Roughly three out of five insurers view the lack of specialized talent to be a key hurdle in their road to innovation. (Photo: Shutterstock) Roughly three out of five insurers view the lack of specialized talent to be a key hurdle in their road to innovation. (Photo: Shutterstock)

The insurance industry has undoubtedly evolved over the years, but its guiding principles remain the same. The success of insurance businesses is still very much driven by how adept they are at calculating risks and determining pricing, while maintaining a solid reserve of capital.

However, the tools and resources they tap and their ability to effectively deploy them separates the winners from the rest of the herd.

At the 2019 Valen Summit, a number of key influencers from insurance companies, large and small, came together to discuss the capabilities, skill sets, and mindsets needed to succeed in today’s evolving, competitive industry.

Here are some valuable takeaways from the event.

Staying ahead vs. keeping pace

Today, insurers are embracing technological advancements much more readily than ever before. But taking innovation from a sluggish pace to hyperdrive requires insurers to adopt an innovation culture and mindset.

Unfortunately, innovation in the industry is often held back for a number of reasons — most often due to the lack of specialized talent. According to a survey shared by Matthew Mosher, CEO at AM Best, 61% of insurers perceive the lack of specialized talent to be a key hurdle in their road to innovation. Understanding the needs of today’s top talent and catering to those needs can help insurers attract the specialized talent they need and overcome this hurdle.

In addition, insurers need to evaluate how their organization compares to the top innovators across various industries. For example, the technology industry maintains one of the most dynamic employee bases and can serve as a good benchmark. By emulating tech organizations in offering flexible hours and celebrating diversity, insurers can become more inviting of — and a better cultural fit for — top talent.

Another way to combat this issue is by training existing employees in the skills needed to foster innovation. Doing this not only offers employees an opportunity to grow professionally but also lessens the burden on the insurer to find new employees with specific skill-sets.

Another reason innovation has lagged in the insurance industry is the increased regulatory oversight, which stems from the prevalence of IoT, big data, advanced predictive analytics, and robotic process automation. Regulators are closely watching insurers and the implementation of these tools to ensure that consumer data and privacy aren’t compromised. While new regulations typically impose new hurdles, they also present insurers with opportunities to turn regulatory lemons into innovation lemonade by “influencing through education.” Technology is racing ahead, and those responsible for oversight may find it difficult to keep pace or consistently understand its implications. Working through industry trade groups, a proactive engagement with — and education process for — regulators can demonstrate the benefits of technology and how they contribute to a fairer insurance ecosystem. Insurers can demonstrate that technology can actually provide far better management of data and consumer protection when implemented appropriately.

Cultivating a winning data strategy

In the gig economy and with shared consumption behaviors trending upwards, insurers know that they can no longer rely on traditional risk metrics. After all, what’s the proper coverage for a vehicle that is shared for personal and business use each day? Or how are benefits defined for part-time employees? Since there are no set rules and formulas for making these calculations, insurers are increasingly relying on data-driven predictive analytics to guide their decisions.

However, not all insurers have the same capabilities and resources when it comes to data. For example, some insurers may have in-house capabilities to turn data into predictive insights; others may need to seek outside help to convert their data into actionable information. And most insurers are looking to combine their in-house data with third-party data to get access to the most valuable insights.

As a result, it is important for insurers to factor in their specific data needs and abilities and to evaluate which data sources are most valuable and cost-effective. For instance, research shows that behavioral and transactional data such as consumer purchasing history deliver much more granular insights than static data points from a snapshot in time. But the costs of managing, processing, cleansing, and restructuring transactional data can be expensive, so insurers must be judicious in selecting the data that will adequately and effectively provide their predictive model with the most lift.

Weaving technology into all aspects of the insurance business

From insurance staff to customers, everyone stands to benefit from the seamless interactions and “one-touch” convenience afforded by IoT, big data, artificial intelligence, machine learning, and automation. Yet, most insurers employ technology solutions reactively to address specific business needs and demands and not as part of an overall business strategy.

To reap the benefits of today’s technological advancements — from increased productivity to improved loss ratios, to enhanced customer experiences and loyalty — insurers must take a holistic approach to technology implementation, one that spans and interconnects all departments and business functions. But it’s important that insurers factor in the technology’s efficacy, compatibility, and ease of use when incorporating new tools and solutions into their business. They should be wary about potential downtime and the need to train their staff, plus have a roll-out plan that minimizes workflow disruption.

Today, traditional insurers have an expanding set of competitors, from upstart InsurTechs such as Lemonade to the rise of managing general agents. With a far greater number of companies vying for the iron throne, insurers must be sophisticated in applying performance-enhancing technologies and fostering an organization-wide data and innovation mindset in order to remain competitive.

Kirstin Marr (kirstin.marr@valen.com) is executive vice president of data solutions at Insurity.

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