Fair or not, many look at insurance as an outdated industry, lagging behind others of similar stature and scale when it comes to innovation.
While sectors such as financial services and healthcare have embraced digitization and automation with open arms — whether by choice or mandate — insurance has largely played catch-up.
Whether that’s an accurate picture of the industry as it stands can be debated. You can argue whether concepts like the independent agent distribution model are actually antiquated (as some insist) or whether the adoption of telematics and usage-based pricing have already elevated insurance into the modern age of technology.
But, you can’t argue the facts. Insurance faces a potentially staggering employment hole, as the current workforce ages (with some predicting as much as 25 percent will retire by 2018). And, the emerging workforce doesn’t view insurance as a particularly appealing profession, seeking instead more flexible, innovative environments.
Fortunately, insurance is in the midst of a turnaround. Global competition will continue to push the industry to innovate in 2016, and momentum for change has never been stronger.
This past November, London-based business process technology company Xchanging held its annual Xchanging London Market Conference, gathering delegates from the London insurance market to discuss this topic. The conference assessed the current state of the market (and industry at-large), identifying global insurance trends and challenges to overcome in 2016 and beyond.
The key takeaway from the conference: Insurance must continue to modernize to remain competitive in an increasingly globalized environment.
Here are four key trends that the insurance industry must embrace in 2016:
1. Tackling cyber risk management
Insurance businesses face the very real threat of cyber attacks — from both underwriting and risk management perspectives.
Companies hold vast amounts of personal data and must ensure that their cyber technology and security measures are constantly reviewed and updated. Consumers are more educated about this risk as well, with high-profile data breach cases from the likes of Anthem and Target illustrating just how far-reaching the impact can be.
Insurers have made strides in shoring up defenses, but the industry still has much ground to cover.
According to a survey conducted onsite at the Xchanging London Market Conference, only one-third of respondents believed their companies could withstand a major cyber attack.
Companies must realize this is an industry problem — and in some areas, we’ll see organizations collaborate, sharing knowledge and skills to strengthen defenses.
2. Digitization and automation
Insurance is well on its way to shaking the paper-based mechanisms that kept the industry in neutral.
Many, including Lloyd’s and the London market, are now almost fully digitized with electronic claims processing. This has enabled insurance to get ahead of the game when it comes to implementing automation, at least on the back-end.
Take the relatively new concept of robotic process automation, or RPA.
RPA essentially entails programming software to trigger decisions on multi-step tasks, using software, or server-based robots. These robots can mimic humans to access systems, processing claims or administering policies in a fraction of the time.
Early returns from software like RPA are promising. Companies can expect an average cost savings between 20 percent and 40 percent depending on the project. Working with Lloyd’s to implement RPA, Xchanging now maintains a virtual workforce of 27 robots automating 120,000 transactions a month. Moving forward, solutions like RPA could impact everything from natural disaster claims to net settlement.
3. Embracing big data analytics
From telematics to weather modeling, big data and more sophisticated analytical solutions are squarely on carriers’ and insurance technology experts’ collective conscience.
We’ve already seen the power of telematic devices, and the rise of usage-based pricing using data transmitted from vehicles. Moving forward, we’ll see these devices continue to transform claims processing. Connected cars, for example, can quickly and accurately notify insurers of an accident, determine fault and facilitate more rapid settlement.
Advanced analytics will also drive more precise settlement. As we continue to learn lessons from disasters like Hurricane Sandy, weather modeling will help carriers and communities plan months in advance, and better allocate resources after the event.
Bottom line: Embracing big data and analytics will no longer provide a competitive advantage. It will be key to succeed in a competitive, globalized industry.
4. Attracting fresh talent and new skill sets
In filling the looming talent and experience gap, insurance must address two pressing issues. First, companies need to cater to the needs of a younger workforce — hungry for innovative atmospheres, flexibility and independence.
Companies are already retooling with these needs in mind, creating more fun, social environments with social hubs, game rooms and “hot desks” — enabling movement around the office.
Second, as companies blend technology (robotics, automation and analytics), they’ll need to recruit and train for new skill sets. In addition to training for domain expertise (for instance, how to spot an unusual claim), employees will need to be more analytical, tech-fluent and social-savvy than before.
In reality, the insurance industry has been quietly stepping up its game for years, embracing more advanced technology and modern work environments. If last year is any indication, we’ll continue to see the pace pick-up in 2016.