By Patrick O’Neill, Founder and President, Redhand Advisors
In the developing realm of risk management information systems (RMIS), 2024 represents a pivotal juncture marked by the ascension of generative artificial intelligence (GenAI) as the driving force, both for users and vendors.
As organizations confront increasingly complex risk landscapes, the convergence of cutting-edge AI technologies with risk management practices has emerged as a transformative catalyst. This year’s RMIS Report spotlights not only the profound influence of AI but also the burgeoning adoption of RMIS systems among mid-market and small enterprises.
The expected change in annual expenditure on risk management technology compared to last year has surged by 10.5% on average, according to this year’s report. This increase underscores the growing recognition among organizations, irrespective of size, of the indispensable role that advanced RiskTech solutions play in navigating contemporary risk challenges for all businesses.
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Top 2024 User trends
Based on our user survey, we anticipate that the pulse of RMIS trends beats strongest within the 74% who expect increases in expenditure. Two overarching trends emerge as defining pillars shaping the landscape of risk technology:
1. AI tools are here to stay.
The emergence of GenAI tools signifies a major shift in RiskTech. While currently only 10% of risk professionals report utilizing GenAI, a staggering 54% have zero exposure to it. However, the trajectory is clear, with 48% of respondents anticipating adoption within the next three years.
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The integration of advanced technologies like GenAI in the insurance sector, which traditionally has been reliant on human expertise and manual processes, presents an unprecedented opportunity for transformation. With approximately 80% of claim data existing in unstructured formats such as emails, documents and phone calls, the potential for GenAI to revolutionize the claims process is immense.
Although it’s too early to gauge its full impact on cost reduction, there’s palpable enthusiasm among RiskTech vendors to explore its applications. GenAI holds promise in revolutionizing areas such as damage assessment, fraud detection, claims processing and customer support, while also offering valuable data-driven insights.
Despite the promising prospects, challenges and barriers to adoption persist from the user’s perspective. Security and privacy concerns rank high, as cited by 42% of respondents, followed by the challenge of understanding AI capabilities and limitations, reported by 35%. Other impediments encompass issues related to quality and reliability, complexity, data privacy, fraud risk, bias and integration. Like any other technology, AI is not a panacea; it comes with risks and challenges, both external and internal, and it requires a well-thought-out, holistic approach to implementation and ongoing utilization.
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2. Mid-market and small enterprises are embracing RMIS at a faster rate than ever before.
Smaller organizations are adopting RMIS systems at an increasing rate. In the past three years, 37% of smaller organizations (<=$500mm in revenue), adopted a RMIS, compared to 26% in the previous three years, signaling a shift in the market dynamic toward smaller entities. Notably, half of all implementations in 2023 were the first-time RMIS adopters. This shift is indicative of the pervasive nature of risk, transcending organizational size boundaries in 2024.
Previously considered the domain of large organizations, RMIS systems were often out of reach for mid-market counterparts, leaving them to manage risks through manual processes or spreadsheets. However, risk management is now assuming a central role in boardroom discussions, propelled by factors such as regulatory scrutiny and evolving business landscapes.
Now small organizations are catapulted into the spotlight. The rise of the mid-market risk manager is emblematic of this new era, with risk management garnering the attention of the C-suite like never before. In this new paradigm, risk technology solutions emerge as indispensable tools for organizations of all sizes to navigate the complexities of modern risk landscapes effectively.
Top 2024 Vendor trends
When it comes to RMIS, vendors serve as the crucible for innovation and evolution. From the vendor perspective, three pivotal trends emerge as the guiding beacons shaping the trajectory of risk technology solutions:
1. Increased accessibility and adaptability.
In response to user feedback regarding the increasing complexity of these tools, vendors have embarked on initiatives to enhance usability and adaptability. Recognizing the challenges faced by smaller organizations in effectively utilizing sophisticated tools, efforts have been directed toward simplifying interfaces, menus and dashboards.
Vendors have prioritized the development of intuitive interfaces tailored to the needs of their customers, facilitating ease of use. The focus lies not only on streamlining navigation but also on incorporating functional sections within dashboards, catering to both data display and actionable insights.
2. The use of workflow optimization tools and robotic process automation (RPA).
A pervasive trend across industries, including risk technology, is the emphasis on workflow optimization and self-service tools. With millennials increasingly seeking autonomy in their interactions, vendors are integrating self-service functionalities into their offerings, enabling clients to handle tasks autonomously.
Robotic process automation (RPA) serves as a cornerstone in this endeavor, automating repetitive tasks that were previously carried out manually and streamlining processes. While RPA excels in rule-based automation, it is complemented by AI, which introduces adaptability and learning capabilities. This continuum from process-driven RPA to data-driven AI plays a pivotal role in transforming workspaces, enhancing efficiency and fostering innovation.
3. Managing GenAI integration and understanding ethical AI practices.
The integration of GenAI into RMIS and RiskTech solutions marks a significant stride toward unlocking the potential of AI in the insurance industry. AI technologies such as natural language processing (NLP) and predictive analytics are revolutionizing various facets of insurance operations, from claims processing to risk assessment. Vendors are actively incorporating AI integration strategies to automate claims processing, enhance customer interactions through NLP-driven chatbots and derive actionable insights from data analysis.
There is also a growing emphasis on secure and ethical AI practices, ensuring transparent data handling and user consent to uphold trust and integrity in AI applications. These initiatives underscore the commitment of vendors to leverage AI responsibly while enhancing customer service and maintaining data integrity.
Thriving in an era of risk
The 2024 RMIS Report illuminates a dynamic landscape where AI and the democratization of RMIS and RiskTech redefine traditional paradigms. From the transformative potential of AI in revolutionizing insurance claims to the increasing accessibility and adaptability of RiskTech tools, organizations of all sizes stand poised to harness innovation in navigating complex risk environments.
As vendors continue to innovate, integrating workflow optimization, RPA and GenAI capabilities, the trajectory of the market promises unprecedented efficiency, effectiveness and ethical practices. Embracing these trends not only enhances operational resilience but also fosters a culture of proactive risk management, empowering organizations to thrive in an era of evolving risk dynamics.