Although AM Best’s innovation capability assessments continue to skew towards lower profiles, some companies have demonstrably improved since the initial assessment cycle, resulting in a marginal shift. More companies are placing high importance on data quality to improve efficiency and profitability, and leadership teams understand that system and IT infrastructure upgrades are critical to achieving these goals. The pandemic has helped leadership to better view the links between their innovation efforts and overall strategic objectives, and develop a more comprehensive yet focused innovation strategy.

In March 2020, AM Best released its Scoring and Assessing Innovation criteria. Immediately after, the world was transformed by COVID-19. The pandemic altered the way people live and work, and spurred immense changes and innovation throughout the insurance industry. Challenges due to the pandemic continued in 2021, and persistently low yields and stagnant growth contributed to industry pressures. Inflationary pressures and rising interest rates were prominent in 2022, for the first time since the turn of the century. Technological change continues to alter consumer behavior, transforming the insurance landscape across product lines. These trends have created challenges and opportunities for insurers, accelerating the need for innovation and rewarding the most innovative insurers.

In response to the evolving risk environment, insurers accelerated their shift to digital technology and intensified their focus on product innovation and policy language modifications. Although our innovation capability assessments again skewed towards lower profile…