Has COVID-19 rerouted the insurance industry?
The term ‘innovation’ is a double-edged sword; on one hand, it’s the key propeller for businesses to survive and thrive in the modern era and on the other, it’s costly, time-consuming and difficult to get right. This then begs the question, what should your business prioritise? While some industries have fully embraced innovation as a key part of their business strategy, others have held back – preferring to direct their focus in other areas of growth.
Inconsistent progression across industries
As some businesses continue to push boundaries and make fundamental changes to both the way they operate and how consumers find and use their services and product, the insurance industry has consistently been criticised for lagging behind; but is this now set to change? Having faced some significant roadblocks in the past, the current COVID-19 pandemic has instigated global changes that no-one could have predicted, forcing progression in areas that have previously remained staunchly fixed in their ways.
Before COVID-19, progression was already in the air, with the increasing popularity of artificial intelligence (AI) for claim and benefit management, product and pricing and underwriting and risk management, alongside the use of IoT (Internet of things) devices in health wearables and black box technology. There was also a marked upsurge in insurance companies adopting digital strategies to move their applications and claims processes online and making use of blockchain technology to limit the admin costs associated with renewing policies and checking payments made by third parties.
Challenges of digitisation in the insurance industry
While there has long been a desire within the insurance industry to transition to a more digital landscape, it has encountered challenges along the way. Despite a desire across many brokers and insurers to move away from paper trails and take their processes online, according to McKinsey, ‘9 out of ten insurers acknowledge that they are struggling to develop the technology infrastructure they need to support digitisation.’  Other significant roadblocks included the cost of developing and implementing new technology, the security ramifications of moving more processes online and discrepancies between how fast insurers wanted to progress compared to the ambitions of brokers.
Even if more advanced technology and digitisation of processes was on the pipeline for implementation in the next decade or so for businesses, it was difficult to drive innovation faster due to these challenges, that is – until a worldwide pandemic struck.
Instigating irreversible technological progression
While dated platforms have played a major factor in stalling the progress of those within the insurance industry, McKinsey argues that the ‘reality is that insurers can revamp many discrete processes without making changes to their underlying technology infrastructure.’ When businesses were forced into lockdown and required to transition to a homeworking environment in an extremely short timeframe, the choice was then removed for them; a digital transition was imminent.
From the outset, the biggest change was the facilitation of remote working in a way which did not pose a major cybersecurity threat to the business. This task was harder for some offices than others; for many, the architecture was already in place but was not set up to accommodate the speed and scale of the transition. Over the months of lockdown, company IT teams were then faced with a complex network of other challenges, from dealing with the impact of being unable to source the equipment they needed through third-party offshore suppliers to ensuring that they remained secure against cyberattacks despite not being in a controlled office environment.
Tackling cybercrime in a pandemic
Another major concern before COVID-19 struck was how increased reliance on a businesses’ IT network would open it up to cyber threat. While these concerns are undoubtedly valid, once the pandemic struck, the only way forward was to tackle these head-on. Rather than avoiding progression because of the threat of cybercrime, the time had come to advance nonetheless.
Unfortunately, during COVID-19, the risk of a cyberattack escalated exponentially worldwide. For opportunistic cybercriminals, this was simply another opening to gain access to systems and extort data. This meant that IT teams were not only required to work on securing countless devices in multiple locations, but also to educate staff on the latest protocols and best practices. While the threat of cybercrime will never be truly mitigated, the lessons learnt over this period and the push to tackle cybercrime rather than avoiding progression because of it has gone a long way to advancing the industry in an extremely short period of time.
The future of innovation in insurance
As time passed, many of the initial challenges faced were gradually brought under control and businesses and staff settled into their new way of working, many began to see how efficiency was maintained or even improved under the new model. The changes demonstrated to those in the industry that they could offer more flexible working opportunities for workers, revealed the potential of virtual onboarding for new starters and exposed how lengthy travel for business meetings is often unnecessary.
The possibilities don’t end there either. Businesses within the insurance industry are now starting to look for ways to balance what they’ve learnt from lockdown while incorporating aspects of their old way of working to develop a new business model that’s geared for future progression in areas such as AI, blockchain, personalisation within data and human intellectual capital.
While there’s still no room for complacency and there’s a lot that needs to be done accommodate individual business continuity plans, now that initial investments have been made and key processes have been put in place, this is thought to have paved the way for much faster advancement in innovation across the insurance industry.