The skills and culture that are essential to the digital age are different from those traditionally embraced by many insurers. But the foundation for change is stronger than you might think.
By Thomas Peplow, UK Development Lead, Milliman.
In today’s rapidly changing business climate, insurers must adapt if they are to stay successful. As they look to transform, they should consider adopting some of the capabilities and approaches that are common to the surging InsurTech sector.
InsurTech companies tend to have an entrepreneurial and innovative mind-set. They aim high, make their own rules, and create scope for failure without fear.
In doing so, they take advantage of the latest technologies and agile development practices. Collaboration is a key part of this, both internally among their development teams, and externally with partners and customers. Product prototypes are rapidly delivered, then constantly updated based on customer feedback, and the direction of travel can be nimbly altered if things are not working out.
InsurTech businesses also understand the modern data landscape, and the kind of information that can be gleaned from apps, websites, and digital sensors. Every customer interaction yields precious data that drives knowledge and insight.
Building on existing skills
Many of the advances that InsurTechs make possible are premised on the sophisticated manipulation of data to enhance the predictability of risk, generate sales opportunities, and improve customer-insurer relationships.
These are skills that actuaries have in abundance. Actuaries are experts at assessing risk and understanding probability. They are experienced at gathering data, understanding its limitations, and honing and augmenting it to bring out useful insights.
Meanwhile, employees in insurance firms understand what is required in a production environment—a vital skill if innovative ideas are to be translated into practical advantage.
Facilitating cultural change
The cultural shift required to modernize any organization should not be underestimated. It may be that younger staff are better versed in InsurTech culture, and the opportunities of data analytics, than older generations. But young, digital talent will only be attracted to businesses that offer an environment in which they feel they can thrive.
Insurers can create a breeding ground for innovation by combining new data science skills with their existing in-depth knowledge of the industry—knowledge gleaned from the experience of meeting regulatory mandates and the demands of a large customer base.
Plugging skills gaps
Insurers may encounter skills gaps when it comes to approaching problems from a data science perspective. Actuaries may lack experience with the appropriate data analytics tools.
In many cases, these gaps can be bridged with relative ease. If actuaries have the fundamental understanding, then some additional training should do the trick. Alternatively, insurers may need to complement their employees’ capabilities with external resources, which have expertise in areas such as distributed computing and big data management.
Creating beneficial partnerships
Many InsurTechs are not aiming to disrupt the established order of the industry. Insurers are their clients, not their rivals. Their aim is to bring about incremental improvements to the way in which transactions, marketing, and risks are managed.
We are increasingly seeing traditional insurers partnering with InsurTechs, often via start-up incubators, to gain insights into digital innovation, and expose their employees to tech culture. By reimagining their corporate cultures and practices, insurers can truly embrace the possibilities of digital transformation.