This post was co-authored by Alan Walker of Alan Walker, LLC, and Jimmy Chou, SingleStone's CEO.
As told by the insurance industry itself. Our survey says: the industry is reimagining business models accelerated by COVID-19.
When Alan Walker asked insurers how they were immediately responding to the uncertainties of COVID-19, he got two resounding answers: the insurance industry was quickly shoring up risk management and aiming to increase communication channels with its customers. A digital transformation originally thought to take years happened in a matter of weeks.
Now we’re here. Five months have passed and the future is even more uncertain. We’re still facing the COVID-19 pandemic. And now, we have an unstable economy, social unrest, and a polarized political environment. Simply put by one of our respondents:
"It's very challenging to have any sense of what the future looks like post-pandemic.” - President, Health & Employee Benefits Insurance Company
Even though it’s difficult to think ahead, we still wanted to get somewhat of a feel for how insurers and distributors are preparing for 2021. So, we asked them.
Top priorities, investments, and friction in the insurance industry
Nearly 60 people gave their feedback. 85% of our respondents work for an insurer, reinsurer, and/or distributor in Property & Casualty, Life & Long-term Care, Health & Employee Benefits, and Excess & Surplus. 60% of the respondents were decision-makers at the VP or above level. This is what they told us.
Hint: looking for the TLDR? Read the headlines. Those are the biggest takeaways.
Investments in policy administration and customer service, distribution and sales, underwriting, and claims will be made
What are the top three functional areas you are prioritizing for business and technology investment in 2021?
Things have already changed greatly. Insurers and distributors have a more customer-facing and forward-leaning posture. Back in May, the number one focus was risk and compliance.
It appears the industry is settling in after the initial jolt from COVID-19. A CIO from a major P&C insurer is taking it one step further with a challenge to the industry:
“It’s time to reimagine the full value chain. Evolution, and even transformation, is no longer enough."
And it looks like the industry is answering this call. The majority of respondents listed Distribution and Sales (47%), Policy Administration and Customer Service (47%), Underwriting (44%), and Claims (42%) in their “Top 3” functional areas that are poised for the greatest investment in 2021.
Let’s get digital: digital selling, automation, and cloud are going to see increased budgets in 2021
How do you expect your investment budgets to change in the following areas in 2021 vs. 2020?
While most in the industry were already in some form of digital transformation, COVID-19 has elevated and accelerated these priorities. An operations executive shared that her organization is:
"Reducing what was a five-year transformation roadmap down to two years.”
The survey tells us there’s an industry-wide intention to shift more quickly from physical to digital channels and products, with end-to-end automation and optimization of processes from intake through to claims.
COVID-19 is also pushing forward investments in the Cloud as insurers and distributors seek to create infrastructures that can serve as the foundation for increased business agility. This is a familiar pattern from other disrupted industries that are further along in their transformation journeys (e.g. retail and banking). As the insurance industry continues to modernize, we expect an even bigger emphasis on analytics, continuous delivery pipelines, and cyber. Again, repeating the patterns seen from other industries.
Planning for investments also means facing the reality that COVID-19 is cutting budgets across the board. We know there’ll be tough choices ahead, especially as we consider the self-identified top frictions the industry is currently facing.
Top areas of friction: legacy systems, culture and siloes, budget, and immature delivery practices
What frictions are impacting your ability to quickly deliver quality capabilities, products, features, and experiences to customers (choose top three)?
Just like there’s a consensus in planning to invest in their full business models, there’s a common thread of frictions in the industry. Legacy systems, hierarchal culture and siloes, lack of budget, and immature tech delivery processes are causing the most issues.
It’s great to identify the frictions, but quite the challenge to eliminate them. Typically, organizations have been built on risk management and control. A huge cause for concern is the lack of emphasis on tech skills development (see question #2). Successful transformations—especially full-on business model reimagination—require leaders to empower teams with the processes, tools, and skills necessary to cut through the legacy culture, delivery practices, and systems that are the industry’s biggest obstacles today.
So…what have we learned?
If COVID-19 has taught us anything, it’s that humans are amazingly resilient. The insurance industry responded quicker at the beginning of the pandemic than many thought possible just a few short months ago.
Now is the time to carry the momentum forward. The old plays won’t work. It’s time to reimagine. Right now, we’re having discussions with insurers to see if these results compare to what they’re seeing. If you’re open to sharing your insights with us, comment or send a message and we’ll be in touch.