Insurance to be reshaped towards purposeful growth
Globally, the insurance industry is seen to be on the verge of a “dynamic and purpose-driven moment” this year, as multinational professional services firm Ernst & Young (EY) noted in its latest “Global Insurance Outlook.”
“We believe the industry is poised for a period of purposeful growth, despite daunting macroeconomic and structural challenges, fierce competition and ongoing tech-driven disruptions,” the outlook’s authors wrote in the report.
Driving that dynamic moment are three trends that are expected to reshape the insurance market, as well as open opportunities for insurers to make more meaningful decisions for their clients and workforces.
“The decisions and actions leaders take today can meaningfully influence the future of the industry — and the lives and livelihoods of billions of people around the globe,” EY’s Global Insurance leadership team wrote in a message in the outlook.
Recognizing the rise of open finance and the ecosystems of financial solutions it enables, EY sees an emergence of open insurance, where insurance-related data and other types of personal information are shared among different organizations through application programming interfaces (APIs) that connect disparate systems.
Like how open finance can transform the delivery of financial services, open insurance makes it possible for insurers to tailor-fit policies or packages for customers.
“Across all lines of business, there is increased demand for more affordable, transparent and customized insurance that better suits evolving conditions and can be easily adjusted as the needs change,” EY’s outlook read. “Customers are increasingly willing to buy that insurance from other companies (e.g., retailers, other financial institutions, tech platforms) that offer intuitive personalized experiences.”
In addition, global professional services company Accenture recognized that technology, as it is integrated within traditional insurance products, will enable the personalization of solutions.
“Wearables and Internet of Things (IoT) sensors are creating new ways to track, price and promote health, home safety and security and auto insurance solutions,” Accenture wrote in its recent analysis of the insurance revenue landscape in the future. “Technology allows for increased personalization of products, services and rates, but insurers need to be prepared to operate on the right platforms and with the right partners to enable that personalization.”
Whereas before technology and automation is considered to cause job reductions in the insurance industry, at present the industry is set to have a more nuanced and interdependent human-tech dynamic — the second trend EY spotted.
“The consensus among forward-looking executives is that human talent is every bit as important to future success as AI, machine learning and modernized processing platforms, the firm’s outlook read. “Yet the scarcity of key skills and “the Great Resignation” mean that insurers must address the traditional view of the industry as slow-moving and dull if they are to become employers of choice.”
In attracting talent, EY recommends insurers to take stronger positions on social issues that matter most to rising generations of workers (e.g., diversity and inclusion, sustainability); provide meaningful work; and enhance their benefits, performance recognition and compensation models.
“Younger workers are also looking for more purposeful work, which gives an advantage to insurers that can articulate a clear story about how their products and services benefit society as a whole,” EY added.
Also, Accenture observed that the coronavirus pandemic and “the Great Resignation” are creating the pressures and shifts that will force insurers to disrupt long-standing apprenticeship models for skilling in essential functions like claims and underwriting. These forces are also pressing the need to attract and retain talent that are critical in roles critical to insurance workforce transformation like technology, analytics, and actuarial.
“Insurers will always need humans. But with fewer workers, they increasingly need humans enabled by machines, transforming how work gets done regardless of who’s doing it or where,” Kenneth Saldanha, senior managing director – Global Insurance lead at Accenture, wrote on the company’s website.
As insurers are seen to be seriously considering the impact of their actions to the environment and society around them, sustainability, the third trend, brings “a historical opportunity” for the industry to purposefully lead, innovate, and grow.
“Previous discussions about sustainability were largely theoretical and centered on making public pledges of support. Today, however, leading insurers are taking tangible steps and adopting hard metrics to address the full range of environmental, social and governance (ESG) issues and opportunities,” EY’s outlook added.
For most insurers, the outlook continued, the focus is squarely on the “E” in ESG, as climate change is expected to have the biggest and most immediate impact on the industry’s financial performance.
Accenture even recognizes climate change to drive innovation in the insurance industry, in spite of the growing volatility of environmental catastrophes and damage linked to climate change being a complex risk to insure.
“Technology can help shape and improve that response with more sophisticated risk modeling, enabled by digital technology such as AI and analytics. Insurers can improve pre- and post-incident handling around climate-related disasters,” Accenture’s analysis read.
Social issues, nevertheless, are also needing urgent responses, and so insurers must lay out their strategy with specific targets and quantifiable performance metrics, EY advised.
“Within a broader ESG strategy, insurers must identify priority focus areas, clarify why they are allocating resources to them, and determine what benefits they expect to achieve,” the outlook’s authors wrote. — Adrian Paul B. Conoza
