Keeping pace with changing demographics, changing customer expectations, as well as technological advances are some of the major challenges that insurers face, and is likely to continue to be a major concern in the next 2-3 years. The recent 2017 Insurance Banana Skins survey launched by CSFI and PwC looked at the top risks that the insurers are facing. In Singapore, the top 3 risks to the insurers are all interconnected: change management, technology, and quality of management. Here’s the reason why:
Let’s start with the biggest buzzword over the last few years—technology. It is not surprising to many that advances in technology are already challenging the traditional way of doing business, and to a larger extent, the existing business model. Digital first-movers have set new standards for speed, convenience, and ease of use through leveraging technological advancements. In China, for example, an internet service provider, an online retailer, and an insurance player has come together to launch a fully digital insurance company that sells products and even processes claims settlements online. This makes it more apparent to incumbents that if they don’t keep up with technological advancements, they will face stronger competition from new players who leverage digital to provide a seamless customer experience and possibly even lighten the costs on the back-end.
Additionally, customer expectations are now no longer confined to a generic suite of products that insurance companies offer, but whether the insurance products offered are customised to suit their needs and risk profile. This raises the next question—how much do insurance companies know about their customers when the current business model depends largely on the agency channel, and insurers therefore have little direct contact with their customers?
Across the board, there is increasing use of Artificial Intelligence (AI) to digitise service offerings. But incorporating AI effectively requires data. Incumbents are often burdened by legacy systems that may be fragmented and therefore makes it difficult to take full advantage of AI and big data. Instead, insurers are taking small steps in digitalising their offerings rather than overhauling and modernising the entire architecture. The industry has historically been slower to react than their counterparts in banking and the key here is whether the pace of change is keeping up with the disruptions driven by technology and changing customer expectations. Is the industry ready for the change and has what it takes to handle it?
Consequently, survival and success demands a fundamental overhaul of technological capabilities coupled with a strong innovative mindset, and ineffective change management can potentially lead to disastrous consequences.
How do we accelerate change in an industry that is known for an innate aversion to change? There is a pressing need to have a mindset shift in the way things are done. Effective change management requires the use of the right strategy, talent management, and mindset to drive change. There should be a vision that makes it perfectly clear what the future state will look like, have that communicated clearly, and make people understand why change is absolutely necessary, and a leadership that assembles and aligns a group with enough empowerment to lead change.
To make the changes stick, the change has to be embedded within the insurers’ everyday activities, not just at the C-suite level but cascading down to even the administrators who process the claims payments. What is needed is people with the right mindset and ability to make it happen, which then leads us to the other interrelated risk—quality of management.
Quality of management
Effective change management must come at all levels of the organisation and there must be a shift in management’s skills and mindset. Existing skillsets that were relevant five years ago may not be the right skills for the organisation to navigate through the increasingly complex environment. This is even more pronounced when it comes to those in management.
Having a digital-ready workforce seems to be the way to go, especially with the Monetary Authority of Singapore paving the way through tech-friendly regulatory developments which prioritises digital innovation to grow the ecosystem. There is a pressing need to have fresh thinking and an innovative approach to management. But there is also a need to strike a balance between importing new talent who may be totally new to the industry and recycling veterans to drive the change agenda. “Ultimately, one thing is clear – insurers can no longer continue status quo. If insurers want to not just survive, but to succeed they must be adaptable to change, embrace digital technologies, and ensure they have the right talent to drive and manage the change.”
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Insurance Asia. The author was not remunerated for this article.
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Woo Shea Leen and Penny Ying are both from PwC Singapore. Woo Shea Leen is the Insurance Leader, whilst Penny Ying is the Insurance Director.