Technology is the key to unlocking potential and creating a truly digital, customer-focused enterprise. Our 24th Annual CEO Survey shows that two-thirds (64%) of global insurance CEOs are planning to significantly increase their investment in digital transformation over the next three years.
This is essential for overcoming some of the biggest challenges facing insurance businesses including dealing with a patchwork of siloed legacy systems, taking on new entrants and handling new ways of working. The winners are going to be those that are digitised, fast and responsive.
While Insurtech startups have the advantage in being leaner and more able to take risks and adapt their products to customer needs, incumbents have a huge asset in the form of their vast stores of data, acquired over decades. Forward-looking businesses will take the opportunity to redesign their technology systems to break that data out of silos, clean it, and use it to drive real value across their business.
“Incumbents have a huge asset in the form of their vast stores of data, acquired over decades. Forward-looking businesses will take the opportunity to redesign their technology systems to break that data out of silos, clean it, and use it to drive real value across their business.”
Shifting systems to the cloud will make this data accessible across an organisation, enabling teams to measure productivity, assess new opportunities and judge the most profitable lines of business with greater speed, accuracy and insight.
Looking ahead, richer streams of data could even come together with new innovations in areas such as wearable technology and equipment sensors to create always-on customer engagement, pay-as-you-use cover and proactive risk prevention. This will help address one of the sector’s main concerns, as 77% of insurance CEOs told us they were concerned about keeping up with changing consumer behaviours.
Data is also critical to keeping insurance businesses viable while maintaining an appropriate risk profile. For example, shifts in extreme weather relating to climate change will mean that policies written, and investments made, will need to be evaluated using the best data possible. The Task Force on Climate-related Financial Disclosures (TCFD) has created recommendations on how these factors should be incorporated into company reports. Smart organisations will take these on board and use data-driven decision making across their business as standard to create sustainable change that drives growth.
Greater use of digital, alongside a greater shift to remote working, brings additional risks and opportunities for insurers. Our CEO Survey found that cyber security is the top concern for insurance CEOs – 66% said they are ‘extremely concerned’ about cyber threats, putting it above even pandemics and health crises (55%) on their risk register.
Cyber security needs to be a fundamental consideration in transformation plans and strategic business decisions. Key to this is simplifying organisational structures and IT systems so they are easier to secure – something that transformation can help to address.
As well as building operational resilience, a secure digital transformation will help build trust with customers and regulators. An organisation that is digitised, nimble and transparent can adapt faster to evolving regulatory requirements, like IFRS 17, while reassuring customers their data is being used and protected in an ethical manner.
“An organisation that is digitised, nimble and transparent can adapt faster to evolving regulatory requirements, like IFRS 17, while reassuring customers their data is being used and protected in an ethical manner.”
Moving to more agile and technology-enabled business models requires a shift in workforce behaviour, culture and mindset. It’s essential to prepare the workforce for this new world and secure their buy-in to make the most of new opportunities and the potential to carve out fresh revenue streams.
“It’s essential to prepare the workforce for this new world and secure their buy-in to make the most of new opportunities and the potential to carve out fresh revenue streams.”
Insurers need to define the skills and competencies required to run a fully transformed insurance business and develop an upskilling programme to accelerate their competitive position. This will likely get a positive reaction from their workforce – our research into the UK public's views on employability and upskilling found that 62% of people are ready to learn new skills to remain employable in the future.
It’s also important for organisations to re-engage with the workforce around future working models and determine the factors that will enable employees to perform best going forward. Hybrid working, for example, could help businesses attract the new talent required to achieve technological transformation ambitions. Our research shows that three-quarters of the UK workforce (77%) would prefer a mix of in-person and remote working.
Striking the right balance between resilience and flexibility is important though. The pandemic showed that some offshore resource was not as resilient as originally thought. This resulted in the work having to be quickly on-shored, where organisations had finer control. In such scenarios, organisations can again look to technology for the solution. Robust cloud-based systems can ensure the availability of resources to staff wherever they are located – although cyber security must be embedded in remote working systems and policies to provide the reliability and accountability required by regulators and investors.
Creating and clearly demonstrating long-term value is vital for the future of the insurance sector. Environmental, social and corporate governance (ESG) presents an opportunity for businesses to showcase their wider role in society, enabling them to stand out from the pack through their choice of channel investments and wider contribution to society. The share price of a company could depend on this, so getting it right is crucial.
“Environmental, social and corporate governance (ESG) presents an opportunity for businesses to showcase their wider role in society, enabling them to stand out from the pack through their choice of channel investments and wider contribution to society.”
Organisations should look to embed ESG considerations throughout their operations. This means looking at the financial side of the business as well factors such as how staff are treated, including working conditions and diversity and inclusion policies. This needs to be done in a way that speaks to their purpose and goals. To come across as disingenuous, or taking action that’s not been thought through, could be worse than taking no action at all. Organisations should think carefully about their ESG ambition, and then choose to participate and report on it in an authentic way.
We also can’t overlook the opportunities that come from the need to combat climate change. In an interview for our CEO Survey, Nigel Wilson, CEO of Legal & General, told us that climate change "is the biggest investment opportunity in the world," with the UK having the chance to become a leader in offshore wind power.
“Carbon capture, hydrogen, onshore wind, solar, retrofitting 20 to 25 million houses. This all adds up to a trillion pound industry creating tens of thousands of jobs if we put in place policy and regulation to make these things happen.”
Insurers must demonstrate the value they can add to the green economy. Increasing momentum on how ESG and Net Zero initiatives are reported to the public, regulators and investors is key to establishing the insurance sector as an even greater force for good in society, rather than something where its value is only realised when things go wrong.
The current opportunities that insurers have to transform promise long-term benefits. New technology offers the chance to do business better and faster and with more insight than previously possible. It also allows for better relationships with customers and more personalised services and products. Changing ways of working can cut costs and make better use of the skills of the workforce, as well as provide new opportunities to innovate.
Insurance is a force for good. It protects people and businesses when they suffer a loss. It provides stability in the economy as a long-term investor. Insurance also funds infrastructure development through investment. So much of what the insurance sector does hasn’t always been transparent. But with new tools, new digital capabilities, new ways of working and a more communicative data-driven approach, it can create sustainable change that benefits everyone.
“So much of what the insurance sector does hasn’t always been transparent. But with new tools, new digital capabilities, new ways of working and a more communicative data-driven approach, it can create sustainable change that benefits everyone.”