In October 2023, Digital Insurance reached out to insurance professionals to learn which trends they believe will be shaping the industry and affecting their businesses in 2024 and beyond. Join us for Predicting the Future: Insurance Issues to Watch in 2024 - a Transformation Forum that examines the risks and other factors insurers anticipate will affect their coverage and their policyholders in the coming months. Understand the increasing role of technology in the industry, economic concerns and how they relate to business planning, and how carriers are addressing the talent shortage and more. The data presented is proprietary and available only through Digital Insurance.
Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Patti Harman (00:08):
Good afternoon and welcome to our Transformation forum on Predicting the future: Insurance issues to watch in 2024. I'm Patti Harman, editor in chief of Digital Insurance, and I'll be your host for today. Digital Insurance's parent company, Arizent, has a number of divisions that collaborate with our editorial teams and enable us to provide insights and information that are unique to our news organizations. One of those divisions is our research division. And joining me today is Janet King, Vice President of Research and Content Solutions for Arizent. Thank you so much for joining us today, Janet.
Janet King (00:50):
Thanks for having me, Patti.
Patti Harman (00:54):
So, earlier this year, your team conducted research to ascertain some of the issues insurance carriers will be watching in 2024. Can you share a little bit about the research and who you spoke to for the survey?
Janet King (01:11):
Yeah, absolutely. This is an annual research initiative that we conduct to provide leaders across the industry with a perspective on what their peers are thinking about for the year ahead. And we cover a wide range of topics in the survey with the intent of helping leaders regardless of where you sit in the insurance ecosystem with insight into the factors and the trends that will be shaping their business strategies for 2024 and beyond. So data collection takes place in the fourth quarter of the year, and this year we had a hundred respondents from insurance carriers, insurance brokers and agents and InsurTechs complete the survey. And just to give you a little more context on that sample composition, 40% of those folks were employed by carriers, 30% at agents or brokers, and the balance of just under 30% from InsurTechs or tech vendors, and more than half of those responding are division heads, senior business unit executives, or c-level executives. So it's a very qualified audience, I'll say.
Patti Harman (02:18):
Definitely. It really is a nice mix. So the results should really give us an accurate picture of what's going on in the industry at all levels. So at Digital Insurance, we cover the intersection between technology and various aspects of the insurance industry, and we're seeing technology literally permeate every facet of the insurance experience. What were some of the top trends you found insurers believe will be impacting their businesses over the next one to three years?
Janet King (02:48):
So this was a question where we saw some interesting shifts in the data year over year, and I think it reflects what you're seeing with respect to technology. So for several years, changing customer behavior and demands was the top trend insurers reported impacting their business. And some of that I think was in response to the changes that were accelerated by the pandemic and how people shopped for goods and services and interacted with businesses across the board in most sectors. We saw a very fast spin up of new customer-facing digital technologies and insurance was certainly not exempt from that trend. But this year, with chat GPT and other generative AI tools really dominating a lot of the tech conversation, new technologies emerged as the top trend expected to impact insurers over the next one to three years. So it was I think third and it's gone to one, followed by changing customer behavior and demands and growing political and socioeconomic instability, and then rounding up the top five things that people are thinking about the changing competitive environment. So that's really talking about new entrants, big tech and how that might impact the industry. And then changes in the macroeconomic cycle are other things that insurance leaders are keeping an eye out for the short term.
Patti Harman (04:14):
Lots of different things to kind of keep an eye on for sure. So technology affects every area of daily life, and as we said, it's also impacting the insurance experience from sales and underwriting to binding policies as well as claims and the payment process. As companies go through their digital transformation, what areas are they prioritizing for 2024?
Janet King (04:42):
Well, not surprisingly, probably AI and machine learning are at the top of the list, right? We've talked about how it's really been the year of AI for the past 12 months. And even though AI is certainly not new to the industry, generative AI and some of the newest iterations of AI have really amplified the conversation, if you will. So AI and machine learning are at the top of that list along with cloud and digital infrastructure and then big data and analytics. So those three things, when people were asked to pick one their top priority for digital transformation, those are the things that sort of floated to the top. And I think combined, they represent a trifecta of technologies, if you will, because they all work together to amplify progress across key digital transformation initiatives.
Patti Harman (05:31):
Yes, they definitely do. And you're right, because artificial intelligence is changing everything, especially in terms of how agents and brokers, claims adjusters and other insurance professionals do their jobs. And it's interesting because as a risk averse industry, carriers aren't going to be the first ones to implement new types of ai, but they do recognize its value. And I'm wondering what were some of the benefits as well as the risks that they identified as part of your research?
Janet King (06:07):
So this is such an interesting conversation and there there's so many pros and cons to all new technologies, and AI certainly is one of those areas of development that really sparks a lot of conversation. So right at the top of the list is automation, right? That's the top cited benefit. And that is not surprising because AI and automation are really inextricably linked with AI inherently leading to more automation, specifically intelligent automation. But if you think about things that are beyond traditional RPA and things like that, so more automation inherently leads to more game changing AI. So progress in one area advances progress in the other, right? They're just connected that way. Another frequently cited benefit is the ability to synthesize large amounts of data more quickly and efficiently. And that's a big benefit, obviously given the large volumes of data that insurers are working with.
(07:08)
We've got customer data, claims data, IOT data. It's a data rich environment, so that's an important benefit and also the opportunity to operate more efficiently with fewer resources, so yielding those time and money savings. So those are the things that kind of bubble up when you ask any insurance leaders and stakeholders, what do you think AI is really going to help your business? On the risk side, the things that they most often bring to the surface are concerns regarding use of inaccurate data that may introduce biases into decision-making that really leads the list of concerns and that's followed by challenges explaining algorithms and concerns that could introduce some regulatory challenges that can't explain those things. And then finally, cybersecurity and fraud, particularly the risk of exposing customer data or providing new points of vulnerability for fraud.
Patti Harman (08:07):
That is so important. I was at a fraud conference last week and one of the things that they were talking about is there's so many great things that we can do with AI, but we have to be so cognizant of the risks that it creates. And even for insurers, they understand that this has a lot of promise, but if they can't get their arms around how to manage the risks associated with it, they're not going to use it in their companies and they really don't want their policyholders using it either. So with all of these changes attributed to utilizing AI and other technologies, how is that affecting how companies invest in technology in the coming year?
Janet King (08:48):
Yeah, it's interesting, right, because despite some of the uncertainties that have been swirling around insurance and other sectors, economic and geopolitical and everything else, we continue to see a really strong appetite for technology investment. And what you see here is that two out of three are expecting to increase tech spending over the next 12 months, which is really consistent with what we saw last year. And I think importantly, most of those that are not increasing spend are at least holding that spending steady. And I think that suggests the long-term commitment that insurers are making to those digital transformation initiatives.
Patti Harman (09:35):
I think it'll be exciting to see what happens because like I said earlier, the digitization of the insurance industry, it's occurring across the entire ecosystem. There is not a single aspect of the insurance process that's not going to be affected. And it's interesting because in the wake of the pandemic, the pandemic really forced insurers and agents and brokers to kind of adjust how they worked almost overnight. But now as things start to get back to some semblance of normalcy, what are insurers identifying as their top priorities or needs in the post pandemic world?
Janet King (10:17):
So I think you see two things that rise to the top there. So transforming technology and maximizing the customer experience. And of course they go hand in hand, but that's consistent with some of the earlier data that we discussed, and in particular the trends that insurers see shaping their industry the most in the next few years. But that perception does change a bit depending on where folks are sitting, right? With carriers most often inciting technology transformation as the most significant change in their needs while agents and brokers most often point to maximizing the customer experience as the biggest change for them post pandemic. And to your point earlier about AI, it's going to be interesting to see where AI fits into that, particularly around maximizing the customer experience. And we're in the midst of putting together a large survey on AI, which will be released on Digital Insurance in March. And one of the things we're really digging into is what are insurers doing to be more AI ready? And also are they putting policies and things in place to really restrict usage of those technologies? So it'll be interesting to see where they land on things like that given this focus on really moving the customer experience board.
Patti Harman (11:38):
I agree because a lot of what they're doing in terms of their technology implementation has to do with improving the customer experience because if they're not making their customers happy, then that's going to have a major impact on their bottom line. I was talking to one insurance executive who was talking about how they're using AI in the life insurance space, and he said, this allows us to bind policies almost immediately because of that instantaneous access to insurance, and we don't have to gather records from here and information from someplace else. And he said, we can say to a customer, yes, we can do this. This is what your policy will look like, all of those sorts of things. And so to really improve that experience for the customers I think is going to be hugely important for the carriers. So with so much of the insurance experience being automated, carriers and agents and brokers are also cognizant of maintaining those relationships with their customers. The pandemic kind of changed how they communicated with their policyholders and even within their teams to a large extent. What were some of the biggest changes they saw in terms of their customer expectations? And we've touched on that I know a little bit.
Janet King (12:53):
Yeah. But it's interesting when you flipped the question, right? The previous question was, what has been the biggest change for you as an insurer post pandemic? This one is how do you think your customer expectations have changed post pandemic? And the biggest change I think that we see reported first and foremost is delivery on customer expectations For a fully digital experience, and I've mentioned this previously, but with so much of consumers' lives being transacted online, customers expect all of their digital experiences to keep pace with their best digital experience in any vertical, right? Whether that is a retail, a banking or entertainment. So insurers, I think particularly carriers who you can see on this slide, really cite that as the number one change to customer expectations. Those fully digital experiences insurers can benefit from looking outside the industry for best practices to apply to their own digital customer experiences.
(13:57)
But another key change is more transparency, and that is customers expecting more transparency throughout every stage of the insurance process, more visibility into the status of claims, for example. And that's a sentiment more often cited by agents and brokers than carriers, but it's the number two on the list. And then finally, insurers recognize that customers want coverages that better match their expectations. And I'd love your perspective on this, Patti, but to me it really speaks to the need to help customers navigate product complexity. And I think to put a point on that, there was a recent McKinsey survey of 8,500 insurance customers in North America, and that survey revealed that roughly 40% of insurance customers who considered canceling their policies were considering doing so because they believed it was not necessary or did not provide sufficient value. So there's a real need to educate and help them navigate that complexity and help them understand the value of what they're purchasing.
Patti Harman (15:03):
There's a bit of a disconnect because we've made it so easy for people to purchase insurance online since they're not going through an agent or a broker. The education piece I think has suffered a little bit. So whereas an agent could say to you, this is why you need this type of insurance, this is why we are recommending this coverage limit, because this is what it's going to cost to repair your car if you're in an accident or if it's totaled or the repair process, if your house suffers just a tree limb falling on it versus having major flooding, that sort of thing. And so I think that's part of where that disconnect is. And it was interesting, you were talking earlier about transparency, and as I've spoken to people in the industry, what keeps coming back up is that policyholders and claimants want the Amazon experience. So think of how transparent it is from the time you order something to where it is, you can track it and when it's going to actually arrive at your door. That's the expectation that people have within the insurance industry now, and that's why the digital transformation is so important and plays into those customer expectations and what they want and what they need at this point in time.
Janet King (16:19):
Absolutely.
Patti Harman (16:20):
That's really good. So I have had the privilege of working remotely in some fashion for probably close to two decades. So when everyone else went remote during the pandemic, it was a pretty easy transition for me. But for many companies, having remote or hybrid workforces is kind of a new way to operate. And there were a number of insurers who either closed or downsized their offices during the pandemic and adjusted to remote work because it really gave them the opportunity to hire the best candidates regardless of where they live. And so I know one of the things I'm interested to hear about is what did your research show in terms of what do workplace models look like now as we're going into 2024?
Janet King (17:09):
Well, it's interesting. I too have had the privilege of working remotely for many years, and as a longtime remote worker, COVID kind of leveled the playing field for everybody. You had access to your colleagues and your peers and your clients through video and other channels that were new. And it was a bit of an experiment, right? But our survey suggests that hybrid work is here to stay, right? In fact, 60% of these insurance leaders, and these are folks across the entire ecosystem, so it's carriers and agents as well as InsurTechs, but 60% report their companies are offering a robust home and office arrangement for their employees. 19% are going fully remote and 14% are offering some limited work at home options. So what that tells you is that a very small minority, in fact, only 6%, plan to ask employees to return to work full-time. So pretty significant staying power with the hybrid work model.
Patti Harman (18:12):
Very much so. It's hard to remember going back into an office full time. The expectations have changed and people learned how to juggle everything, I think. So according to the US Bureau of Labor Statistics, approximately 50% of the insurance industry is expected to retire by 2036, and that's going to leave about 400,000 positions open, and it's really going to create a significant talent shortage for the industry. What did your research show in terms of recruiting workers, especially as the work models change, and what are employers and insurers expecting to see in the coming year?
Janet King (18:55):
Well, I found it interesting that just over half of those surveyed expect some difficulty recruiting new employees, but notably, firms that will be fully remote in 2024, which again was about two in 10, are less likely to anticipate recruiting will be a challenge. And to the point you made earlier, certainly those firms are able to cast a wider net for new talent without putting those geographic constraints in place. So it's interesting, and I can't really tell from this data how much of that 50% is really, it would suggest to me that it's not really because of having to go back to work some of the time, given that many of them are hybrid, but maybe has more to do with just sheer numbers to your point, so many people are leaving and just not enough of a pipeline of people coming in to the industry. But I think we discussed this at our digital insurance event last year, and I think it's a really exciting time for insurance because with all of the data at the insurance industry's disposal, there's kind of a really unique opportunity to do some interesting and leading-edge things with AI and other technologies.
(20:16)
So I would think maybe it's about educating people about how exciting insurance can really be, right?
Patti Harman (20:24):
That is so true. I've actually spent the last couple of years trying to do that because there are so many opportunities and everybody, you talk to them about insurance and they're, oh, and it's just not that at all. And there are a lot of opportunities. Part of that is the increased use of InsurTech. It's just really changing the skillsets that carriers are looking for when they're hiring. And I'm wondering, is this affecting their training or their hiring preferences now?
Janet King (20:57):
Seems what we're seeing here, what this data would suggest is that most employers are willing to train new hires in technology rather than bringing already tech savvy employees into the fold. So we saw here that about 50% said that they're looking for employees who are comfortable learning new technologies in another quarter, or 21% said that they're willing to teach them how to use tech, but they would like some insurance-specific expertise. But even having insurance specific expertise wasn't really the driving thing. It seems more just having people who maybe have an aptitude to learn and adapt to new roles, new skill sets that'll be required to be successful in the future.
Patti Harman (21:40):
I don't think people realize that most of the people who work in the insurance industry didn't start here. They all did something else. And I think that's what's so fascinating is those skill sets and that knowledge and that information that you have a lot of, it does translate really well to the insurance industry. And I've been covering insurance for about two decades now, and I still find it fascinating, so much so that usually with my friends and colleagues, when I start talking about insurance, they just kind of look at me and roll their eyes and laugh. And so maybe that does make me an insurance geek, so to speak. But I just think that when you consider that insurance touches every area of our lives, which is both scary as well as just really fascinating. And the way that the industry has had to change and evolve over the last 10 to 15 years is really pretty amazing. I mean, think about it. When I started covering the industry, we didn't have Uber and we didn't have Airbnb, and we didn't have the DeepFakes that we have now. There are just so many different aspects that have changed. So I'm wondering, with all of the changes occurring, what are some of the factors insurers see standing in the way of growing their businesses at this point?
Janet King (23:00):
I'm glad you asked that because to close out the survey, we asked insurers if we gave them a magic wand that would allow them to fix one thing that they feel is standing in the way of the future of their business, what would they choose to focus on? And it's a fun question. It's meant to get people to really prioritize where they would focus. And what we've learned is that insurers would most often, most commonly, I guess, direct those resources towards modernizing legacy systems, right? Followed by improving their ability to understand and react to customer needs, which is an area where AI and big data can certainly play a significant role and bodes well, given those were two of the technology areas that folks were focusing on for digital transformation over the next one to three years, improving business agility was another target of the magic wand along with the ability to identify emerging risks earlier and better organize and consume data. So you can see a number of those wishes connecting back to the promise of AI.
Patti Harman (24:06):
Yes, very much so. And the legacy systems, that has been a challenge for insurers for as long as I can remember because there are still people who have their Excel spreadsheets and that's how they track everything. And it's just like taking all of this depth and breadth of information and figuring out how do we pull it together and put it into something that we can synthesize and use it and parse it out in different ways. We have covered a lot over the last couple of minutes, but I was wondering, is there anything about the survey that I haven't asked you at this point or anything that you want people to know?
Janet King (24:47):
No, I guess I think that last point you made about modernizing legacy systems, if you think about that in the context of the number of retirements and things that are coming up in the industry, it will be interesting to see how some of those technology roadmaps change or maybe get accelerated as talent changes and new guards come in and things like that. So that will be interesting. But I think we've covered it all. But I would like to tell everyone and remind people that the full report for this research is actually going to be released on Digital Insurance in mid-January. So I would encourage people to keep an eye out for that.
Patti Harman (25:25):
Alright, great. Well, thank you so much, Janet, for joining us today and for giving us kind of an insider's look into what insurers and brokers see in the year ahead. I also want to thank our audience for joining us today, and I hope you'll join us in January for our Transformation Forum that will look at where technology is having the most impact in the insurance industry. Thank you and have a wonderful holiday season.
