Regulation and retention will determine whether Facebook, Google, Alibaba and their peers continue to clean up
Retention of key staff that is. If, as this FT article describes, staff are increasingly critical of the digital giants they work for and move elsewhere will insurers and brokers be a destination? Or the new and equally lively, if smaller, insurtechs.
In his annual review of the current and future year Nigel Walsh perceptively calls out the need for new talent at insurers.
Top preface #3 below Nigel first writes about: -
"1. Let's fall in love with Insurance
If 2020 taught us anything, is that insurance matters, really really matters! And when it doesn't do what you expected it to do, we lash out and clam it's not fit for purpose, it was sold incorrectly or anything but, I didn't read (and if I did) I didn't really understand what I was buying........
2. Education & Awareness
To fall in love, we need to talk & engage more. During the pandemic, communication has been consistently poor - (see our SME research here). We heard from practically everyone over the last year that we have ever engaged with or given our email address too, other than our insurance company or broker (I appreciate a sweeping generalisation, and not true in all cases). Net result, we need simplicity and transparency in the industry, and we need to start now........
Nigel's point about access to Talent in #3 below relates to the FT article you can follow in the link below. Will innovative and entrepreneurial people move from Google, Facebook, Apple, Ant, Amazon et al to insurers and brokers? Will they fall in love with insurance? Will the ambitions, strategies, culture and resources at insurers attract these digital natives or not?
Insurers were founded on data, analytics, insights to provide unique risk sharing services and support to merchants, traders and enterprises. They need data scientists, chief digital and transformation officers and the very talent that has made the digital giants the awesome success, power and transformational forces they are today.
Consider what Nigel Walsh says: -
3. Access to Talent
By agreeing we need to address #1 above, starting with #2, we will ultimately have a larger talent pool of people who want to and will come into insurance over the next decade. For the avoidance of doubt, this is not a short term fix. This will take a generation or worse, multiple generations. But there is an intrinsic link between all three of these, an ongoing & continuous direct correlation. As our industry relies more and more on technology, partnered up with deep insurance domain - we need more people, lots more people - and in todays digital age when everyone is remote, competition has never been more fierce. Talent pools are now global, no longer restricted to your local area. Your options and competition may be 1,000's of miles away.
To attract great talent we need to change the narrative, rebuild trust, make it a inclusive and diverse environment and show that we are tackling problems that really matter, from global climate change to keeping businesses moving and people alive and healthy. As a result, we will see more insurers focus on brand and reputation. It never more apparent for me than recently when interviewing industrial placement candidates for Deloitte, they knew more about and importantly were inspired more our values, purpose and actions than the actual capabilities, practices and client work we do. This will be a key focus for insurers in 2021, with many including Aviva already making moves, see here for their most recent appointment around brand and corporate affairs. A newly created role for Aviva.
InsurTech's such as Lemonade have long focussed on their Giveback as well as being a certified B-Corp. Randomly, I first wrote about Insurance Brand in 2015 here."
It goes without saying that insurers and brokers will partner with insurtechs to leverage technology but they need the vision, leadership, goals, strategies, culture, organisation and structure and talent to leverage technology which is just a means to an end.
2020 changed everything and whilst insurers and brokers may congratulate themselves that they managed work-from-home and embraced virtual engagement there was a lot of patching together of point solutions. Thank goodness for APIs and easier integration but a warning to vendors, SIs and consulting companies that have lived off the fat of shamefully excessive license and upgrade fees, lengthy implementation engagements and embedded teams of consultants.
It reminds me of the time at Hilton Hotels when we digitally transformed the way clients booked business and private stays at our 600 hotels. The traditional vendors lined up and licked their lips at the tens of millions to be billed. And invariably the "A Team" that pitched the sale were replaced by the "B Team" for implementation.
I was bought in from outside the industry, we sacked the two household name vendors and started again with vendors and SIs who knew exactly what the future required and helped us. They recognised our issues and problems and offered help to overcome them. The results were amazing.
I can see this happening in the insurance, reinsurance and broking areas. They are seeking partners- technology and business- knowing that customers want more than an annual renewal communication. They want engagement throughout the year and products and services that fit the needs of 2021 and beyond. Fit a changed world where usage-based insurance and flexibility count. Where they want delightful UX, products and services to deal with mitigating AND PREVENTING risk.
Why cannot insurers and brokers offer a complete service across all areas of insurance with equally impressive virtual and online UX across not just motor or home but also pet, travel, warranty, PMI, business interruption, --- everything. Why cannot organisations seeking commercial insurance find brokers and insurers working in a connected way so that the perfect matches are made rather than the tedious and inefficient annual rebroking exercise? Where are the platforms freeing up brokers to provide the optimal data for insurers to write risk effectively and faster?
Just as Salesforce.com and transforming SIs disrupted the cosy lives of ERP vendors once and for all so insurtechs are doing the same against traditional insurance core system vendors. Native cloud, no code, dynamic transactional pricing that scales up and down with the waves of customer usage and is flexible enough to deliver innovation, constant improvement and competitive differentiation.
Do insurers and brokers have the talent to leverage this technology though? Which brings us back to the beginning of this article. Talent and resources that enables them to be important components of evolving ecosystems and vital aspects of embedded insurance. That makes an insurer as innovative as digital giants and the Teslas of this world that own the data which, combined with underwriting expertise, potentially makes them the insurer for their customers.
Insurers, reinsurers and brokers are all in this turmoil and significant change and advances will be made during 2021. There are alliances that will success and many that will fall by the wayside. McKinsey has for long stated that only the top quartile of insurers will make an economic return on capital employed. Will you be in that quartile?
Frederik Bisbjerg published a book this year that challenges insurers to critically examine their vision, goals, business models, strategy, talent and resourcing. Much like key management thinkers challenge the status quo he will challenge you to face up to the disruptive forces at work around us. Listen to Frederik talk about his digital transformation and why he decided to write the book
Get these factors right and the good news is that there are technology partners with the platforms and will to help that will make the difference. In digital claims 360Globalnet has risen to the challenge of insurers and brokers compelling needs to anticipate change and disruption. You can expect them adding other aspects of the digital transformation of the insurance value chain during 2021 beyond just claims.
There are other insurtechs offering similar value-add but none of this avoids the need to have the talent to flourish in the right leadership and culture. Freed of backward looking managers with feet struggling in the swamp of legacy systems and silos. Of systems complexity, inflexibility, and cumbersome inability to change.
Will those fleeing Google, Facebook, Ant et al seek a future in and grow to love insurance? If not others will take over the mantle but there are encouraging signs in the top quintile of insurers and brokers and in the transformational reinsurers to avoid that worry.
“You can either have absolute control or you can have a dynamic, innovative economy. But it’s doubtful you can have both,” Fred Hu, an Ant board member and founder of Primavera Capital Group, told the New York Times. Given all this, how innovative can Big Tech companies remain? On one level, it seems absurd even to pose the question. These companies boast mountains of cash, vast pools of data and dizzying ambitions to remake industries such as healthcare, finance and cars.