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The new normal pushes the innovation button for insurance

The new normal is the new cliché. That is not to be cynical, because it captures well how everyone is trying to understand what will be the long term impact of the pandemic and lockdown measures on our economy and society. 

The emerging consensus is that things cannot be the same as they were before, but what does the new normal look like for an insurer, agents and customers? 

In looking for answers, if we could, I would suggest insurers jump on a plane to Tallinn, the capital of Estonia in Europe. It is a truly medieval-looking, towers-and-turrets place that belies the fact that it is one of the most digitised societies on the planet. A deep digital capability is a significant contributor to Estonia keeping the disease at bay so far. A comprehensive e-health system has meant that if people become unwell, they can tell their doctors online and get a test. Unsurprisingly, no family doctors have been infected by the disease, while the number of citizens infected is much lower than other countries of a similar size. 

To me, Estonia’s reliance on these established, comprehensive and trusted digital processes to absorb the shock of the pandemic offers a view of the new normal that is relevant to insurers, if not all other sectors. Digital gave Estonia the flexibility to react fast and protect its people; digital can – and has done – the same for insurers in the current crisis and will be essential to how insurers adapt and thrive in the future. 

Yet, to say the new normal is just about digital minimises what is happening in insurance today.

Insurers have had to implement profound, wide-scale organisational changes in as little as 24 hours. These initiatives have been truly herculean and brave in their embrace of remote working. The primary objective is to protect colleagues and customers and yet the enormity of the transformation in how insurers organise themselves is having a deeper impact. The adjustment to remote working for nearly all colleagues (surrounded by family and pets), and then what is being learnt from these strange new ways of working, including the role of video collaboration, are catalysing a potent accelerant for innovative ideas in business working better.

Talking to insurance technology leaders, there is a common theme about the time being right to reimagine how their organisations could function in the future, now that they have completed these first huge steps to stabilise their situation. With working from home happening so suddenly, and expanding to critical roles, many insurers have discovered that they can cope with their colleagues shifted out of the office and into home working in larger numbers than before. Some, like Nationwide’s CEO Kirt Wild, are even on record saying that they are hitting every target even with so many associates working from home. 

So, with insurers beginning to ask themselves if they could manage and sustain this pivot reasonably well, what else could change? The concept of most, if not all, staff working from home looks like it could continue even after lockdown measures ease. Indeed, insurers like Nationwide are saying they will move to a permanent hybrid home working model. Despite the challenges, home working is popular with most staff and proving productive for companies; though it will need a carrier to be appropriately set up with a modern cloud-based platform to support this innovative way of working. 

The current situation is spurring innovations in how insurers operate internally and externally, and across all functions of their businesses, and this is also shaping the new normal. That is not to say the transition will be easy and it will require a great deal of concentrated endeavour and courage to change what has previously seemed untouchable areas for automation, like the mail room and document scanning. The extent of the re-imagination by carriers is likely to see the elimination of traditional processes and functions because they become redundant in the new normal. For example, the fact that insurance customers have become comfortable and accepting of telemedicine consultations surely ends the need to arrange travel logistics for medical appointments in doctors’ offices.

To be successful in this new normal of accelerated innovation and organisational re-imagineering, maintaining a sharp focus on customer needs is paramount. Or, as expressed to me by the CIO of one insurer, how do we better facilitate that interaction with the customer, ourselves, and our agents? In this instance, the insurer has brought forward the go-live dates for their digital portals that report losses and process claims from the end of the year to a matter of weeks away. 

And this is not an isolated example. I am hearing similar stories from other carriers as they assess how to respond to a tsunami of COVID19-related enquiries from customers and agents to their call centres, and how digital assistants can support these requests for assistance, advice or simple reassurance. This faster pivoting to digital-first approaches has been facilitated by the fact that many insurers were ready to move and have found the lockdown has given them the impetus to go further faster. 

The success we have seen in insurers making profound changes rapidly is going to help the industry face up to the challenge presented by Big Tech who have prospered from the crisis. These digital-first giants have seen that consumers are comfortable in being digitally dependent; opening the way for Amazon and others to extend their offer.  

More than ever insurers need to learn from how the Big Tech challenge will grow significantly in the new normal and be ready to match and outsmart them. For example, tech giants like Twitter have announced plans to work from home forever. If carriers are to enjoy the same benefits of reducing OPEX and boosting productivity, they need to accelerate their own movement into the cloud. 

Business agility is key because the lockdown has changed customer behaviour in profound ways. For example, we are seeing significant falls in auto insurance claims volumes  and this has led some insurers, like Admiral in the UK and Farmers in the US, to give refunds on auto insurance. The question is how long will these new behaviours persist? Indeed, will they become permanent features in the market and thus require insurers to remodel their products in the future? Understanding these trends and potential risks means more use of analytics and AI to help insurers navigate the new normal  with a backdrop of uncertainty, and with the emergence of new challenges like increased cyber threats and fraud linked to the outbreak and the lockdown measures. 

If the new normal had not happened would today’s openness to greater innovation have come about? In reality, the industry has been on this path for years; the COVID19 measures are forcing the pace of change, and thus mean a future of greater automation, analytics and digital engagement between colleagues, agents/brokers, and customers is arriving a lot earlier and more fully formed than we would have predicted six months ago. 

By Laura Drabik, chief evangelist, Guidewire Software

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