Key trends are impacting the insurance industry—climate patterns, the soaring potential of AI, and consumers’ desire for highly personalized service. Learn how firms can adapt and leverage tech to automate and improve.
Keeping up with current events is vital to insurance companies’ success. That’s no small feat, given recent disruptions including everything from extreme weather to employment trends.
How can insurers predict the unpredictable while seamlessly serving customers? By shrewdly using digital tools and investing in agile, cloud-based systems, allowing firms to harness the potential of AI and data insights while reducing risk.
In this article, insurance industry experts and leaders provide five impactful ways insurers can respond to insurance trends.
Global risks from cybercrime to climate change are increasing—and becoming more severe. In response, intelligent insurers are tossing out the old playbook and taking a more agile and proactive approach to everything from risk prediction to price setting.
Take historical weather data, for example. Recent research shows that 30-year weather trends are less reliable for predicting future weather events than they once were due to recent climate patterns.
“Wildfires and storms and hurricanes are drastically impacting insurers’ ability to do business, where they do business, and how they do it,” says Nicole Carrillo, managing director, financial services, for Workday.
Access to better, more timely, and more comprehensive data may help. That’s why 83% of insurers plan to modernize finance and planning operations with cloud migration or system updates to better predict future events and solve other major challenges, a Workday-sponsored IDC survey shows.
Chief among those other challenges? A glut of low-value, manual tasks; long delays in completing financial reports; and legacy systems that are tough to maintain and keep data trapped in silos.
The rewards have been huge for insurers that have already transformed their processes. The insurers best positioned to manage risk and capitalize on opportunities are those willing to boldly reform their operations.
“The systemic challenges many insurers face—involving core people and workforce operations and processes, and of course, technology and data—can’t be fixed incrementally,” says Jaseung Coue, principal, Deloitte Consulting. “Addressing them requires significant investments and a strong appetite for change and innovation. That’s what sets carriers up for long-term resiliency and competitiveness.”
The industry is staring down a retirement tsunami—50% of the current workforce is expected to retire by 2036.
When companies must cut costs, labor is often first under the microscope. Now, many insurers are using tech to drive down expenses more efficiently and effectively while freeing employees to focus on higher-value work.
Specifically, insurers are looking to AI, automation, and advanced analytics to reduce total workload, streamline operations, and deliver greater value. In practice, that looks like:
“The machines are going to be able to identify anomalies and make suggestions, sometimes to a business person, other times directly to a customer, that are going to reduce the need for human beings to do those tasks,” Carrillo says. “That creates an opportunity to perform more value-add activities that yield more benefit to customers, more benefit to the bottom line, and more innovation.”
“The systemic challenges many insurers face—involving core people and workforce operations and processes, and of course, technology and data—can’t be fixed incrementally.”
Jaseung Coue
Principal
Deloitte Consulting
Less paperwork isn’t in the cards for insurers. Just the opposite—firms will need to dedicate even more attention to sustainability, climate, and equity initiatives and the regulations and reporting that go along with them.
“As regulators and other stakeholders seek more information, the scope of data collection, measurement, and reporting work is expected to increase significantly,” Deloitte reports.
That can be problematic for insurance leaders who are “sometimes blindsided by regulatory and statutory changes,” says Caroline Heckathorn, senior manager of insurance marketing at Workday. “All of a sudden, they need to provide a different report, which requires data access.”
Legacy systems that silo data make compliance challenging. Instead, insurers need access to enterprise-wide, real-time data, Heckathorn says. That’s why more firms are turning to cloud-based platforms that provide more granular data and can pull information from multiple business functions with ease.
By having all their data in one place, insurers can also reduce the cost of compliance, eliminating the need to create separate reporting initiatives.
“In the face of these increased regulations, organizations are focused on enabling a sustainable compliance architecture leveraging hyper-automation and advanced analytics,” said Kalpana Ramakrishnan, partner, head of KPMG’s U.S. Financial Services Advisory, at Workday Rising last year.
Automation can help insurers monitor regulatory changes, update policies, and generate reports. That’ll help ensure compliance with complex regulations and free up a workforce that’s already stretched thin.
“[AI] creates an opportunity to perform more value-add activities that yield more benefit to customers, more benefit to the bottom line, and more innovation.”
Nicole Carrillo
Managing Director, Financial Services
Workday
To respond quickly to market shifts, insurers have to transform not just their tech, but also their workforce. And time is of the essence.
The industry is staring down a retirement tsunami—50% of the current workforce is expected to retire by 2036. To stay competitive, insurers must provide the data-driven, highly personalized, and seamless digital experience that customers now expect. And they’ll need a multi-talented, nimble workforce to do that.
“The next generation of successful frontline insurance workers will be in increasingly high demand,” McKinsey’s “Insurance 2030” report finds. “They must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process, but rather a mix of semiautomated and machine-supported tasks that continually evolve.”
To bust the people silos that can stymie innovation just as data silos do, smart insurers will focus on a skills-based approach to talent. Rather than apply strict standards to roles—where companies may expect workers to stay in their lane—employees’ skills and experience can be leveraged company-wide. This will enable collaboration across functions such as underwriting and portfolio investment.
Upending the traditional workplace hierarchy allows highly targeted, purpose-driven, and more efficient efforts to become the norm.
“When we look at dynamic talent and culture strategy, many organizations are aspiring to create a flexible talent pool that can be deployed and redeployed seamlessly,” Ramakrishnan said.
Financial organizations once aimed to be product-centric. Now that’s all changed. Amid tech advances, they’ve taken a decidedly customer-centric shift, Ramakrishnan said. That means exploring embedded insurance options, meeting customers where they are, and offering far more targeted products.
“The total addressable market for embedded financial products is increasing with its broader market adoption,” Ramakrishnan said. “Cybersecurity insurance grew twofold last year, and we continue to see a growth in that.”
Within the next 5 years, 30% of all insurance transactions are expected to happen in an embedded channel, according to EY research.
For insurers to thrive, they’ll need to be a player in those channels, delivering personalized products that target consumers’ specific interests and risks.
Insurers already have the data to meet customer preferences. What they need are the tools to access and interpret that data. Modern cloud-based systems with sophisticated data analysis give them the necessary springboard to “integrate with partners, and support fast, secure data exchange,” EY reports. That will help identify the products consumers need, precisely when they need them.
To learn more about how Workday helps insurance firms meet the needs of modern customers, visit our website.
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