Canadian Managers Magazine / Fall 2023 - Issue 4, Vol. 47 / Article 8

Artificial Intelligence, Are Industries Prepared for the Impact Of it in the Future?

Forward-thinker and Greek philosopher Heraclitus once said: "Change is the only constant in life.”  Fast-forward over 2,500 years, and this still rings true for many organizations.

The insurance industry is undoubtedly amid a radical, digitally infused, seismic tech-driven shake-up. As change accelerates, only insurers with an agile culture and operating model can keep pace with radical innovation.

By Peggy Mendezcuria | Chartered Managers Canada

 

 


Today, most insurers are working hard on specific components of products and services, but only some have sought to overhaul their operations completely. Many companies rely heavily on legacy systems and have been slower than most industries to adopt modern technologies, making it challenging to stay competitive and offer an experience on par with the insured's expectations. Insurers must invest in technologies and double down on their commitments to a proactive and human-centred customer experience, as it is likely that more technological challenges will arise the longer insurance companies wait to modernize.

Customers are already embracing digital channels, and technologies such as the connected car, smart home solutions and artificial intelligence (AI) have ushered in the era of new products built on data analytics.

As Artificial Intelligence (AI) becomes more deeply integrated into the industry, insurers must position themselves to respond to the changing business landscape. Insurers will know more about customer risk profiles, behaviours, digital advances and powerful new analytics to help reduce risk and prevent loss and tailor products and services to meet specific client's needs. 

The COVID-19 disruption has contributed to the hurried timelines of AI by significantly accelerating digitization for insurers. As we can all recall, virtually overnight, organizations experienced a paradigm shift to accommodate remote work, expand their digital capabilities and upgrade their online channels to keep their business functioning. As a result of the COVID-19 pandemic, a trend developed whereby customers have increasingly turned to digital channels to fulfill various needs.

Insurers must transform to become customer-centric, digitally enabled organizations that excel around customer experience, efficiency and effectiveness. Those at the forefront of the changing landscape will identify the changes that must be made to reimagine the journey while remaining ready to adapt to a shifting landscape.  Standing still is not an option. Insurance executives must assess whether their organization has the vision and capabilities to thrive in this journey, despite the unknown.

A thorough understanding of the factors contributing to this change and how AI will reshape claims, distribution, underwriting and pricing is pivotal. With this understanding, insurers can build their skills and talent, embrace emerging technologies and create the culture and perspective needed to be successful players in the insurance industry's future. 

At the core of insurance functions, digital transformation will redesign the journey or how insurance is purchased, underwritten, and paid once a claim is made. The customer's perspective must be at the forefront of a successful redesign to ensure customer satisfaction.  The customers of today and in the future want simple and fast digital interactions with less complex ones, which can cause barriers. Insurers must find ways to simplify products and reduce product generation to ease the developing of a fully digital customer experience.  

According to articles by McKinsey & Company, the rapid evolution of the industry will be fueled by the extensive adoption and integration of automation, deep learning, and external data ecosystems.  The reality is that no one can predict what insurance might look like, but they can take several steps to prepare for the acceleration of change. Here is what they outlined as some steps insurers can take:  

 

Insurers can get smart on AI-related technologies and trends:

As mentioned, the customer experience will be at the forefront of technological change in the insurance industry.  Therefore, board members and customer experience teams should invest the time and resources to build a deep understanding of these AI-related technologies because, realistically, the tectonic shift in the industry will be outside the domain of the IT team.

This effort can include exploring hypothesis-driven scenarios to understand and highlight where and when disruption might occur and what it means for certain business lines.

The use of pilots and proof-of-concept (POC) projects should be designed to test not how a technology works but also how successful the insurer might be operating in a particular role within a data-based system.

 

Coherent Strategic Planning:

The insurer's business strategy must be supported by the technology being explored. The senior leadership team must explore operations, talent, and technology over a multi-year transformation to help their strategic plan. Some insurers are already taking innovative approaches, such as acquiring Insurtech companies and forging partnerships with leading academic institutions. Insurers should also develop perspectives on areas they want to invest in and what that strategic approach would look like.

 

Comprehensive Data Strategy:

We can all agree that data is fast becoming one of the most, if not the most, valuable asset for any organization and the insurance industry is no different; how carriers identify, quantify, place and manage risk is all predicated on the volume and quality of data they acquire during a policy life cycle because most AI technologies will perform best when they have a high volume of data, from several sources.  This means insurers develop a well-structured and actionable strategy to include internal and external data, which may pose challenges in gaining access cost-efficiently.

 

Right Talent:

Insurance companies must make measured and sustained investments in people to ensure that every part of the organization views advanced analytics as a must-have capability. Talent with the right mindset and skills will be significant for future insurers. The next generation of successful frontline insurance workers will be in high demand. It must possess a unique mix of being technologically adept, creative, and willing to work at something that will not be a static process but a blend of continually evolving semi-automated and machine-supported tasks.

Insurers will need to integrate skills, technology, and insights from around the organization to deliver a unique holistic customer experience which will be pivotal in generating value from the AI use of the future.  Doing so will require a conscious culture shift, buy-in, and forward-thinking executive suite leadership to adjust to this new landscape.

Insurers must develop an aggressive strategy to attract, cultivate and retain various workers with critical skill sets to keep pace.  These roles will include data engineers, data scientists, technologists, cloud computing specialists and experienced designers, with the added component of the implementation of reskilling programs. This will be a new workforce for insurers as they identify external resources and partners to augment in-house capabilities to help secure the needed support for business evolution and execution, not forgetting the significant change in the IT architecture of the organization.  Targeted investments are necessary to migrate to a more future-forward technology supporting IT architecture.

 

Leadership:

As insurers seek their footing in a turbulent environment of AI transformation, they need outstanding leaders to guide the organization to the new reality. Leaders not only need to create a vision that people can rally around, but they also need to create the conditions that enable digital maturity, mainly by attracting the best talent and bringing out the best in the talent they attract.  Leaders will need to determine how to align talent agility with business agility.

Leadership may look slightly different as it is not a product of technology, so it may be disorienting, challenging the notions about the nature of leadership, including thoughts, knowledge, perception and reality. In the digital environment, organizations must shift from “scalable efficiency” to “scalable learning.”  This means leadership needs to shift, too.

Leadership in the future is not about having all the answers; it's about framing the right, powerful and inspiring questions. All leaders, whether directly involved in implementing the technology or not, must become digital leaders and must understand the value case for digital initiatives and what aspects of the organization need to be aligned to accomplish those goals. They must be change-oriented, open-minded, adaptable, and innovative. The ability to lead change is no longer for resolute change leaders or change leadership teams in our current fast-paced, evolving environment.

 

In conclusion, insurers must recognize that the customer and employee mix will shift dramatically soon.  Millennials and post-millennials (born after 1997) will make up nearly half of the adult population as early as 2030.  These digital natives will expect seamless, omnichannel, real-time interactions integrated with platforms they frequently use, along with some we can’t imagine today. Insurers will need to balance the needs of these younger customers with those of the other half of the population: Gen Xers and baby boomers who don’t have the same preferences or facilities with digital interaction.

In addition, insurers must also recognize that the rapid technological advances in the near few years will lead to disruptive changes. Those who invest in new technologies, create innovative products, harness cognitive learning insights from new data sources, streamline processes and lower costs while at the same time exceeding customer expectations will be the winners in AI-based transformation.   

Adopting a mindset focused on creating opportunities from disruptive technologies instead of viewing them as a threat to their current business will thrive in the future insurance industry. Strong digital leaders see the disruptive trends in advance and make a conscious effort to do something about them; with a forward-looking vision and a change-oriented mindset, they must also be able to deliver and decisively lead the organization into the future.

Leaders must change challenges into opportunities with an approach to talent agility by embracing dynamic skills-building and taking measures to turn the mindset of workers into advocates of the organization.


About the Author:

Peggy Mendezcuria's career spans over 20 years within the insurance industry, in various roles, including, learning and development, operations management and industry engagements. Peggy is an Insurance Claims Manager at the largest adjusting company in Canada. She is also a part-time professor, and instructor, teaching CIP and insurance management courses. In her spare time, she is also an author of children’s books.

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