The pandemic continues to present a challenging economic environment for insurance companies, with low interest rates and quantitative easing placing a lot of strain on capital liquidity for insurers and operating costs that remain high.

There are a number of socio-economic and behavioural changes that will impact the insurance sector in the near future. For example, the rising awareness of health and mortality risk amongst customers is resulting in an increased demand for mortality and health insurance. On the business side, there is an increased need for cyber and supply-chain types of coverage.

Social inequality is also affecting insurance demand – this needs to be monitored going forward to better identify the impact it may have on the industry.

Accelerated digital transformation and product innovation

The insurance industry’s move to a digital world has been amplified and accelerated due to the pandemic. Leading up to 2020, there was an acceleration in the access to and usage of Big Data, internet of things (IoT), predictive analytics, satellite technology, etc. The industry was already attracting data scientists from a multitude of other industries to use technology to solve traditional insurance problems.

By the time the pandemic hit, the first, second and third wave of adopters were already doing more online using digital technology to connect with their clients and evaluate claims, etc. These insurance companies who were already innovating pre-2020 and had the ability to adapt quickly when the pandemic started and so were at an advantage.

Digital transformation has been a higher priority for many senior management teams during the pandemic. Many “rainy-day projects” have also been addressed by insurance companies (such as adopting blockchain). There has also been a change in the culture of how insurers go about connecting with employees and retaining talent.

Outlook for insurers in a post-COVID world

The fundamental nature of risk is changing for insurers, with a shift from tangible to intangible assets. There has been a drive to meet the change in customer expectations and a drive to digital, but are insurers “doing digital” rather than “being digital”? Are they truly digital enterprises?

Covid-19 had led to the recognition that scale is important as it provides resilience, but specialisation is increasingly a focal point. There is a shift towards a much more specialised focus.

One of the biggest challenges insurers will face over the next four to five years will be a shift in workforce composition. It is important for insurers to start thinking about the capabilities they will need in the future and how they will access those. In the next five years it is estimated that 30% of all technical staff in Europe (e.g. underwriters and claims handlers) will retire and there is not enough talent coming into the sector to replace these roles. Artificial intelligence (AI) and automation technology will be a big part of the solution, but there will still be a very significant gap.

On the positive side, during the pandemic insurers have really focused on the importance of creating an end-to-end, simplified, elegant and frictionless customer experience. New technologies and cloud enablement gives organisations an ability to operate on the frontier of efficiency, rather than just being more efficient.

Opportunities on the strategic horizon for leaders

The pandemic has brought an increased focus on purpose and the development of ESG. Insurers are looking at their ability to demonstrate their purpose through their brand values, how they operate and how they both protect and (potentially) prevent loss.

Organisations are also looking at how to harness, capture and interrogate data in a more fundamental way, particularly from an underwriting base. This is going to be crucial going forward because that is the area of most competitive intensity.

Changing customer behaviours and digital trends

Customers attitudes to insurance have amplified and shifted during Covid-19. There is an increased focus on digital interaction – consumers want to interact with insurers in the way that they desire rather than the way they are forced to. There is also a real focus now on how an organisation’s brand aligns and relates to the values that individuals hold.

Emerging markets took a bigger hit financial hit than more developed markets and as a result there is increased interest in new types of products and services – more integrated with lifestyle and future personal requirements, with more channels of choice.

The growth in AI will continue. Lots of organisations have experimented with investments, but we are yet to see a few truly scale – but this will come. AI will start to disrupt all parts of the insurance value chain – from underwriting to claims, to any services or core processes where organisations are starting to really access and utilise data in a different way.

There are signs of a rapid shift towards cloud enablement, which enables insurers perhaps for the first time to scale cost-effectively and enable them to accelerate some of the new product development that consumers are asking for, such as usage-based insurance (UBI) and carbon-offset products aligned to motor covers.

In the area of IoT and digital ecosystems, insurers are starting to reshape some product: for example, motor in terms of prevention and commercial lines around sensor-based technology. We are at the cusp in terms of the development of sensor-based technology that truly aligns with underwriting requirements and capabilities.

Reimagining the workforce for the “new normal”

Workforce planning and the liquidity of talent is now a focus area for insurers. For first time there are globalised talent pools: but how do they get access to the talent pool in a more considered way?

The pandemic has forced a much more significant focus and investment in HR technology and how the HR function engages strategically with the business.

The future will bring the rise of the millennials and Gen-Z, entering the workforce in huge numbers. These generational cohorts are attracted to purpose-led organisations. If insurance can be linked with purpose – which we know if can be – insurers, and particularly mutuals, can tap into that talent pool. However, (mutual/cooperative) insurers must properly communicate exactly how wonderful the (mutual) insurance industry is and how much it contributes to society.

Session panellists:

• Thomas Holzheu, Chief Economist Americas, Swiss Re Institute, (USA)
• Andrea Keenan, Executive Vice-President and Chief Strategy Officer, AM Best (USA)
• Peter Manchester, Global Insurance Consulting Leader & EMEIA Insurance Leader, EY (UK)
• Shaun Tarbuck, Chief Executive, ICMIF, moderator