By Alexandra Sutton
As with every other industry, insurance is becoming more technologically advanced (which some call disruption) by the day. That said, the transformation happening, analysts say, is much too slow.
There are several reasons for this, but one that may or may not surprise you is that insurers are struggling to attract and retain top-talent despite insurance being a multi-trillion dollar, high-growth industry.
In the last three years, insurtech funding has increased by 60% in the US (from $1.46 billion to $2.44 billion according to CB Insights), while it’s more than tripled in Asia (from $140 million to $506 million). This may seem impressive but it is also necessary.
According to a new report released by the BaoBab Network, Africa’s insurtech space is worth $60 billion (Sh6 trillion) but remains largely untapped – this represents a global share of just 2%.
For Kenya, there are no standardised figures to quote currently but insurtech in the country has been slow to take off, even as it is concurred that there’s an uptick in innovative insurance solutions and platforms.
Insurance infrastructures are established in developed economies, which is a double-edged sword. Companies are struggling to modernise complicated legacy systems and develop new ways of working (with a strong focus on the customer) without sacrificing the old approaches that got them where they are today.
In this area, new players and companies in developing economies are at an advantage – they are able to develop digital-first infrastructures that incorporate the latest technologies from the outset, without concerning themselves with making old, analogue ways of working function in a new world. It is up to established insurance heavy-hitters to ensure they don’t get left behind.
So it is no wonder that a vital area for improvement has emerged – advancing human intellectual capital.
In advanced economies, only 2% of university alumni plan to work in insurance. Young prodigies are choosing consulting, finance, or technology companies instead. This means that many insurers lack the skilled staff required to follow, apply, and develop new insurance innovations.
With this interplay in mind, we’ve compiled a list of the patterns that are shaping the insurance industry – leading with the need for strong talent to make everything else happen.
Human intellectual capital
It is one thing to be aware of the innovations shaping the future of your industry, but implementing them is quite another. And without talented, skilled staff, you have little hope. This is the barrier faced by many insurers, which is why human intellectual capital needs to be a key focus if they don’t want to be left behind.
Why is human intellectual capital particularly a pain point for insurers? Employing and retaining talented, technically skilled staff is difficult and costly for any company, let alone one in an industry that has come to be considered ‘uncool’ – which, let’s face it, insurance has.
Younger candidates, in particular, are showing little desire to venture into insurance over other, more ‘exciting’ industries, such as those in the tech space.
Additionally, retaining experienced staff is a key concern. Especially when it comes to achieving the levels of customer satisfaction that insurers are striving for. After all, happy, experienced employees lead to happy, loyal consumers, and in turn, brighter long-term prospects for businesses.
Which is where insurtech might provide added value. Insurtech partnerships could enable insurance companies to position themselves as dynamic, connected, and potentially disruptive – helping them rise above their old and stuffy image.
What’s more, the prospect of being part of the adoption, enhancement, and development of innovative technologies may assist with employee attraction and retention. Employees are more satisfied when they have opportunities to upskill and learn at their own pace. And the innovation that’s closely associated with insurtech is all about constant learning and growth.
Personalisation and data
Insurers are starting to put the customer at the heart of everything they do. By activating and collecting the right data – from Internet of Things (IoT) such as connected cars, activity trackers, and even toothbrushes, they’re able to better understand consumer needs and offer customized advice, coverage, and tailored pricing. This shift indicates insurers are now viewing consumers as individuals, rather than customer segments.
Usage-based insurance policies, for instance, tap into customer data in order to charge users according to their specific needs and behaviours, putting the consumer in charge of their own fees.
Such personalization and clever data-usage benefit both customers and insurers. Along with improving user satisfaction, tailored products enable companies to enjoy more accurate risk assessment, and stable margins.
And while asking users to share their location with your business might sound invasive, a study by Morgan Stanley and BCG suggests that customers are ready to share it (in return for the aforementioned benefits) as long as companies are transparent about how it will be used.
For insurers catering to the growing markets in Asia, Africa, and the Indian subcontinent, tailored offerings based on data collected from wearables and telematics will be key. Over 60% of citizens in these areas struggle with a lack of income security. So insurers that ease the pressure by offering break periods and enabling customers to postpone paying until they’re able to may prove to be more attractive in these areas.
Insurance companies are adopting digital strategies. Not just for savings and efficiency, but also for increased customer satisfaction with a whopping 61% of customers confirming they prefer to check their applications online.
Of course, transitioning from paper trails to online-only isn’t easy. According to McKinsey, nine out of 10 insurance companies say they’re struggling to develop the technology infrastructure they need, blaming legacy software and the sheer magnitude of their IT systems.
What’s more, internal processes across the industry are unnecessarily complicated, and many companies are duplicating their efforts, with TechCrunch suggesting that insurance brokers are becoming obsolete in this mobile-first world. This means that some 1 million jobs in the US alone could be automated, which would cut costs by up to 40%.
But digitization (tacking digital processes onto existing ways of working) is not always enough. Digitalization (involving a complete transformation of existing business models) is also required.
So, how are companies doing it? To overcome the complex-legacy-system problem and enable new offerings, companies are adopting API or microservices architecture. But keeping the customer at the centre of these developments is key.
Some companies have struck the right balance using robotic process automation (RPA) – software that supports human staff by performing complicated back-end tasks for them in the blink of an eye. Not only is RPA benefitting customer interactions, it’s also boosting their data-harvesting capabilities.
Where do we start? AI and machine learning have the potential to impact every aspect of the way insurance businesses are run, making almost every process more efficient.
Specialised functions such as fraud prevention, anti-money laundering, underwriting, and pricing are set to be overhauled using this transversal tech. Meanwhile, the data collection opportunities AI provides will help companies achieve automation (robo-advisors are incoming) and enhanced personalization.
Of course, AI isn’t mature yet, and a human touch is still needed to help it do its work. But companies that fail to adopt AI now may find themselves left behind by the time autonomous versions appear.
It enables the creation of a digital ledger that can’t be altered. Using this technology, insurers can reduce the admin costs that come with reviewing claims and checking payments made by third parties – blockchain ensures all of this information is shared, fraud-protected, and easy to verify.
According to PWC, blockchain could particularly benefit reinsurers – reducing the steps involved in the process and leading to potential savings of $5-10 billion worldwide. For example, reinsurers in healthcare could cut costs and save time using smart blockchain contracts to quickly verify consumer data and insurance history, reducing the back and forth that is commonly involved.
Additionally, blockchain can be distributed widely without the risk of duplication, enabling
Writer is Copywriter @ Board of Innovation