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Building resilience in
a time of change

The challenges facing the insurance industry are many and varied. Being agile, client-centric, and ready to embrace new business models is essential to stay relevant and build a highly resilient business.


Building resilience in
a time of change

The challenges facing the insurance industry are many and varied. Being agile, client-centric, and ready to embrace new business models is essential to stay relevant and build a highly resilient business.

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Darren Choong
| Linkedin
| Content Manager

What hasn’t happened in the past few years?

COVID-19 continues to be highly disruptive. Climate change is being felt around the world. Regulations are transforming, especially around ESG. There’s sustained inflation and a potential global recession. The digitalization of many industries and ever-changing customer expectations are seeing a growing demand interactive, efficient, and highly personalized digital experiences.

What constitutes risk is now constantly evolving. Nobody predicted the global fallout of the coronavirus pandemic, nor that the economic recovery during 2021 would be so quick. Today, there are ongoing doubts surrounding COVID-19 variants and inflation rapidly rising (largely driven by the energy crisis and it’s a sure bet everyone has noticed that); and like many industries, insurers have been impacted (and transformed) by our increased reliance on technology. Work-from-home became standard, and for many, still is, while cyber-security issues (not surprisingly) surged. This has also seen more wide-spread collaborations and acquisitions of more tech-savvy insurtech businesses (many of which are maturing quickly) to help with digital adoption, scaling, and capability.

And as non-traditional entrants, including banks and asset managers, offer comparable products to insurers, alongside the competition is increasing. Then add in globalization, which is also seeing companies expand and compete with local insurance companies.

Digitization, climate impacts, data security, digital assets, and more are also seeing, as noted in Deloitte’s 2022 insurance regulatory outlook, a large range of regulatory challenges.

The last few years have also seen a massive change in consumer behavior. Expectations on service, personalization, and accessibility are extremely high. In many cases, you only have one chance to get the customer’s experience right before they move on.

The world is clearly changing. For those in the insurance industry, building an agile, yet highly resilient business is essential to weather these changes, stay relevant, and be competitive. This means taking a close look at the technologies and human factors that must be addressed for lasting success.

It’s a digital world after all

While most industries were well into their digital transformations before the coronavirus pandemic, there’s no doubt that everything was accelerated to meet the challenge of remote working and social distancing. For early adopters, this means being able to dramatically improve efficiencies through a range of technologies, including artificial intelligence (AI), machine learning (ML), predictive analytics, and microservices. Those who are just starting on their digital transformation journey or who are still debating the best way forward, are encountering a complex and challenging environment – especially when it comes to updating their legacy systems, which many see as the main obstacle when it comes to digital adoption.

Embracing new tech

What in the world is blockchain? Can we trust an online smart contract? The cloud? Software-as-a-Service (SaaS)? The Internet of Things (IoT)?

Every day it seems like there’s a new technology that’s going to change the world. In many cases, some of them are. Take blockchain. As defined by IBM, a blockchain ‘is a shared, immutable ledger for recording transactions, tracking assets and building trust.’ When used to secure a smart contract (for example), the blockchain makes them trackable and irreversible. For business-to-business needs, in particular, blockchain will be essential.

Other innovative technologies can make things far more efficient and customer-focused. The cloud and SaaS can ensure that businesses are able to operate in real-time, provide 24/7 support on multiple devices, easily share data, and upgrade and update policies in bulk. Ultimately, it can make life easier for yourself and customers, enable more streamlined and optimized processes, improve security, take fast advantage on new revenue opportunities, and reduce the need for expensive IT monitoring and maintenance as a third party does all the work.

Then there’s the Internet of Things. Connected smart devices that are increasingly used in cars, homes, various industries, as wearables, and much more. For insurers, they can provide a range of policy opportunities by being able to directly track user activity, monitor behavior, and determine risks. Policyholders can receive lower premiums or other incentives to use the devices, where low-risk behavior can provide a reward. Do they drive safely? Are they exercising? Are home alarm systems activated?

Whether building efficiencies, providing insights into your customers, or optimizing processes, technology is essential. But to get the most of it, organizations must develop a digital-first mindset.

APIs and microservices

When it comes to creating new product and distribution opportunities, application programming interfaces (APIs) and microservices offer immense potential by letting you provide services exactly when and where a customer needs them. Such ‘embedded insurance’ means providing policies via third-party channels, whether a car manufacturer, travel agency, online store, or healthcare provider. As more purchases are made online, this will see a massive rise of consumers buying most of their insurance through online and mobile apps. APIs and microservices will enable you to create a seamless customer experience as they do so.

By breaking down applications to their core functions, microservices then use an API to treat that function as a single, self-contained service (this application could also come from a third-party service and communicate through the API). Ideal for future-proofing, creating new revenue streams, scaling and/or re-using operations, and providing more personalized products and services.

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AI, machine learning, and automation

How long does it take to manually process a client? Whether signing up for a policy or acting on a claim? Then extrapolate that across potentially hundreds of people at any one time. This is where the automation of workflows is essential, both to improve efficiencies and improve the customer’s experience.

If a task is common, routine, and repetitive, workflow automation utilizing AI and ML can take care of it and where there is missing or conflicting information, pass it on to a human agent with the AI learning as it goes. Overall, it’s a perfect way to cut processing times and reduce the amount of repetitive work. That means more claims processed, more people served, and fewer bored employees!

Big data analytics

If you’re not a data-driven business, you’re at a huge disadvantage to competitors who are. This means going well beyond just knowing the basics about your customers. Years ago, it was enough to know their age, driving record, and the type of car they drove to formulate a policy based on likely risk (so-called structured data). They’re male, 18, had a couple of minor accidents, and drive a Porsche. We can assume that’s a fairly elevated risk for future claims.

But today, getting to know the customer in detail, is a competitive advantage. This requires the use of un-structured data, including shopping habits, social media use, blogs, medical records, comments, business documents, anything that provides a holistic view of the customer.

All can help you to provide personalized offers and, from the analysis of data make faster claims, identify potential risks, predict their lifetime value, manage risks in real time, and more.

With data gathered through telematics in the Porsche, you can gain a true picture of how he drives and make appropriate offers. Perhaps you’re using IoT data to check if a business consistently locks their doors? Social media data to see if a policyholder is making a fraudulent claim?

The power of data shouldn’t be underestimated.

Cyber risks

Data is also extremely valuable. As more organizations progress with their digital transformations, cybersecurity concerns naturally increase. Consumers need to know their personal data is safe and that they can trust it will be protected. If a data breach occurs, it’s a sure bet many will leave, and regulatory fines and lawsuits may follow. This is a big concern, as cyberattacks are increasing. From 2020 to 2021 there was a 50% increase in overall attack per week on corporate networks, with insurance/legal seeing a big rise of 68%.

From phishing attempts (to gain personal data, such as login credentials) to malware attacks (to infect and gain access to computers or networks) , to ransomware attacks (a type of malware attack) along a supply chain where data is blocked (or an entire system), or personal data is threatened with release or destruction, until a ransom is paid. While all industries are targeted, one of the biggest to hit an insurer cost them $40 million to recover stolen data.

Such risks also include digital fraud, and these have also grown at a massive rate. Between Q2 2021 and Q2 2022, global digital fraud attempts targeting insurers increased 159 percent. Attacks can also be made on smart sensors, in-car telematics devices, anything that connects to the internet.

As PwC notes in their 2022 Global Digital Trust Insights Survey, “The consequences for an attack rise as our systems’ interdependencies are becoming increasingly complex. Critical infrastructures are especially vulnerable. And yet, many of the breaches we’re seeing are still preventable with sound cyber practices and strong controls.”

We would also include consistent and thorough testing.

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The human touch

As we invest more into digitalization it’s easy to only think of streamlining and optimizing processes, boosting security, and opening up new revenue opportunities. But it’s important to keep the focus purely on the human customer.

All interactions should be about boosting the customer experience, and this means deeply understanding expectations, spending habits, etc. It’s also essential to remember that for many, certain interactions with insurers only happen at difficult moments in their lives. And each generation will have its preferences. Millennials (in their 20s and 30s) clearly prefer customized solutions they can access via different platforms. Others may simply prefer personal (real) interactions.

A chatbot, which optimizes your call center response times, may become a big negative if the customer isn’t happy with the experience. A study even showed that 73% of Americans would not use a company’s chatbot again if they had a bad experience with it.

Ten years from now it’s likely that nobody will ever notice the difference between an AI-driven chatbot or an actual person, but we’re not quite there yet! Significant effort must be made to ensure that the chatbot behaves in a way that doesn’t feel too mechanical and unreal (and here, comparison testing can make a big improvement). If you believe McKinsey’s prediction, you only have until 2030 to get it right. At the current rate of automation adoption, “insurers could see a reduction in employment of up to 46 percent for claims handlers, examiners, and investigators and up to 75 percent for claims and policy processing clerks.”

There won’t be many real people to take the calls.

Another crucial point is how your business is perceived by the public – its social currency. What matters most to them? Diversity and inclusion, sustainability? Are you making a strong (and positive) stand on similar issues? It’s more complex than just perception, however, it’s becoming a requirement to do business across the world.

ESG, regulations, and a healthy future

Organizations are increasingly being asked to show (and prove) that they are acting responsibly and sustainably. That you are striving for net zero, investing in environmentally-safe technologies and practices, being inclusive, and running your business in an ethical way.

These concepts are the main pillars of Environmental, Social, and Governance initiatives (a fourth, Sustainability, is also often included). If your ESG credentials aren’t clear and living up to stakeholder expectations, this can create a negative impact to your business. As KPMG notes “Consumers are choosing brands for their ethical behaviour and their record on climate change. Investors are favouring businesses with robust ESG frameworks. And governments are implementing regulations requiring organisations to increase transparency in areas such as diversity, equal pay, carbon emissions and modern slavery.”

With unprecedented flooding in Australia, a heatwave setting records throughout Europe, and other extreme weather events impacting the world, climate change is arguably the most important topic for many insurers. This means a focus on Environmental and Social issues. Property damage, health concerns, and social upheaval will impact millions. And that will certainly impact insurers. Good credentials may gain you more policyholders but if you’re not doing your part in minimizing the impact of climate change, it may cost your business (and the planet) more than you’d like.

This is the main point of ESG. To do your part. And as countries enact more complex regulations to make sure organizations are doing the ‘right thing’, it will be hard to ignore in the coming years.

This means developing clear ESG strategies, tracking initiatives against specific ESG targets, and gathering the metrics you need to prove you’re doing what you say you’re doing. To demonstrate strong oversight, compliance, and risk management. All of which must then go into your annual reports to show your progress to investors and potential customers.

The more transparent you are, the more investors will gravitate towards you, the more loyalty you will gain, and the more trust you will earn. That’s good for business (and for a healthy planet).

A matter of trust

From the digital solutions you utilize, the human elements you promote, to the proven work you’re doing to reach your ESG goals, everything is essential to build lasting trust. For insurers, this is vital. It is a substantial element in developing a truly resilient business that can withstand any number of unforeseen changes.

People must feel you are there for them, that you understand their needs, and that through your real-world actions and digital solutions that you can meet them quickly, simply, and when it’s important for them.

This requires solutions where the quality is assured. This takes testing with real people in real-world situations. Only then can be certain it’s user-friendly, reliable, and works on any device or operating system while having no bugs, no security issues, and no functional or localization issues.

As the world rapidly changes around us, getting this right is a true competitive advantage.


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