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The insurance industry is being pitched innovation it can’t use.
In their rush to promote innovation, tech vendors targeting the insurance industry are missing in their approach to the sector—relying more on vision than problem-solving.
Recently, PropertyCasulty360. spoke to Tracie Thompson, the global lead of strategic clients at Cytora, about what insurance companies hear when tech vendors knock on their door. With over 25 years of experience, the former Aon EMEA Commercial Risk CEO now draws on her industry background to define Cytora's technology and support how (re)insurers operate.
PropertyCasualty360: What are tech firms getting wrong when trying to engage insurers at senior level?
Thompson: Tech firms underestimate the nuances of the insurance industry - regulation, compliance and actuarial components pertinent to how the industry operates. Also, they don’t take the significant legacy of the systems which sit within insurance companies, some of which have been in place for more than 20 years and most senior execs have been in the industry longer so are far more reliant on these legacy systems than tech firms sometimes realize.
Tech firms need to focus more business issues with execs and be specific on what they’re solving for - accelerate underwriting, reduce expense ratios etc. Lastly, it’s important to understand the specific part of the insurance industry they’re engaging in as the value will need to be tailored - reinsurance, insurance, life, health—all have distinct and different operating models.
PropertyCasualty360: How are cost pressures, talent shortages and AI changing what insurers actually need?
Thompson: Cost pressures are important as current rates are trending downwards, so operating efficiencies and the ability to write more business at lower cost is key to create better returns. Furthermore, claims costs continue to rise due to inflation, so this drives even more of a need for cost reductions on claims management and underwriting.
Talent is going to be a significant issue in the next decade with 40% to 50% of the current workforce set to retire, combined with the challenge the insurance industry has in attracting younger people to their workforce - the industry must think differently about the type of talent it can attract. An improved operating model is required, one which is more tech enabled. These will mean companies must rethink their people strategy.
AI will play a big part in solving both cost pressures and talent within the insurance industry. AI will also play a big part in solving the data challenges the industry has grappled with - leading to better pricing, improved risk selection and importantly, a great customer experience - all resulting in increased retention levels for (re)insurers.
PropetyCasualty360: What are some of the growing challenges from broker-built platforms?
Thompson: I’ll start with a positive - it is forcing (re)insurers to accelerate their digital strategy! However, they can be seen as commoditizing insurance leading to a lack of differentiation amongst (re)insurers and impacting the customer choice.
Insurers may also look to expand their distribution strategy so they can remain innovative and have points of difference amongst their peers. This is a pretty big question and one which deserves more than a few sentences; it ultimately changes the value chain within the industry which will ultimately impact the buyer.
Furthermore, (re)insurers will need to rethink their data strategy and agree who ultimately owns the data. Finally, brokers will need to factor in how the introduction of platforms impacts their regulatory and compliance requirements.
PropetyCasualty360: Why is the industry at risk of being pitched ‘innovation’ it can’t use?
Thompson: This is really answered in the first question with common factors not being considered when the word “innovation” is thrown around - regulation, compliance, legacy systems and talent gaps.
However, there is a lot of new (re)insurers and MGAs entering the market with a “clean slate” and the adoption of new tech and AI to support innovation is done with a great amount of ease.
PropetyCasualty360: What does the insurance company of the future look like? Will human employees remain?
Thompson: Will be easier to do business with, real-time responses, data driven approach, predictive analytics across more lines of business and improved claims experience for the customer.
Yes humans will remain, one can never underestimate the power of the trust built on solid relationships which is fundamental to the industry. However, the role of the underwriter will change for the better, which is why a robust talent strategy is key as AI becomes more adopted by the insurance industry.
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