I’ve either worked directly in – or provided solutions to – the financial services sector for two decades, but 2020 was a year for shaking up the system. While the insurance industry did, on the whole, fare better than hoped during the COVID-19 pandemic (if a little unevenly), the uncertainty of the last year still left enough of an impression for many insurance companies to rethink their strategy – and specifically, their digital strategy.
According to a recent KPMG report, COVID-19 has accelerated the digitisation of operations and the development of next-generation operating models for 85% of insurance CEOs. 79% say it has driven the creation of new business models and revenue streams. And 78% say it has led to the creation of more seamless digital customer experiences.
In an industry that was already undergoing intense digital transformation pre-pandemic, the shift to remote over the last year has expedited change. Digital literacy has increased, and so too have consumers’ expectations. More confident with making purchases online, loyalty is waning as customers explore new options, research comparisons, and take advantage of ‘on-demand’ services to decide when, how and what policies to buy or claims to make. Customers today are driven not just by price, but by value and simplicity – and expect the same seamless, personalised digital journeys they experience in other sectors.
COVID-19 has been just as disruptive for businesses as for consumers, with supply chain and cash flow challenges, reduced sales and operating speedbumps. The knock-on effect is a much more conscious and proactive market for buyers. B2B insurance companies will need to invest in fluid digital buying processes and tailored packages that mirror the flexibility of growing Insurtechs. This will mark the evolution of insurance from product-led to service-led, as features like ‘bundles’, on-demand and point of purchase policies become more commonplace.
Meanwhile, as process automation becomes more common, insurance brokers will need to harness technology to evolve beyond being seen as an intermediary. Focus will be on offering personalised, data-driven services and more accurate cover suggestions, as well as on adding value in high concern areas for clients, such as cybersecurity and compliance.
The last year has also shown the insurance industry the importance of agility. COVID-19’s intermittent lockdowns, an economic recession, an increase in claims, the FCA’s pricing review and proposed reforms, and a tough market with low interest rates and declining premiums, could have spelt disaster. But instead the industry has responded with surprising dexterity and stability to change – and digitising processes will be a great way to maintain this agility going forward.
How are insurance providers leveraging technology?
Many insurance providers are distancing themselves from a world of response - risks, policies and products, to a world of action – pre-empting customer needs, continuous development and quick, slick processes.
As a result, many are revamping their digital roadmaps and exploring new operating models, with 80% of insurance executives saying that their company’s business and technology strategies are becoming inseparable. Collaboration – with Insurtechs, outsourcing companies, and technology providers – has become key for bringing in new capabilities and leveraging skills in niche areas, like cloud storage or data.
Businesses are investing heavily in their technology architecture to boost agility and future-proof. Platform-based approaches are proving popular for businesses that want to be able to isolate and replace legacy systems without disrupting entire infrastructures and ‘stack’ new developments as they emerge. This drive for efficiency is evident in the growth of low-code and no-code platforms, the move to cloud architecture, and the drive for greater intelligent automation to respond faster to the external environment.
Insurance providers are also investing in technology that will help them get closer to customers. Data, AI, machine learning (ML) and natural language processing are all helping insurance providers dissect nuances in customer behaviour, make more precise recommendations and understand unique preferences. Data, in particular, is a growing field – with big and small data, internal and external, structured and unstructured, and graphs, all creating an in-depth picture of customer experience.
And then there’s the evolution of the Internet of Things, wearables, and digital twin technology, which will help insurance providers break into new markets, such as digital health, smart homes, smart auto, and growing sectors such as climate change and energy.
The potential benefits for technological transformation are significant. Accenture estimates that insurers who decline to innovate in the shift to digital face revenue declines of up to 5%, while the global insurance industry will grow by $1.4 trillion between 2020 and 2025 thanks to increased revenue from technology-enabled products and services, value-added services, and monetization of data and technology.
What challenges do insurance companies face for digital transformation?
According to KPMG, 39% of insurance CEOs believe that a lack of insight into the future of operational scenarios stands in the way of digital acceleration, 29% say they have difficulty making quick technology-related decisions, and 14% experience challenges in moving from pilots to scaled deployments. A further 11% cite an unclear view on key technology trends, meanwhile 7% express a lack of skills and capability in IT organisations as a barrier for change.
For me, these challenges all amount to one thing: increasing demand for experienced talent.
The insurance industry is not alone in its need for radical digital transformation. In May 2021, the technology job market hit a five-year high. There are few markets more competitive to recruit for than technology, and the COVID-19 pandemic has only exacerbated that need. For example, recent research commissioned by the Department for Digital, Culture, Media and Sport found that nearly half (48%) of businesses were recruiting for data roles, and a similar proportion (46%) were struggling. Data, as discussed, is one of the insurance sector’s target technologies. The volume of digital transformation taking place in the insurance sector at the moment is phenomenal, but it’s also driving up the demand for skill scarce talent.
There are a few ways that the insurance industry can tackle the tech talent battleground. One is by upskilling and reskilling your workforce and nurturing new talent to build a sustainable talent pipeline. Another is by broadening your reach to attract new, diverse talent pools and examining processes to hire for potential. Or you might invest in your employer branding and value proposition to ensure you’re a top pick for candidates. You could also consider trying out different talent sourcing models to achieve optimum results. For example, contingent workers are an invaluable resource for bringing external expertise, insight and knowledge into your business to complement your permanent workforce, while expediting change (click here for more information).
Many insurance businesses are currently exploring contingent workforce solutions (CWS) and managed service programmes (MSP) to support with all of these challenges. In an MSP, a talent solutions provider (like Lorien) will manage the contingent workforce lifecycle on your behalf, from entry to exit, with a focus on control, visibility, cost savings and crucially, value. It’s one of the most efficient ways to get a handle on your contractor use and improve the quality of talent coming into your business.
How’s your digital transformation journey going? If you would like to discuss your digital plans and how to find the talent to make them happen, please get in touch with me for a confidential discussion.