Change has arrived in the insurance industry—and it has decided to stay a while and get comfortable. In this recap of a general session from The Institutes CPCU Society 2016 Annual Meeting, industry executives spoke about the ramifications of today’s landscape of change and the need for insurance and risk management professionals to stay on top of the latest technologies and technological issues, such as cyber risk, and to embrace ACE: agility, collaboration and education.
The insurance and risk management industry is constantly evolving and, like many of the industries it insures, is currently at an introspective point, as change is all around.
Much of this change is driven by the increasing use of technology, which is having a profound effect on businesses, individuals and society as a whole. Cyber risk, for example, is a major concern for insurers. With nearly half of insurance professionals planning to retire in the next 10 years, developing a new generation of leadership is essential.
To be an insurance and risk management leader in today’s environment requires continuing education. That was the consensus of a panel of industry chief executive officers who discussed at The Institutes CPCU Society 2016 Annual Meeting in Hawaii emerging trends in insurance and risk management and how to be a leader in the modern work environment.
I had the pleasure of moderating the panel, “CEO Conversations, Becoming a Leader,” which included Jeffrey Bowman, FCCA, senior adviser in Deloitte Insurance Consulting Practice and chairman of The Institutes’ Board of Trustees; Albert “Skip” Counselman, CPCU, chairman and chief executive officer of Riggs, Counselman, Michaels & Downes; Alan Krapf, CPCU, president of the Property and Casualty Insurance Group at USAA; and Christine Sears, CPA, CPCU, president and chief executive officer of Penn National Insurance.
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All of the panelists have experience managing change in the industry and implementing new technologies, regulations and working practices. As great leaders themselves, they have helped others grow into leadership roles within their own organizations. They also serve as board members of The Institutes, which has given me the pleasure of knowing them for many years.
The panelists agreed that for the industry and its professionals, honing critical thinking skills and maintaining knowledge of emerging issues—such as growing technology and data analytics—and then being able to use and apply that knowledge are critical to future success. Regardless of professionals’ comfort level with technology, lifelong learning about it, as well as about economics, societal changes and other new developments, is vital to the advancement of both their careers and the industry.
Understanding New Technology
In regard to new technology, the panelists noted that, though it can help facilitate communications, analysis and efficiency, it also poses a large risk. For example, Bowman said that understanding, preventing and insuring cyber risk is a major concern that professionals are still trying to determine how to insure.
Because it is evolving quickly, is very complicated and has many elements, “nobody really has this right at the moment,” he said, adding that companies also have to be aware of third-party risks: “It brings in a whole realm of issues around compliance, regulation and governance that everybody has to be aware of.”
Counselman noted that cyber crime does not discriminate, but affects everyone: individuals, large businesses and small businesses. “You can buy insurance, you can transfer the risk, but transferring the risk isn't the entire answer,” he said. “What's really the answer is being vigilant and educated, learning and trying to stay one step ahead. And that's the message we have to get across, because just as we thought about fire insurance and general liability insurance for years and years as being the mainstay of what we were doing and telling our clients about, this cyber risk can shut down a client and put a client out of business very quickly if the appropriate safeguards aren't enforced.”
Chief among corporate cyber risks is reputational risk. Krapf said: “It's not just about protecting the data and the financials. It’s also about the brand. How do I protect the reputation of my company, too?”
Sears added that reputational damage from cyber crimes can cause billions of dollars in damage. “What is really key is that you have a plan in place for when that happens,” she said. “And so, all of us should have a crisis management plan in place so we know that when it happens—because it really is more a matter of when—we know exactly what the processes are that we're going to follow.” Accordingly, she said, companies should have a plan in place to quickly handle a public relations crisis.
ACE in the Hole: Remaining Agile, Collaborative and Educated
The panelists all agreed that, to address the rapid changes in technology and other spheres, continuing education and agility are essential.
“Really, what is happening today is a fourth industrial revolution: technology in the insurance industry,” Bowman said. “To deal with the changes that are coming in and the changes that have to happen within organizations, you have to have qualified staff.”
Panelists also discussed how collaboration across departments is key to dealing with the fast pace of technological change.
“To be successful in observing and understanding change, deciding what to do about change and implementing change, you need to collaborate today,” Counselman said. “You can’t just make your own plans within your one division or within your one department. You need to collaborate. You need to have input from people who might be involved on a daily basis in property-casualty coverages and risk management advice, in IT advice and financial planning. You need all of that, and you need to be effective at giving everyone the opportunity to understand the issue that you’re trying to approach and determine your strategy—and you need that input across divisions.”
Diversity can enhance collaboration, the panelists asserted. With a diverse workforce comes diverse perspectives, which can aid in everything from product development, customer relationships and risk management.
“Diversity lets you come up with richer and better decisions and allows you to come up with an answer that’s not just the answer that’s always been out there,” Krapf said.
Allowing Professionals to Shine
Part of facilitating collaboration across departments is the move to more decentralized organizations. Decentralized organizations are often flatter and less bureaucratic, thereby helping empower employees to be more involved in decision-making processes.
Krapf added that institutional success further depends on a clear explanation of the mission. “You have to make sure you’re clear with all of your employees about what you are trying to accomplish and then let them make decisions.”
To be well-equipped to make proper decisions in today’s rapidly changing landscape, insurance professionals must continue to learn. Gaining information and ensuring a solid understanding of that information are competitive advantages in the workplace. This idea was reinforced by Sears, who said, “Lifelong learning is absolutely what got me to the position that I’m in today.”
With nearly half of insurance professionals expected to retire from the industry in the next decade, the industry needs insightful and capable new professionals. The good news for the industry, and specifically CPCUs, is that they have proven their commitment to lifelong learning and staying on top of industry issues.
Changes in insurance, business and society present both opportunities and challenges for ensuring professional growth and leadership development and for grooming a generation of professionals with different working styles. From the panel’s perspective, insurance professionals are clearly going to have to work harder than ever to keep up with new developments and best practices and to develop creative solutions. This will enable them to thrive within the industry’s dynamic work environment and help the industry evolve.
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Looking out from my moderator’s chair at the hundreds of new and veteran CPCUs in the audience, meeting with many more at the CPCU Society Annual Meeting and interacting daily with members of the industry, I am optimistic about the future and excited about the opportunities in front of all of us.
The insurance industry plays a vital role in making people’s lives easier. Insurance offers the promise that, if you pay your premiums, you will be protected from certain forms of catastrophic risk, thereby allowing you to engage in risk management. Through mutual trust, insurance also provides the peace of mind needed for families to buy a house or car, entrepreneurs to start a business and large companies to expand overseas. In this way, insurance helps oil the wheels of the economy.
As holders of the industry’s premier designation, CPCUs are the insurance industry’s natural leaders and role models for continuing education. To this point, Counselman told attendees, “The most important thing you can do is commit yourself to lifelong learning. Getting your CPCU designation is only the beginning.”
CPCUs should take great pride in their industry, hard work and accomplishments to date. There will be many opportunities ahead. I encourage CPCUs to raise their hands and seek these out. Find a mentor. And always keep learning.