Tag Archives: talent

How AI Will Define Insurance Workforce

Prior to COVID-19, the U.S. boasted historically low unemployment and a roaring economy. Nearly every industry was expected to face a severe talent shortage within the next 10 to 20 years. But then March hit, and the world turned upside-down.

Since then, the pendulum has swung in the other direction. The current unemployment figures are reporting as many as 10.7 million people are out of work, and, despite this sudden abundance of available workers, staffing issues remain — they’ve just become more complex.

To navigate this wildly fluctuating environment, companies will rely on data for decision-making about hiring, training and countless other matters that affect the bottom line. This will require tools, like artificial intelligence (AI), to make sense of data and to adjust quickly amid uncertainty.

The best way to examine AI’s value in today’s uncertain world is to look at how it can work within a specific industry. Doing so makes it possible to show practical applications from which lessons can then be applied to other industries.

Commercial Insurance: A Case Study

Like other industries, commercial insurance faced a significant hiring crisis pre-COVID-19. The average claims adjuster remained in the industry for just four years — about the time it takes to gain full expertise — and those workers who stuck with claims have inched closer to retirement. So, this multibillion-dollar market is at risk of losing much of the human brain trust that enables current systems to run, as new workers cannot be hired, trained and retained fast enough to balance the scales.

Fast forward to today. Commercial insurance looks markedly different. The types and volumes of claims are changing. For example, claims related to COVID-19 contact or work-from-home circumstances are rising quickly, as are post-termination claims, while traditional claims have dropped.

At the same time, access to traditional healthcare has been in flux. To combat the limitations on available providers, telehealth solutions have exploded, opening up a whole new set of providers that claims reps need to become somewhat familiar with to facilitate claims accordingly — claims that bear a greater potential for fraud and litigation, which cost companies millions of dollars each year.

In short, almost everything about claims operations has changed — and, like many other industries that have been traditionally slow to adapt to new challenges, commercial insurance faces real hurdles.

The Importance of Data and Intelligence

Data is the key to overcoming dramatic changes within a relatively static industry. Maintaining a pulse on what’s happening across a business, or with a specific claim, and how it relates to things experienced previously is important; spotting trends early is vital. Organizations require data to determine if their plans and practices are working — and, if they are not, data should be used to drive intervention and adaptation.

But thousands to millions of data points alone won’t save the day if an organization doesn’t have the capability to understand what the data is telling them. What is the context? How are points connected? If a trend continues, what will be the effects six months or two years from now?

AI systems unlock the meaning of data to make it useful, pinpointing where organizations need to make adjustments. In commercial insurance, AI could allow for expanding provider networks to offer better, faster access to care. To actually expand networks using quality providers, systems need to tap into more data to learn which providers have achieved the best outcomes on which types of cases.

What is particularly exciting about implementing AI in this rapidly changing environment is that interpretations of data are not fixed. Machine learning capabilities are constantly refining and updating insights so that organizations — and their people — can respond accordingly.

See also: How AI Transforms Risk Engineering

Designing the Future Workforce

So, if data analytics and AI become staples in modern business, how do they solve the human resource problem? What do they mean for the future workforce? The answer is threefold.

Data determines what your hiring needs actually are: In a world that is changing so quickly, your business might not need as many people specialized in a certain area, whereas new opportunities or divisions may emerge. Your business may be forced to alter its offerings to match customer needs. Data is the guide; it lets you home in on exactly what skills are required.

AI guides training: Because AI is able to analyze so much data so quickly, new hires are able to access the information and prompts they need to do their jobs well as soon as they need it. There is not as much feeling around or dependency on senior colleagues. This is not to discount the value of experience, but it means that workers can reach a competent level much faster; what they lack in experience and intuition is replaced by data-driven insights and standardized practices.

AI augments jobs: AI solutions take care of many of the rote tasks workers are routinely bogged down with today. As a result, employees can focus on making more efficient, informed decisions; they can actually use their brains more. AI flags potential errors or problems so that they can be addressed before they escalate. Reps can focus on delivering compassion at a time when people need it most.

While COVID-19 has fundamentally altered the future workforce, tools like AI help get it back on track. In leveraging it effectively, organizations will become nimbler and more responsive to conditions while employees are more knowledgeable and effective.

AI in a Post-Pandemic Future

The COVID-19 pandemic put businesses under extreme pressure and has led to a massively accelerated digitalization of the workplace. The silver lining is the opportunity to develop more efficient, digital operating models by reinventing work and leveraging the power of artificial intelligence and automation.

Artificial intelligence and why it matters

Hype has for some time surrounded AI, but promises first made more than 60 years ago are now finally being delivered. What has been the game changer responsible for putting AI back on the map and on the verge of changing, well, just about everything? The answer is deep learning, an old idea that found an opportunity to mature in the late 1990s and early 2000s. 

Based on learning tasks using artificial neural networks inspired by the biological nervous system, deep learning technology is highly advanced and requires vast volumes of data and computing power only recently made possible. By 2030, AI is estimated to contribute as much as $15 trillion to the world economy, making it the biggest commercial opportunity in today’s fast-changing economy. Indeed, the new realities of the post-COVID-19 world require the accelerated adoption of AI to deliver the efficiencies and augmentations of a highly digitized workplace.

Figure 1: AI’s projected impact on global GDP

For more than 250 years, the fundamental drivers of economic growth have been technological innovations, the most important being general-purpose technologies such as electricity and the steam engine. Now it is AI that stands out as the transformational technology of our digital age, which, as with previous GPTs (general purpose technologies), is expected to trigger waves of complementary innovations and opportunities.

What tangible opportunities does AI offer businesses right now? We are currently witnessing the first wave, usually as a result of companies automating tasks and processes, reducing costs and creating more efficiencies. The work dividends from this first wave are mostly positive. Low-level, tedious, hazardous and boring tasks are taken over by machines, freeing time for the humans to do the higher-level, more productive tasks. 

Significant shifts in computing power and availability of large-scale data advance the development of AI applications that continue to rapidly grow in complexity and autonomy. AI’s autonomous nature and the way it is trained on data – essentially learning from the mistakes made in the past – make the technology both an opportunity and a risk.

See also: 4 Post-COVID-19 Trends for Insurers

AI at work

As organizations deploy technologies that automate work or introduce machine intelligence in the organization, the limiting factor in translating these innovations into real business benefits will be talent. Beyond the designers, developers and data scientists that everyone is battling for today, companies will need to explore what new roles are likely to emerge in digital disruptors.

As with many professions, underwriters have been doing a job one way for decades and now are expected to do things differently. The role is primed for transformation as AI is poised to reconfigure and augment insurance underwriting. Fueled by an explosion of data, low-cost data storage and open source technology, AI has the potential to help underwriters analyze an incredible amount of information, find red flags and help make more accurate decisions. 

While there is no expectation for human underwriters to be replaced, as their judgment will still be needed for complex cases, future underwriters will be expected to work alongside AI systems to ensure all risks are accurately measured and priced. As underwriters increasingly interact with automated AI systems, there will be a need for new skill sets to develop, with some old skills potentially becoming obsolete.

Meanwhile, demand for these new skills far outstrips supply at present, which indicates that the main roadblock to insurers capturing the full value of this new technology is not the science, but the human change management factor. It is a tall order, but starting by having the right people with the right skills in the right roles will far outweigh picking the right technology, algorithm or latest start-up to work with.

More digital, more human

One of the major transformations of the digital age is to see more companies adopting a flat working structure, where career paths are less clear and the turnaround of young talent greater. In this new environment, a next-generation operating model that supports the opportunity to learn skills, to have thought leaders provide mentoring and to involve new staff in meaningful projects will be critical to attract and retain the best digital talent. 

By moving beyond a one-size-fits-all approach to human resources and talent management, digital workforce platforms can help create the conditions in which employees feel energized by their work, valued by their organization and happy in their environment.

Google and Apple are examples of early adopters of digital workforce platforms that built ecosystems allowing them to innovate, take advantage of new technologies to cut costs, improve quality, build value and respond quickly to the fast-changing and rising digital expectations of consumers. How can this model be replicated across other industries?

The answer may depend on the ability of corporate leaders to restabilize the workforce — and to reconceive organizational structures — by using the very same digital technologies that have destabilized it in the first place. The incoming AI revolution should reinforce, not weaken, the uniquely human characteristics that define how we work, particularly in the way that we collaborate, communicate and develop relationships. To fully exploit emerging digital capabilities, most organizations will continue to depend on people, with human skills actually becoming more critical in the digital world, not less. 

See also: Stop Being Scared of Artificial Intelligence

As tasks are automated, they tend to become commoditized; a “cutting edge” technology such as smartphone submission of insurance claims quickly becomes almost ubiquitous. In many contexts, therefore, competitive advantage is likely to depend even more on human capacity, on providing thoughtful advice to an investor saving for retirement or calm guidance to an insurance customer after an accident.

AI is likely to be one of the biggest game changers in insurance history, offering a wide range of opportunities from faster and more efficient claims management to a greater variety of on-demand insurance services. As organizations transform to thrive in a digital environment, their success will be affected by how well they integrate their workforce into the transformation journey and manage the tension between the constant drive to innovate and improve and the new governance, compliance and regulatory risks created by new AI technologies. Digital transformation requires the overhaul of culture beyond technology updates or process redesign to reap the anticipated benefits.

Keys to Finding and Nurturing Talent

There’s keen focus in the insurance industry about overhauling obsolete IT infrastructure to support innovation, along with the resulting costs and benefits. Yet few people talk about the benefits of top industry talent in the same quantified manner. For innovation to truly scale, the industry needs to be able to attract and retain the best talent. With the proliferation of the Insurance Careers Movement, we’ve seen insurers take important steps in trying to attract new talent to the industry, but struggle to put that talent on a path to succeed long-term.

With the insurance industry’s unemployment rate down to just 2%, finding the right people to fill newer technology-driven roles, particularly those in data analytics or advanced AI, is proving to be increasingly challenging. According to an independent study conducted by Insurity Valen Analytics, 73% of insurers find it moderately to extremely difficult to find new talent in data and analytics, and the reasons for this difficulty haven’t changed much over the years. Two recurring reasons include a disinterest in insurance careers and more enticing opportunities in other tech startups or data-driven companies. The top reason has consistently been difficulty finding talent in the geographic area of the insurer.

Even when insurers manage to capture elusive tech talent, the total turnover in insurance is 12%. Turnover is expensive for employers and speaks to the inadequacies in employers’ strategies for identifying, acquiring and grooming new talent.

Let’s explore some best practices for employers in the insurance space to find and retain the best talent.

Engaging in the Early Career

With 25% of the workforce in the industry set to retire in the next few years, the U.S. insurance industry is in dire need of a new and reliable talent pool equipped with advanced technological skills. But it’s also not just about backfilling roles left open by retirees. A combination of diverse skill-sets and out-of-the-box thinking is key to fostering an environment of innovation, while combating this talent shortage. Millennials are perfectly suited to offer both but generally haven’t shown much interest in insurance industry employment. According to Pew Research Center, only 4% of millennials show interest in an insurance career.

It is also estimated that, early in their careers, people remain in their jobs for just 12 to 18 months on average—a trend that has proven true from one generation to the next. So how do insurers turn new hires into tenured employees?

See also: How to Scout and Draw the Best Talent  

It is critical to find ways to resonate with younger talent by understanding the issues important to this generation. Today’s job seekers want positions that align with their values and offer viable, meaningful career development opportunities. They seek flexibility in the work schedule and location, which works to the insurer’s benefit when they are unable to find talent locally. Other critical elements to engaging with younger workers are pay parity, diversity and inclusion. In 2018, women earned 85% of what men earned in the U.S. While the gender pay gap is closing, there’s still much room for progress, and, as an industry, insurance can lead the change.

By emulating tech companies and constantly encouraging new thinking to foster an innovation culture, insurers have the opportunity to appeal to high-level talent.

Mapping Out a Career Path

“Career pathing” is an integral part of talent management. One of the primary reasons people leave jobs is to advance their careers. The key to attracting and retaining top talent is giving prospective hires not just what they ask for, but what they haven’t thought about yet. This includes carving out possible career paths for them, complete with road maps of employees’ career goals, performance metrics and training needs. When people feel like their employers are invested in their personal futures, they tend to stay where they are, longer.

The importance of this concept is amplified in an industry where finding the right talent is challenging. A career pathing strategy keeps the existing talent pool engaged and makes the company more attractive to those looking for their next career move.

A company that walks the walk of innovation is one that always encourages learning and development, but this can also be done strategically to equip existing employees with skill sets that are in high demand. For example, five key areas have a rising need for new talent within insurance: sales, underwriting, customer services/admin, technology and claims. Employers should consider investing in training opportunities to groom existing talent to learn these in-demand skills.

Managing the Management

Fostering a positive and engaging work culture is important in motivating and retaining employees. It is vital that employees are able to communicate and collaborate with their colleagues and immediate managers or supervisors. Oftentimes, it’s a manager’s inability to make co-workers feel supported that can lead employees to seek or be vulnerable to other opportunities.

See also: 10 Essential Talents to Leverage Insurtech  

Offering congratulations on a job done well or keeping the team apprised of coming plans and projects can make a huge difference. Employees should benefit from the leadership of their managers and receive the training and resources needed to excel at their jobs.

It is just as important to equip the managers with the right tools to engage with and motivate both the new and existing team members.
The insurance industry has the opportunity to define how technology and evolving economies will define their business strategies. This creates a once-in-a-lifetime opportunity for next-generation talent who want to make a difference, and sending this message front and center in their hiring narratives can go a long way.

Ned Ryerson and the Future of Insurance

Does the name Ned Ryerson sound familiar? Perhaps just vaguely familiar, but you can’t quite remember where you’ve seen or heard the name? I’ll give you a hint: BING! How about now? Still don’t remember? Did you see the Harold Ramis film, “Groundhog Day”? BING!! Remember the annoying insurance salesman who torments Bill Murray’s character, Phil Connors, every morning, claiming to have attended the same high school when they were kids? BING!!! Remember how he shouted his cheesy, personalized catch-word as he badgered Phil to buy nearly every type of insurance known to man? BING!!!! “Needlenose Ned”? “Ned the Head”? BING!!!!! That was Ned Ryerson. (I’ll spare you the catch-word this last time.)

For the five people on the planet who have not yet seen this comedy classic, a supernatural event forces a self-absorbed TV weatherman covering the annual Groundhog Day event in Punxsutawney, PA, to repeat the same day over and over again. Each morning, weatherman Phil Connors awakes on Feb. 2 and re-lives the same set of events, interacting with the same people, including the cringe-worthy Ned Ryerson. The first three or four times Phil encounters Ned, he does his best to avoid him. By their fourth encounter in the movie, Phil flattens Ned with a vicious punch before he can once again launch into his déjà vu sales pitch.

After repeating the same day for the hundredth, thousandth or possibly millionth time, Phil Connors undergoes a personal transformation from egotistical jerk to a kind, caring person, thus allowing the calendar to finally turn to Feb. 3. And, yes, part of that penance included a purchase of insurance coverage from Ned Ryerson. After all, what greater demonstration of humanity is there than to be nice to an insurance salesman?

Houston, We Have an Image Problem

Ned Ryerson is the fictional embodiment of nearly every insurance stereotype in a single person. Unable to turn his “whistling belly button trick” from the high school talent show into a professional career, he did the next best thing; insurance. He’s creepy. He’s annoying. He tells bad jokes that only he finds funny. He never takes a hint. He’s relentless. He displays many of the worst traits perceived in our industry, and, sadly, he is one of the more positive depictions of the insurance industry that has appeared on the big screen.

Consider the alternatives. In the Denzel Washington movie “John Q,” a desperate father holds a hospital wing hostage and forces doctors to perform a potentially life-saving surgery on his dying child because his insurance company will not authorize the procedure. “The Rainmaker,” a screen adaptation of the John Grisham novel, follows a lawyer suing an insurance company for denying a bone marrow transplant to a young man who later dies as a result of the company’s “deny all claims” directive. “Sicko” offers a scathing (albeit slanted) view of the American health insurance system that takes billions of dollars from individuals and then refuses to provide them coverage.

If we are to believe Hollywood, the insurance industry steals hard-earned money from people who can least afford to lose it, seizes every opportunity to deny benefits to those in need and condemns children to death to protect profits. By contrast, Ned Ryerson is practically the patron saint of the industry.

See also: Future of Insurance Looks Very Different  

So what does Ned Ryerson have to do with the future of insurance? The Bureau of Labor Statistics projects the insurance industry will need to add nearly 200,000 jobs in the next five to six years to match projected demand. Brokerage firm Guy Carpenter projects that as much as 25% of the insurance industry will have reached retirement age by 2018. With so many stable, well-paying insurance careers available, it would seem the insurance industry should have no issues filling its employment coffers. And yet we do. In fact, we may be approaching a crisis-level talent gap. Why? Perhaps it’s because so few young people have had a positive introduction to the insurance industry. Maybe it’s because there are only a handful of universities offering insurance programs. Or just maybe, college students simply don’t want to envision their future selves as Ned Ryerson.

No Degrees of Separation

Insurance is one of the only major industries in the world that does not require or even encourage prospective employees to have an educational background in the field. There are insurance professionals who hold diplomas in English, finance, economics, liberal arts and a myriad of other disciplines but virtually no insurance degrees. When people learn that some universities offer insurance as a degree program, their reactions usually fall into one of two categories:

  1. Sasquatch sighting: I’ve heard rumors such things exist, but I’ve never actually seen one in person.
  2. Unstable personality concern: You mean people actually WANT to do this for a living? Perhaps these lost souls should consider seeking professional treatment for this condition….

Why is it so surprising that an insurance professional would have an insurance degree when it’s commonplace for others to hold degrees in their chosen fields? Attorneys attend law schools. Mechanics go to technical training schools. Doctors go to medical school. Why wouldn’t an underwriter or broker study insurance? Think about it. How would a patient react if he learned his neurosurgeon attended culinary school? Would an accounting firm hire someone who studied ballet? What if the electrician re-wiring your home offered his undergraduate degree in physical therapy as proof of qualification? Wouldn’t that be strange and possibly a little unsettling? Yet this is how most of the insurance industry operates.

Professionals with educational backgrounds outside of insurance aren’t necessarily less qualified than those with insurance degrees. There are many exceptional people in our industry who did not pursue insurance as a course of study but still found their way to an insurance career. Yet how many talented young people do we miss every year simply because insurance is not offered as a career choice at the schools they attend?

If we are to solve the long-term issue of youth and talent acquisition facing our industry, we will need to make insurance a more desirable and available option for college students. To do so, we need to help more colleges and universities across the country develop meaningful insurance programs. Unless the insurance industry supports college degree programs, students aren’t likely to consider insurance as a career path worthy of their time and talents

A Bridge Under Troubled Waters

According to a 2015 study published by Business Insurance, Temple University hosted the largest insurance program in the country with 475 undergraduate students in 2014. On the surface, this number may seem impressive but when compared with the enrollment in other courses of study and the projected needs of the insurance industry over the next few years, a very different picture emerges.

Of the nearly 28,000 undergraduate students attending this university in 2014, less than 2% chose insurance as a potential career; fewer than those pursuing music and dance. If we assume half of the undergraduates studying insurance would be graduating in any given year, this particular program would fill fewer than 1,200 positions over the next five years.

Gamma Iota Sigma, the insurance industry’s lone national professional fraternity, has active local chapters in just 50 of the 3,000 or so higher education institutions in the U.S. offering four-year degree programs. This means insurance is available as a course of study in just one out of every 60 colleges and universities across the country. In 2014, the top 20 schools offering insurance as a major had roughly 3,400 undergraduate students enrolled in those programs collectively. If the Bureau of Labor Statistics’ projections are correct and our industry will have about 200,000 jobs to fill within five years, there won’t be enough insurance graduates to fill the job vacancies left by those who are retiring, let alone the new positions.

To bridge this impending employment gap, our industry will need to look to other non-insurance graduates to fill the void. For some of these individuals, insurance will provide a challenging and rewarding career, but for others it will be an option of last resort. The best and brightest of those pursuing other fields of study will likely have found homes in their chosen career paths. Insurance will get the leftovers. If the insurance industry is to continue to evolve and improve at the same rate as those we insure, something will need to change.

The Lesser of Two Evils

In recent years, a great number of studies have been published on the attitudes, values and work ethics of millennials. A 2011 report issued by PricewaterhouseCoopers (PwC), Millennials at Work; Reshaping the Workplace, indicates personal development opportunities, organization reputation, work/life balance and opportunity to make a difference are some of the key factors millennials consider when choosing a job. Compensation was also a factor but was not among the top three criteria millennials used to make career choices.

The insurance industry would seem to meet most, if not all, of the essential criteria millennials use to judge prospective employers. There is an enormous opportunity for personal development and advancement for young people entering the insurance industry over the next few years. Likewise, many employers in the insurance industry have moved toward flexible working hours and work-from-home arrangements to accommodate a better work/life balance for their employees. Lastly, the insurance industry undoubtedly makes a difference for many people. Insurance allows people to buy homes, operate businesses and recover from life-threatening injuries without fear of possible financial ruin. It even helps people care for their families after they die.

If not for one glaring exception noted in the PwC study, the insurance industry would appear to be a nearly perfect fit for millennials seeking professional employment opportunities. But to quote the great sage Ned Ryerson, that one exception is a DOOOZY. When asked if there were any specific industries millennials would not consider based on reputation alone, insurance ranked second behind only the oil & natural gas industry. Even Ned would have a tough time spinning that one to a prospective millennial. You may hate us, but our carbon footprint is really small… How’s that for a rebuttal and recruiting pitch?

School is Back in Session

The reality for most insurance industry recruiters is that the battle for millennial talent historically was lost before it even began. Not only do we not have an extensive network of colleges and universities providing insurance as a course of study for incoming students but most prospective millennial candidates decided against insurance as a potential career option long before they even chose a college to attend. If the insurance industry is to reverse this trend and attract talented youth, we will need to develop a strategy to engage young people before they begin pursuing a profession.

Traditional career days and fairs at most high schools and colleges generate a relatively high attendance but typically offer little in the way of meaningful interaction with individual students. The likelihood of convincing someone to consider an insurance career in a two or three minute conversation is minimal. A guest lecture lasting 30 minutes (or more) provides much better odds. Many high schools now offer business classes as electives to their students. Some of these schools will occasionally invite guest lecturers from local businesses to speak in their classrooms. A guest lecture that presents an insurance career as a positive and challenging opportunity could be the first introduction to a rewarding career path for some students.

See also: Future of Insurance: Risk Pools of One  

Not sure if your local high school offers business classes as part of the curriculum or if they allow guest lecturers into their classrooms? Why not pick up the phone and ask? We call on prospective clients nearly every day asking them to place their business with us. Shouldn’t we put forth the same effort to secure the future of our industry?

Supporting existing college insurance programs will also be a critical component to securing top notch talent in the future. For companies that want to participate in scholarship and grant programs without the administrative responsibilities of operating those programs, there are options available. Organizations like the Spencer Educational Foundation provide scholarships from donor companies and individuals to students pursuing careers in risk management and insurance. These scholarships provide real incentives for talented students to choose insurance as a career. Individuals can likewise help aspiring college graduates by participating in mentorship programs that pair graduating students with experienced professionals. Having a mentor available may make the transition from college to professional life easier and possibly improve the chances of those students remaining in the industry for the long term.

Lastly, while there are only about 50 colleges and universities with established insurance programs nationwide, that leaves about 3,000 opportunities to develop new insurance degree programs. It is likely that at least a handful of the multitude of retiring insurance professionals may simply be looking for a change of scenery rather than a complete departure from the working world. A new career as a college professor could be an option for some. If just one college in every state were to create a small staff of adjunct professors from the pool of retiring insurance professionals, the number of colleges in the United States offering insurance as a degree program would nearly double. This wouldn’t eliminate the talent gap on its own, but as Ned Ryerson would likely agree, it sure as heckfire would be a step in the right direction. Am I right or am I right?

3 Forces Shaping Insurance’s Future

The disruptive power of digital technologies has spread more slowly across the insurance industry than other financial services. This will not last much longer, and many insurance executives risk being caught by surprise by the drastic changes these advanced technologies will inspire.

What kind of change is coming? In life insurance, a U.S. company says it can help companies accept or reject new policies by analyzing selfies to determine an applicant’s health. In other examples, advanced analytics can help fine-tune prices and segment customers more accurately; machine learning can present precise cross-selling opportunities; and digital interfaces can support single-event policies and purchases without any interaction with human agents.

Indeed, the first waves of disruption have already hit automotive insurance, where claims are being processed using smartphone apps and where online aggregators are leading buyers to the lowest-priced offers from a range of companies. Similar changes will unfold across all corners of the industry. Our experience shows that many executives in all branches of insurance are underestimating the disruption these technologies can bring, putting their companies at risk.

Early incursions into insurance

Change enabled by digital technologies will come from outside and within the industry. Attackers will find ways to snatch profits along vulnerable edges of the industry, while longtime players will refine their models, products and customer service to become more competitive.

Technology companies focused on financial services, known as fintechs, have grown rapidly in recent years. These fintechs moved first and aggressively into traditional banking services, giving many insurance managers a false sense of comfort.

In 2016, the market intelligence group VB Profiles reported that 1,329 fintech companies globally had together raised more than $105 billion and had a combined market value of $870 billion. Of these, 356 specifically targeted banking and payments, 196 financing, 108 investments and just 82 insurance. The remainder focused on technology infrastructure, such as analytical and business tools, that could be applicable across sectors. VB Profiles also said that in 2015 insurtech companies that work directly on insurance innovations attracted investments totaling $2.2 billion, more than any other segment in its study. This is an ominous trend for traditional insurers, even though investment levels slid in subsequent years as companies focused more on product development than on raising funds.

Already, digital applications are scooping up profits at the periphery of the industry. Price-comparison websites, for example, scan the internet for car insurance prices and provide the data to users. A separate study by S&P Global Ratings found that almost two-thirds of new car insurance policies in the U.K. are being sold through these sites. Another example from outside the core industry is single-trip cancellation insurance offered by online travel-booking companies such as Expedia, often underwritten by established insurers.

Insurers are also using digital technologies to cut costs, improve customer service and create competitive advantages. In the U.S., for instance, property and casualty insurer Allstate lets customers file claims on car accidents by submitting photos through its smartphone app. In an example of using new technologies to augment current practices, a large U.K. insurer gathers its internal data to make pricing and service decisions that take better advantage of a customer’s life-cycle value. A customer with several products, for instance, could automatically have claims processed faster or be offered favorable pricing on additional insurance products.

Three unstoppable forces

Three extraordinary forces—a cascade of data, advanced analytics and heightened customer expectations—make the flood of technological innovations seen today very different from advancements witnessed in recent memory. Handheld tablets introduced to agents may have improved efficiencies, but they had little effect on underlying business models or how sector profits were divided. These three forces will be different.

See also: 2 Paths to a New Take on Digital  

Using auto insurance as an example, we’ve noted how price-comparison platforms have changed how customers shop. Soon, data automatically delivered from built-in sensors in cars and trucks will offer judgments on driving habits that could allow companies to raise or lower prices for individual clients with increased precision. The same sensors could also notify insurers of an accident, prompting the insurer to dispatch police, medical personnel or tow services; to send an automated drone to assess and film the situation; and even to arrange a rental car. All the while, the customer is updated on these actions over a smartphone app. Not only is customer service improved, but companies will also have immediate, concrete information on incidents, which could help prevent fraud, reduce costs and improve risk modeling.

Increased data

In 2015, Forbes magazine noted that more data had been created in the previous two years than in the prior entire existence of mankind and that only a tiny portion of that data — about 0.5% — is analyzed or mined for value. This data is generated constantly: tens of thousands of Google searches every second, tens of millions of Facebook messages every minute and, soon, 50 billion smart devices connected globally, composing the Internet of Things, among other sources.

Insurances companies that harness this data can make better decisions, improve customer service and even prevent claims in the first place by, for instance, advising clients on healthier lifestyles or safer driving habits. Used properly, this cascade of data is the raw material needed for a more precise risk assessment on every single policy and for early warnings of any anomalies.

If neglected, this trove of data is also a threat to established insurance companies. For example, a digital giant such as Google or Facebook could use its rich deposit of data to target the most attractive customer segments with tailored insurance offers that would be difficult to match in terms of personalization. Or, a major automaker could leverage data already arriving from sensors to strike an exclusive relationship with a single provider, closing a significant portion of the market off to others. Such a move is plausible as self-driving cars are perfected and as carmakers themselves seek ways to protect their own profits as the economic value in the auto industry moves from manufacturing to software.

Advanced analytics

While the data stream has swollen significantly recently, companies have been capturing data from their customers for years, often without extracting optimal value. Recent advances in analytics and predictive analysis, however, make it easier for companies with technological expertise to find value in these terabytes of data.

Advanced analytics can provide better risk profiles of customers using data from a wide range of sources, from social media activity to public databases relevant to specific locations or occupations. The analytics also open the door for technology startups to target especially attractive customer segments or create targeted products, such as nascent “gadget insurance”—policies that cover just a laptop, tablet or smartphone rather than an entire household and its contents.

Analytics can also help perfect pricing and customer-service policies. For instance, advanced analytics can be used to present promotions that would be attractive to a specific client based on how a large pool of other customers responded to the promotion. Analytics could also flag new opportunities, such as when a client’s children have reached a life stage when they might need their own policies.

Customer expectations

In the digital age, customers are becoming accustomed to highly personalized products and services. These customers, especially digital natives who grew up with the internet and represent the new generation of insurance buyers, expect Amazon, for instance, to suggest items based on their previous purchases and to be able to pick exact seats when buying concert tickets online. They expect immediate access to their banking information over their smartphones and have little patience for elaborate sales pitches.

Such expectations cannot be satisfied by simply migrating traditional offers to a website or mobile platform. Customers want to have a choice between, say, purchasing a standard auto insurance policy or picking and choosing from among modules, such as roadside assistance and rental-car replacement, rather than an online brochure that touts traditional products.

As an extension of closer customer relationships, some insurance companies are using new technologies to offer preventive programs, which deliver clear benefits to both policyholders and insurers. For example, insurer Discovery in South Africa runs the Vitality wellness program, which predates the digital era and has been updated with new technology. Vitality applications allow the company to encourage customers to frequent gyms, eat healthily and improve their driving habits. Hospitalization costs for program participants are as much as 30% lower than for nonparticipants, and participants live 13 to 21 years longer than other insured groups do. Similarly, IAG in Australia uses claims data to identify dangerous road segments, alerting customers as they approach these hazardous zones and working with governments to correct them. The company says a single improved highway ramp can save AU $600,000 (U.S. $470,000) a year in claims.

Implications span crucial areas

The exact implications of new digital technologies on insurance are difficult to foretell. Innovations in the financial services sector, in general, have been dynamic, and there is every reason to believe that these technologies will have a similar wide-ranging impact as they embed themselves into the insurance sector.

Broadly, four areas can expect the greatest disruption.


A clear understanding of changing customer expectations is essential to take full advantage of new technologies. For many companies, this means adjusting product and service portfolios to cater to customer wishes, rather than presenting the same set of rigid offerings that have sold well in the past. Companies that use big data and advanced analytics to better understand their customers and agile product development to cater to these new needs rapidly will have a better chance of thriving in the digital environment.

In one example, a growing number of private clients are participating in the sharing economy using platforms such as Airbnb for properties and BlaBlaCar for shared rides, and they need relevant policies to protect against damage and liabilities under these new circumstances. Unlike traditional policies, such products might cover only clearly limited periods or specific situations.

Customer experience also has greater importance. While good experiences may not always outweigh price, especially as comparison websites reach more broadly into the industry, bad experiences, such as complicated site designs or claims processes, can easily send customers to rival offerings. In one example, a large U.K. insurer processes claims quickly, often within seconds, for customers whose data shows they are long-time clients who meet certain criteria, such as owning several products or having few past claims.

Products and prices

Companies will have to reexamine their product and service portfolios, taking into account evolving customer expectations, insights generated by advanced analytics and aggressive maneuvers from attackers. For example, insurers will have to find ways to deconstruct homeowners’ policies. Rather than insuring the entire contents of a home against theft or damage, specially designed policies could cover only selected items, such as computer equipment or musical gear. Products for individual events, such as travel or leisure activities, should also be expanded.

Using new technologies, products can also be developed for customers who might be otherwise unattractive or too costly to serve. For example, in agricultural insurance, remote sensors could provide an insurer with pertinent information on soil conditions, temperatures, humidity and other factors for remote farms. Crop insurance claims from a drought or other natural calamity could be more quickly and efficiently processed using primarily this data, rather than waiting for an expensive visit by an adjuster.

Insurance companies must also use technology to keep prices competitive while preserving profit margins. Looking at car insurance, S&P noted in 2016, “Insurers that do not find their quotes in the top five places on a [price-comparison website] may struggle to gain new business, no matter the quality of their product offering and service.” Among other measures, deploying new technologies to partially or fully automate processes such as application processing and claims payments can be especially effective in reducing back-office costs.

The potential for increased transparency into client lifestyles and habits will also affect policy pricing and risk assessments. Although privacy concerns are still being addressed, sensors on smartphones and wearable fitness gadgets, for instance, could provide data that allows insurers to reduce premiums for clients who lead healthy and active lifestyles. In a similar vein, sensors inside vehicles can provide automotive insurers with valuable information on an individual’s driving habits. Increased use of this data, however, also leaves insurers open to the risk of customers hacking into these devices and sensors to present erroneous favorable data.

IT systems

For many established insurance companies, legacy computer systems are not up to the task of compiling and analyzing the massive amounts of data that feed these new technologies. These systems often lack the flexibility and speed needed to cater to today’s customer needs and to keep pace with industry attackers.

To face this challenge effectively, many companies have developed a two-pronged IT approach. Processes that don’t require the strengths of new technologies, such as accounting and fraud management, remain the province of legacy systems, while social media, customer service, product development and process automation, among others, are handled by updated systems. For most companies, investments in new systems will be required to meet these needs.

Among recent IT breakthroughs, blockchain technologies, which essentially provide a shared digital ledger that no individual controls, are being scrutinized for potential opportunities. Fifteen insurance companies, including Allianz, Munich Re and Swiss Re, have joined in a pilot program called the Blockchain Insurance Industry Initiative B3i to “explore the ability of distributed ledger technologies to increase efficiencies in the exchange of data between reinsurance and insurance companies,” according to an Allianz statement. Blockchain technology has particular potential in transaction validation and fraud prevention.

Business models and risk

As we’ve seen, advanced technologies deployed within the industry can support new business models, from gadget insurance to intricate pricing approaches. These technologies deployed in other industries could also disrupt business models. Consider the example of self-driving cars. Once they are in common use, the liability for any accident could shift from human drivers to manufacturers, bringing insurance into the suite of services offered by manufacturers in the overall ecosystem. Maintenance of software and mechanical systems could become more crucial to reducing risks, compelling insurers to collect data from service providers to help assess and manage these risks.

Similarly, home insurers could gather data from utilities using smart meters and other sources to monitor the risk of fire or flood and dispatch warnings and instructions to mitigate risk to clients as necessary. In the U.K., home insurer Neos, founded in 2016, offers its customers a policy that includes a suite of smart-home sensors that alert the homeowner and the company if, say, a door is left open or the plumbing leaks. Neos also offers to arrange the necessary repairs.

See also: Finding Value in Insurtech (Part 1)  

While the availability of such data can help assess policy risks more accurately, it also creates internal risks that must be understood and managed. Perhaps the biggest issue revolves around privacy questions, especially as companies gather data from a variety of external sources to create customer profiles and inform pricing decisions.

For example, one U.K. insurer is considering a program in which potential customers are given policy quotes with virtually no questions being asked. Instead of the usual long list of questions, the insurer would use the mobile number of the incoming call to identify the caller, find an address and compile various data related to the caller’s lifestyle and risk. The call-center agent would then offer an immediate quote for the desired policy. However, similar programs from other insurers that tapped into social media activities were met with protests over privacy concerns and had to be discontinued.

Talent brings it all together

To make the most of these advanced technologies and remain competitive, insurers will require new talent and new capabilities. The technology itself is readily available; assembling the talent needed to extract the greatest value from digital advances will be the crucial element that sets a company apart from its competitors.

The talent insurers want — and where to find them

Most insurers seek digital hires with capabilities in data analytics, digital apps, the Internet of Things, the habits of digital natives and other comparable areas. A natural first stop to find such talent would be the broader financial industry, especially banks, which have a head start on insurers in addressing these changes (and also have familiarity with operating in a highly regulated industry). Hires from banks and other financial services companies are likely to experience less culture shock than would those from outside the financial industry, but insurance companies must be ready to pay for this scarce talent. Recruiting from further afield will be more difficult, although necessary.

Forward-looking insurers also prize meaningful international experience—a common gap in the resumes of otherwise high-flying, U.S.-based digital executives, who tend to have spent little time managing outside their home territory.

Finders, keepers

Of course, finding digital leaders is only half of the equation. The insurance companies most successful at transforming themselves will also prioritize employee retention. This is easier said than done, given the insurance industry’s reputation as a stodgy work atmosphere. Potential cultural clashes and generational gaps between young talent and older insurance executives must be recognized and addressed. Indeed, cultural clash may be the most difficult obstacle in recruiting and retaining the top talent needed to exploit new digital technologies.

As banks have discovered, top hires with technology backgrounds expect a fast-paced, innovative environment, or they will take their in-demand talent elsewhere. One way that insurers seek to bridge the cultural divide is to set up separate innovation centers that mimic the digital “hothouse” environments found in technology or other fast-paced industries. Such models can work—and work well—but only when senior leaders are purposeful about attacking the perennial management challenge these approaches bring: transferring any insights generated in the incubator to the core business and integrating them into its day-to-day operations. Executives who expect this to simply happen of its own accord will be sorely disappointed.

In the end, we find that the most powerful approach to keeping digital talent engaged is deceptively simple: make sure that company leaders—starting with the CEO—do their utmost to instill a sense of purpose in the work of the transformation itself. To be sure, perks and pay matter, but when digital leaders feel a genuine commitment to change, they are far more likely to stay the course, despite the inevitable culture clashes and other growing pains. Seeing a meaningful commitment to innovation and responsiveness from company leadership goes a long way to engaging and retaining digital talent.

When in doubt, partner up

In most circumstances, partnerships will also be needed to fill capability gaps. Insurance companies will have to collaborate with a range of technology companies, rather than relying on a small set of providers. In the process, the role of the chief information officer (CIO) will evolve to encompass a greater emphasis on managing a vast ecosystem of diverse vendors and partners as well as in-house innovations and proprietary systems. The shift will be complemented by other organizational changes, such as the creation or promotion of chief data officers or chief digital officers, to help maintain the right balance.

For optimal impact, companies cannot pick and choose among these approaches to talent but rather must incorporate each model. Internal talent development, new hires and strategic partners must all be brought into the mix for the best results. Like all transformational efforts, success is largely reliant on top-level support and enthusiasm. CIOs and other senior executives must work toward an ideal balance of new capabilities and hard-won industry knowledge. Processes and structures must be adjusted.

This will require a mix of new and old change-management skills, with communication a central component. One British insurer established a task force to disseminate the new digital culture and language throughout its global organization. As part of the transformation, an initial group of 30 “ambassadors” was responsible for explaining the changes broadly, and each recruited 10 new ambassadors to bring the message deeper within the organization.


Outside innovators and leaders within the insurance industry are already looking carefully at the risks and opportunities posed by new technologies. Like those already witnessed in the banking industry, disruptions are likely to move quickly through the insurance sector, affecting everything from customer service and products to back-office processes. The key to capturing the value of these new technologies will be digital talent, which is already scarce. Companies that wake up and move now will have a much better chance for succeeding in this new environment.