engage directly with customers across sales, claims and service. While GenAI is rapidly emerging as a core component of technology solutions, insurers are still trying to figure out how to use this technology and manage the very real risks and change-management challenges associated with scaling it. So far, we are seeing them focused more on building a range of ‘co-pilots’, enhancing marketing via hyper-personalization, and improving internal knowledge management rather than developing GenAI-powered customer-facing applications. Property and casualty is currently a key focus area but use cases and applications are being evaluated across all lines of business. These are still early days, however, and we have yet to see many examples of large-scale adoption and integration. An open question is how Generative AI will become a larger element of the overall insurance technology stack – through selective development and integration by carriers or as a by-product of being embedded in the majority of insurance-focused technology offerings.
3. An industry facing the demons of its past and needing to pay its technical debt
Even as the industry looks ahead to a new AI-powered world, it is grappling with a different tech challenge that was very much front of mind at ITC: namely, what to do about legacy IT systems. This was a frequent topic of conversation. Insurance is a long game—for some segments within life insurance or longer tail P&C, played out over many decades—and many carriers are still burdened with tech systems that were built on mainframes that are nearing the end of their lives. Does anyone still know how to code in COBOL? Certainly, it is becoming hard to keep these systems running and increasingly expensive to do so; some niche players specializing in servicing legacy systems have not hesitated to raise prices. Thus, the tech challenge for the industry is twofold: how to put an end to the technology reaching obsolescence while simultaneously embracing a cutting-edge future. That’s a tall order.. A broader revision of tech architecture is called for, with carriers needing to figure out (quickly) what proprietary technology they want, and will need, for their technology stacks, and what platforms and other solutions they can buy ‘off the shelf’.
4. Investors are back (but can they avoid overpaying?)
Insurance investments had a banner year in 2021, with more than 1,600 deals globally and private equity investment of $45 billion. Then came the rude post-pandemic reality: as interest rates rose, the volume of deals dipped and their value plummeted; indeed, deals in 2022 and 2023 together were lower in value than for the single year of 2021. This year, as we have noted elsewhere, we seem to be at a turning point, with deal volume and values rising—although still short of where they were three years ago.
At ITC, there were many signs of the return of investors, not just private equity players but also corporate venture funds that a significant number of carriers have set up. The renewed flow of capital into insurance technology and services suggests that there are still big opportunities for disruption. But there may be more investors than there are companies ready for the checks they want to write—and that means there is a risk of some eager investors potentially overpaying. For now, the bigger scaled deals and bolt-ons are at a lower implied multiple than they were two to three years ago. Still, there’s every reason to fully understand the direction of the industry and the trends highlighted above.
All in all, then, ITC provided an invigorating few days in Las Vegas—with plenty of evidence that the insurance sector is finding new dynamism and balancing a wide range of options to raise its game and retain its relevance.
Tanguy Catlin is a senior partner in McKinsey’s Boston office who works with major financial institutions and leads McKinsey Digital hubs across North America. Grier Tumas Dienstag is a partner, also in Boston, who leads McKinsey’s Insurance and Private Equity and Principal Investors Practices’ joint venture work in North America.