The Biggest Challenges Facing the Insurance Industry Today
We’re living in a world where the only constant is change. To many insurers, the continuous need to pivot, meet new challenges and adapt to industry trends can be overwhelming and leaves them feeling three steps behind. At Gallagher Bassett, we have our finger on the pulse, so you don’t have to.
Recently we sat down with John Deane, Gallagher Bassett General Manager, Self and Specialised Insurance, to hear his insights on the biggest challenges facing the insurance industry right now and how insurers can address them.
Q: John, what do you see as the three biggest challenges facing the industry at the moment?
A: In a post-pandemic world, new challenges are constantly arising, posing new and unique risks across the board. With many constantly on the backfoot trying to pivot, it can be easy to lose sight of what the biggest challenges actually are. Today, the three biggest challenges facing the industry are the attraction and retention of talent, premium affordability and insurability, and changing customer expectations.
Talent retention and skill shortage have been a challenge the insurance industry has struggled to grapple with for many years now. Offering clear and well-defined career paths, proactive diversification – and embracing it – coupled with broader environmental, social and governance concerns are all existing challenges that have only been amplified as the world has tried to return to the office during the ongoing COVID-19 pandemic. Employees now know that they can do business, and do it well, from anywhere that isn’t their office cubicle. This shift in operational dynamics has given employees and potential candidates the upper hand when seeking a new offer of employment.
Like talent retention, premium affordability and insurability have become increasingly challenging over time. As the economic cycle booms and busts over the years and natural phenomena such as climate change compound with an increasing population, insurance premiums hike. With inflation comes a sense of exclusivity in the ability to afford insurance as many are now being forced to consider foregoing the security of insurance.
Customer expectations are another challenge that the industry has been pivoting around for many years. Driven by both values and value-for-money, customers are in the driver’s seat as demand shifts towards digital insurers and a customer-centric approach. In general, the insurance industry has been slower in its uptake towards this level of customer experience compared to other sectors, particularly through the claims management lifecycle. It is quite exciting to look towards the room for innovation when leveraging data and analytics, coupled with a customer-centric approach to service.
Q: What are the known risks of these challenges and how can insurers diversify their claims management processes to capitalise on these challenges?
A: The risk around the attraction and retention of talent manifests itself negatively to the bottom line in a number of ways – specifically through decreased performance, compliance, and customer service.
On a global scale, the insurance industry needs to redefine its employee value proposition and highlight the myriad of career paths that many don’t know are available across the industry.
Creating a compelling employee value proposition won’t just support in the attraction of new talent but it will align the right talent with the career path that best suits their skill set, lifestyle and individual needs.
At GB we understand the value in working with graduate-level professionals; but also, with new entrants from all walks of life with the right sort of personality, transferable skills, and interests who we can work with, train and who will ultimately bring fresh perspectives to our team.
The risk around premium affordability and insurability, and potential market failure impact both the growth and profitability of the industry and has potentially devastating impacts on affected industries and communities.
There is room for the industry to capitalise on the challenge of premium affordability by leveraging data and analytics to inform risk and pricing decisions. Each insurer can also – to further diversify their risk portfolio – partner with specialist providers for the management of claims that do occur.
The Federal Government has implemented and backed a reinsurance pool to improve accessibility and affordability of cyclone and flood insurance for residential and small businesses in cyclone-prone areas of Northern Australia from July 2022. It is reasonable to expect similar measures may be implemented on the back of the flooding events up and down Australia’s eastern seaboard over the last two years, as the population in these areas and the frequency and severity of these events increase.
The known risk around changing customer expectations is the failure to retain customers. The industry can continue to enhance connectivity through the customer journey. Improving digital accessibility to not only purchase, but easily renew, tailor, and make claims is the first step. The industry can also broaden its investment into providing additional value to customers in the prevention, pre, and post-claim spaces. In today’s omnichannel digital environment, customer experience is a key area of focus for GB. Utilising sentiment analysis allows us to enhance our customers’ experience along each key segment of the customer journey.
These challenges, along with others the industry faces including the ongoing regulatory and compliance transformation, cyber security, cost optimisation, and ESG, require a coordinated approach. Insurers who innovate holistically will lead the charge, but the industry as a whole would benefit from further collaboration in addressing these challenges.
Q: Looking to the future, what’s ahead for the insurance industry?
A: The biggest single influence over the next six months will be the attraction and retention of talent. In particular, the ability of insurers to provide either an ongoing remote or hybrid work option for their employees. The expectations of the workforce have changed over the past three years, and due to this, we will continue to see the movement of talent if organisations are unwilling or unable to adapt to and sustain these changes.
We foresee that this turbidity will somewhat ease in 2023 as companies and employees have time to find their feet in these new operational dynamics. However, the importance of other aspects and the overall employee value proposition for both current and potential talent will continue to remain as important as ever.
Regulatory and compliance transformation has been a key focus of the industry over the last few years following the Hayne Royal Commission and various ombudsman’s investigations and white papers. This will continue over the coming year as the industry reviews the implementation of recent changes and prepares for further regulatory change. Those in the industry that can successfully
undertake this, whilst simultaneously transforming customer experience and optimising their operating model, will be ahead of the curve.
One consideration to this is environmental, social, and corporate governance (ESG), it is an increasingly important element for Government, commercial and individual customers in line with changing community expectations. At GB we are big drivers for change when it comes to ESG, working to achieve transparency, robust processes, and strong governance – which is why we are proud to share that for the 11th consecutive year we have been recognised by the Ethisphere Institute as one of the World’s Most Ethical Companies.
At Gallagher Bassett, we are always looking for new opportunities to get out amongst the community and work together for a better tomorrow. Some of our current community contributions include: · Sponsorship of the Special Olympics and Law Enforcement Torch Relay · GB’s Gentle Bear – a program born through collaboration with the South Australia Police Department to reduce PTSD in young children impacted by traumatic events.
Is your practice faced with new challenges? Connect with me today to see how Gallagher Bassett can support your team in diversifying their claims management and address the challenges you’re facing.
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