“But the best way we take into consideration and do insurance coverage has reworked dramatically”
As we transfer additional and additional right into a digitized future, we additionally expose ourselves to newer dangers – some nonetheless unknown or poorly understood. Despite the various advantages it will possibly convey to a sector that’s coping with a staggering variety of dangers as a result of a altering world, there could also be some advantages to slowing down and looking out contained in the yard earlier than going past it.
It’s a sentiment that’s expressed by Swiss Re Solutions CEO Russell Higginbotham (pictured above) in dialog with Insurance Business’ Corporate Risk channel, one which’s backed by nearly 30 years within the international agency and a very restrained view on the sector’s most hotly mentioned matter – synthetic intelligence (AI).
“I think that there’s clearly a lot of talk around AI at the moment, and it clearly has a lot of potential in the future. That said, it’s probably a little bit overhyped as well,” Higginbotham mentioned. “I see that some of the AI capabilities, they can take away some of the more menial tasks and give people more time, but I think for insurance there’s so much that we can do that’s closer to home and nearer at hand that’s going to be more impactful.”
Citing the supply of information as one thing that needs to be explored extra, Higginbotham mentioned that this facet is “dramatically different” to what it was not too way back. This specific knowledge can be utilized for all elements within the business – whether or not it’s underwriting, portfolio administration, claims, and so forth. – and as such he urged the business to “not get carried away” by AI and give attention to near-term issues that insurers can do to make the prospects for the client higher.
“At the end of the day, what we all want to achieve is to have better value, well-structured policies in the hands of more people,” he mentioned. “That’s ultimately what we’re trying to do in insurance; closing that protection gap is always the challenge. There’s more that we can do around that.”
“People still need insurance for the same reasons”
As somebody who has been within the thick of insurance coverage and threat administration for a really very long time, Higginbotham is veteran sufficient to inform that the business is “massively different” to what it was 15 or 20 years in the past.
“It’s an interesting one, because on the one hand, you’d say it’s massively different because of digitalization, availability of data, everything becoming electronic and virtual… whereas in the past, everything was more paper-based and there was a long slow process. In that sense, the industry really transformed, but on the other hand, things really haven’t changed. People still need insurance for the same reasons: to protect their lives, health, etc,” Higginbotham mentioned.
In the identical manner it did prior to now, he burdened that insurance coverage remains to be making an attempt to cost a premium that’s commensurate with the chance, in addition to making an attempt to usher in extra folks to the sector whereas ensuring that they perceive the dangers that they’re bringing.
“To reiterate, the fundamentals of insurance have not changed, but the way we think about it and the way we do it, has transformed dramatically,” he mentioned.
Despite his tepid views on AI, Higginbotham agreed that digitization and automation did wonders for some elements of the business, essentially the most notable of which was the client expertise.
“If you think about things like underwriting – historically, you’d fill in a paper form, then you would go off and you’d wait a few weeks, you might get sent for a medical, then you need to wait for an appointment … then you’d have your medical, then you’d need to wait a bit longer – the time it would take to buy a policy would be somewhere between two to three months, which is a completely unsatisfactory experience,” he mentioned.
Now, nonetheless, the claims course of is constructed round digital underwriting techniques primarily based on knowledge that’s been constructed up over a few years between lots of of 1000’s of individuals. Higginbotham touted the agency’s personal Magnum system, which has a straight-through processing price of someplace between 80% and 90%, which means that prospects will be accepted on the spot.
“I think these are the sort of things where the ability of the insurance industry to get people on board faster, to look after clients better during the term of the policy, and to pay claims faster has really changed a lot,” Higginbotham mentioned. “What hasn’t changed so much, I guess, is insurance, for a lot of people, isn’t an automatic purchase. It’s not something they wake up thinking about; ‘I must buy insurance today.’ The pandemic changed that for a while, but even the effects of the pandemic raising people’s awareness… It wears off every time because other things come into their minds.”
“Digitalization is not necessarily the answer to everything”
Turning to the difficulty of legacy techniques and the crossroads it finds itself on, Higginbotham mentioned that COVID was a major turning level for the difficulty as properly.
“I think there was a trend pre-COVID towards digitalization in the insurance sector, and COVID really had the impact of accelerating that, because you could no longer rely on face-to-face interactions. I think, in a sense, digitalization becomes a must-do – table stakes, if you will – to remain competitive in the industry in the longer term,” he mentioned.
This reliance on digitalization meant that prospects’ expectations had been additionally altering. Higginbotham mentioned that they now need pace, comfort, and suppleness in interactions with their insurer, however there’s nonetheless a serious barrier: price.
“We had a road show in Hong Kong about four or five weeks ago and we were talking about future topics like data and AI. The insurers on the panel, they kept coming back to legacy systems, legacy topics, and the challenges around these,” he mentioned. “Nobody is starting with a clean slate; they’ve got to consider what they have at the moment, if it’s financially feasible to transfer over to new systems, whether they have to run a new code or an old code… It’s a really challenging topic for the insurers.”
Higginbotham additionally urged the business to contemplate one thing of their digitalization journey, and that’s its inherent necessity for the enterprise at hand and the worth proposition that it will possibly add, not solely to prospects, however for the agency as properly.
“I think that we should also remind ourselves that digitalization is not necessarily the answer to everything. Customers still want to talk to people when they’re dealing with complex products or big decisions or sensitive topics. Transforming your business into a digital business doesn’t necessarily mean you’re going to sell more products. It doesn’t necessarily draw extra customers into the net. I think people need to think quite carefully about their digitalization journey in the context of their wider strategy of how they serve customers and how they attract new customers into their business,” he mentioned.
The way forward for threat administration, and “the challenge we haven’t solved yet”
The way forward for the sector appears so ambivalent to many; Higginbotham mentioned: “If I had a crystal ball.” That mentioned, he did say that the longer term hinges on tackling an issue, one which has not modified since he first stepped foot within the insurance coverage and threat administration sectors.
“The fundamental challenge for the insurance industry is still the same: trying to get more people to buy insurance which is good value and well-structured. That’s the challenge that we haven’t solved yet, I would say,” he mentioned.
It’s a problem that he’s now making an attempt to sort out as CEO for the comparatively younger Swiss Re Solutions model. Using Swiss Re’s intensive threat data database and current IP, the division places all of those property into one place and consults with purchasers, non-clients, and different elements of the insurance coverage and threat ecosystem about challenges and different elements associated to the companies to make them extra aggressive and have higher propositions for his or her purchasers.
Digitalization, Higginbotham mentioned, might be extra prevalent sooner or later, however for him there’s nonetheless one thing that must be addressed if the business is to stay related.
“If you think about a life insurance contract, you go through quite the process to buy one. You apply, you fill in the form, maybe you’ll get accepted on the spot,” he mentioned. “Now that you have the policy, the question will be: what happens between the start of the policy and the end of the policy? What sort of contact do you have with your insurance company? Not much, still, right? There are health and wellness apps out there and they appeal to a certain sector of the customer base, but for other people, the engagement between the insurer and the policyholder is quite limited.”
Alluding to this relationship as the guts of the matter for insurance coverage and threat administration, Higginbotham discovered it unusual that such a side is missed as we attempt in direction of a extra digitized future.
“It’s kind of weird, in a way – the alignment of interests between the insurer and the policyholder is perfect, because the policyholder doesn’t want to die and the insurance company doesn’t want them to die, either. So, you think it’d be a good idea to build a better relationship between the two to try and make sure that happens, right?” he mentioned. “I think there’s still work to be done in terms of ‘what does it mean to own an insurance company?’ and ‘how can you build a relationship between the parties?”
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