Making the most of innovation is a top challenge for insurers
For the insurance industry 2019 is shaping up as a year of changes, challenges, and opportunities. While key influences like regulation, global consolidation, and disruption are important concerns this year, developments and opportunities in tech clearly remain a top concern for insurers of all sizes.
There’s no question technology, when harnessed appropriately, can give any business a clear edge over its competitors. The right tech not only enables businesses to act quickly and responsively in meeting new challenges and developing new products, but also provides them with the ability to identify potential opportunities that can open up entirely new markets. In simplest terms, the “right” technology can increase revenue and even establish new revenue streams to help businesses remain more competitive and more successful.
In a recent Stanton Chase survey of top insurance industry professionals, I learned just how important tech is to the future of the industry – and how stakeholders are positioning themselves to tap into tech and all the benefits it offers. Here’s what survey respondents had to say about the future challenges confronting the insurance industry, and specifically, how tech plays into the major themes of opportunity, talent, threats, and preventive health and wellness.
What is the greatest potential value add technology can bring to the insurance industry?
On the consumer side, the demand for information – and faster, easier ways to access it – has never been higher, and respondents felt that this issue is perhaps the greatest driving factor behind most of both the challenges and the opportunities for the industry. Today, consumers have come to expect quick answers, if not outright solutions, at the touch of a button (or the click of a mouse). As a result, organizations are tasked with identifying and implementing superior products, channels, and delivery systems to satisfy their markets, providing an easier yet richer client experience at every stage of the client journey. IoT combined with “big data” provides insurers with the opportunity to capture and capitalize on a massive increase in rich information that can be leveraged to predict risk, streamline acquisition costs, build new products, and increase overall revenue and market share while improving efficiency and cost of delivery.
Artificial intelligence and machine learning solutions offer the opportunity to “free up” staff, enabling them to shift their energies from handling basic client-facing activities to focusing on more critical, labor-intensive issues that demand “hands-on” attention. At the same time, insurers should be ready to provide staff with the training they need to manage the disruption that accompanies a shift toward AI, ideally increasing speed to market while facilitating the overall sales and client acquisition processes. Finally, tech systems can be used to offer global services to corporate clients, expanding current offerings while growing market share.
What do you see as the greatest area for opportunity area in the insurance industry?
Not surprisingly, technology was identified as a major driver for growth in terms of market share, revenue, and product development. And according to respondents, those stakeholders who are able to truly embrace IoT and rich data and capitalize on the disruption these changes cause will be poised to reap the greatest rewards. While some innovations like driverless cars may be slow to overtake the automotive industry (and spur insurance changes), remote sensing technology and telematics will nevertheless play a bigger and bigger role in automobiles, “smart” cities, and other entities, ultimately altering the insurance landscape. Being prepared for these disruptions before they occur is critical for enabling companies to stay competitive and relevant.
On the consumer side, insurance organizations should be ready to promote new “convenience-based” products, including “on-demand” insurance and short-duration coverage options, rather than “traditional” annual policies. Greater transparency and access to pricing data on the customer side means consumers will be pushing prices downward, increasing competition and driving the need for innovative solutions to drive sales.
Bottom line: The overall winners will be those who have learned how to use rich data and emerging trends to tap into the mindset of their buyers, learning to price risk effectively while improving customer experience.
What do you see as the greatest threats to the industry?
While tech offers lots of opportunities, several of the main threats our respondents identified are also linked to tech. An inability to capitalize on new innovation tops the list; after all, as important as it is to recognize the potential value of technology, without a clear plan to implement new systems and deploy innovation, companies can find their best efforts stymied.
Innovation and access to multiple marketplaces will provide clients with an unprecedented level of transparency with regard to products and pricing, potentially shaving profits from product lines that already have razor-thin margins. The switch to a sharing economy comes with its own challenges, specifically with regard to auto insurance lines. As ridesharing becomes more popular and more cost-effective for consumers, insurers can expect to see a shift from consumer products to greater reliance on liability products purchased by the corporations that provide such services.
While cautioning about the need to remain agile in a tech-driven economy, most respondents said fears of an industry-altering “killer app” were not founded, or at least not imminently relevant.
Finally, respondents worried about a lack of strong global leadership to identify challenges and evolve along with the changing marketplace, as well as a dearth of top talent.
What are your thoughts on Preventative Health and Wellness as a product and what do you see as its impact on premiums and claims?
Preventive health and wellness programs are viewed as a “megatrend,” but it’s not clear how these programs can be monetized and by whom. Focused on preventing illness and injury and accelerating return-to-work, preventive and wellness programs have the potential to lower care costs and reduce premiums for health insurance overall. Most programs focus on consumer-driven behaviors aimed at improving health and reducing risks for serious medical issues. These programs have become a central point of many employee assistance programs (EAPs), typically including a mental health component in addition to services for physical ailments. As EAP has grown in popularity among employers of all sizes, a concurrent increase in preventive programs is also anticipated.
What is your view on the industry’s talent level?
Survey respondents uniformly agreed the insurance industry is lagging when it comes to attracting, developing and retaining top talent. In part, those gaps may be explained by a lack of clarity on what the industry is and what it does. Industry associations can and should play a more prominent role in helping the industry gain more visibility and attractiveness, as well as improving recruitment activities for both undergraduate and graduate students.
Compared to consulting firms and financial entities like banks and investment firms, the insurance industry lacks the “sexiness” necessary to attract top talent, especially in tech roles. As the industry embraces tech in a more visible way, an increase in innovation and implementation or “insurtech” may provide the impetus that’s necessary for attracting top talent, especially recent graduates and millennials.
Respondents also lamented the industry’s dependence on old-school thinkers and an emphasis on short-term performance that leaves little room for innovation for future growth. While shortages of top talent can be felt throughout the industry, in tech, the gap is especially wide. While organizations may embrace the hardware and software solutions that can help them grow, without a skilled tech team to extract and implement those solutions, they won’t be able to capitalize on the real benefits those solutions can offer.
Finally, some respondents pointed to ineffective HR strategy lacking in long-term planning needed to establish meaningful and lucrative career paths for potential hires. A lack of promotable talent and an unclear path to advancement are also hampering hiring efforts, they said.
With tech shaping so much of the industry’s future, insurance organizations committed to staying nimble and adaptable will have the most to gain. And since tech is obviously here to stay, investments in technology and skilled talent offer the greatest promise for optimal growth in 2019 and during the years to come.
About the author: Gary Lazzarotto is a director in the Sydney office of Stanton Chase, specializing in the financial services, industrial and utilities sectors. With more than 20 years of human resources experience, Gary has successfully built and managed regional businesses across Asia. His in-depth knowledge of recruitment and cross-cultural team-building has enabled him to successfully place C-suite executives and other key employees in ASX-listed, private and start-up organizations throughout the APAC region.