Fair or not, many look at insurance as an outdated industry, lagging behind others of similar stature and scale when it comes to innovation.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.