The outlook is bleak for insurance professionals. Here's why.
How many people in your company fall into the category of an underwriter, claims processor, bookkeeper, accounting and auditing clerk, payroll clerk, or benefits manager? What do these professions have in common? They were all included in an Oxford study as the most susceptible white-collar professions to automation.
So what happens when underwriting is completely automated? What will your hard-earned designations and training be worth? Those diversifying their skillset now will have an incredible advantage when the time comes. Ask yourself, if your profession becomes automated, what are your competitive advantages? Can you compete with the underwriter who has an MBA with a concentration in analytics? Or those who have been teaching themselves to code at night instead of watching Game of Thrones?
While at one point, corporations resisted InsurTech initiatives, many have learned that it is not a battle that they will win. Corporations that do not embrace technology and automation to improve efficiency and business operations will lose. Resisting technology is not a viable long term strategy. Many of the tools already exist and are already being utilized to a varying extent. So what happens to the professionals who devoted their lives to this industry?
You may think that your career is immune to the effects of automation and technology, and you may be right. But you have to be really sure that you are one of the best at what you do. Having a coveted skill, such as software engineer or data scientist, will not be an automatic ticket to success forever. As more and more talented people are displaced, they will be competing in new fields, particularly those currently thought of as secure.
The outlook is even bleaker if you factor in M&A activity. I know how ugly this can be. How depressing it is to look around the room and wonder who will have an edge in today’s market and who will struggle with basic needs like healthcare, rent, and bills in a matter of months. A KPMG report released in 2018 showed that 81% of insurers intend to seek M&A activities over the next 3 years and 37% hope to divest at least one asset in that same period of time. Will your company be next?
This one-two punch will change the landscape of the insurance industry and decimate the social stability for many that we know and care about. This isn’t a matter of if, it is already happening. It is a matter of how fast and what happens to those affected. What safety net is in place?
While many think that blue-collar jobs are most at risk for automation, I disagree. There’s no doubt that blue-collar jobs are and will continue to be affected, however, they are often manual in nature and require extensive robotic processing to completely automate. This takes much longer to create than software to automate the underwriting or claims process. If you’re not prepared for this transition, get ready. The technology that already exists is pretty amazing. Just some of the things that technology is capable of:
Underwriting: Root Insurance provides car insurance entirely via mobile technology. Rating is predominantly determined by actual driving behaviors monitored through telematics, which is a big step forward for more equitable pricing in the insurance market. MetroMile’s automated insurance charges a rate per mile driven.
Claims: Lemonade has not only automated the underwriting process but also claims. In an interview, CEO Daniel Schreiber was asked about the company’s next steps and responded with, “We haven’t quite completed our U.S. rollout, but we are also looking at international expansion, and that will be forthcoming in the coming months. We’ve got a lot of growing to do. We’ve got over a quarter million customers but less than 100 employees. It’s about using technology to do stuff that humans would otherwise be doing so that as we scale our company, there’s continuous innovation and processes that we try to automate both to collapse time and the hassle for customers and to collapse cost concurrently”.
While you may point to the unprofitable results that these companies have had to date, they have shown significant market traction and are collecting massive amounts of data. Keep in mind it took Amazon 14 years to turn a profit. Don’t discount the strategy of these lean, data-rich startups which take an iterative and continually improving model to achieve profitable long-term results. If they don’t, fast followers will enter the space their space and combine the efficiencies gained by automation and price it more sustainably.
These disruptive insurance models are here to stay. From auto, home, life, small commercial, liquor liability and more, people are saving time and money by choosing the more “efficient” (automated) version. If their scaling continues, and they make the necessary changes, the future profitability will be on a much larger premium base. Don’t count these guys out because of a few lousy years.
While the mindset has definitely shifted, for a long time insurance companies took an “us” versus “them” approach when it came to technology. I’m glad to see that many have wisened up and have started to embrace technology to improve operations rather than resist it altogether. The companies that manage to do this well will win. Some areas of InsurTech outside of Claims and Underwriting include:
Customer service: Chatbots chatbots and chatbots! Millennials and younger are completely accustomed to trusting computers over people. Announced earlier this month, botique.ai allows companies to use their Natural Language Processing (NLP) software to assist insurance companies with client service requests. Don’t think you’re safe because you work in a call center and there will always be unhappy customers.
Loss Control: Not only are models being utilized to better target loss control initiatives, but automation of reports and follow-ups also allow for the caseloads to increase while improving customer service. Drones have been used for loss control as well as quoting properties and monitoring them prior to natural disasters and quickly responding post-catastrophe. It now seems silly for people to actually climb up on a roof and take pictures. The safety and efficiency effect of using drones this way is logical, and as the price of drone technology continues to decrease, more insurance companies will rely more on them and less on people.
Fraud: The percentage of insurers who had fully integrated technology into their anti-fraud systems had increased from 50% to 75% between the years of 2012 and 2016, a study released by SaS November, 2016 shows. Fraud software using big data, predictive modeling, AI, and social network analysis tools already exist, so as the algorithms are refined, there will be less of a need for human involvement. I expect the partnership announced earlier this month between InsurTech Shift and the National Insurance Crime Bureau (NICB) will allow greater access to data for many insurance companies with the launch of their AI-powered fraud detection solution, FORCE, which is integrated with the NICB databases.
This list is not exhaustive, but I think you get the point. And just like there’s InsurTech focusing on technology to improve efficiencies in the insurance sector, there are verticles in FinTech, IoT, Brand & Retail, Mobility, Health, Supply Chain, Food & Beverage, Travel & Hospitality, Energy and Sustainability, New Materials and Packaging, Real Estate, and more.
This problem is not specific to insurance, and the overall effect on our middle class has, and will continue, to be devastating. 78% of people are living paycheck to paycheck while our economy continues to thrive. The problem is not a lack of jobs, however, a lack of stable and secure ones. To read more about the overall impact of technology and automation, check out my blog, Technology and automation are causing a nation divided.
It’s not all bleak though. We have an opportunity to build a robust safety net for these people. One that can provide additional income to those struggling or an alternative to traditional employment altogether. This problem will only intensify unless we work on a solution now.
Kako is an idea that we can use technology and automation purposefully to provide a safety net to contributing members of society. In the wealthiest country in a world of abundance, we CAN and MUST do better.
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