A Real Economy publication

2022 insurance industry outlook

Feb 07, 2022

Insurance industry outlook key takeaways

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A confluence of pressures is forcing many insurance companies to reinvent their traditional operating models.

Insurers are modernizing their legacy systems, creating connected networks across the enterprise, and expanding their vendor partnerships, all while improving employees’ work experience and the skills and tools available to them.

The current moment is a prime opportunity for the insurance industry to redefine and reinvent how the work gets done.

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Financial services Economics Insurance

With a continuing pandemic, an unprecedented level of job quits, more people reevaluating their career priorities, and the fact that the median age of insurance company employees is higher than other financial sectors, insurers are facing talent challenges that can no longer be ignored.

The confluence of pressures is forcing many insurance companies to reinvent their traditional operating models that include large corporate campuses working in siloed departments, along with in-person, rotational training programs. We expect swift changes ahead as insurance companies race to attract and retain top talent by rethinking the work experience and the roles of the future.

Two years of change

While the pandemic disrupted insurance carriers’ financials for a short period, its longer-lasting effect will be on the industry’s workforce. Since March 2020, overall employment levels in the U.S. insurance industry have remained flat, yet wages have increased on average by 8%. Fear—driven by uncertainty in the financial outlook for 2020—brought on a hiring slowdown as carriers reevaluated their operating models in a virtual environment.

In 2021, stagnant employment growth continued despite higher wages, U.S. Bureau of Labor Statistics data shows, indicating workplace transformation may be underway. Carriers have been leveraging labor-replacing technologies in business processes that are ripe for automation, which can result in the elimination of lower-wage jobs. However, the remaining skilled insurance workers are not experiencing wage growth to the same extent as workers in the broader economy, which will pose continued retention and recruiting challenges for insurance companies.

All of this has made clear that the pandemic has accelerated the shift to the future of work and there is no turning back. Insurers are modernizing their legacy systems, creating connected networks across the enterprise, and expanding their vendor partnerships, all while improving employees’ work experience and the skills and tools available to them. Here are three major areas insurers are racing to prioritize:

  1. Remote work options—Remote work is here to stay. Flexible work options are now a prerequisite to attracting and retaining top talent. Several insurance companies have adopted a hybrid business model combining remote work options and a redefined office experience. For employees to commute to and from the office and adjust their day-to-day lives, going to the office must add value and purpose. If an employee goes to the office to sit in a cubicle and work, much like they would if they were working remotely, what is the point? Employers are reinventing physical office space by incorporating more collaborative physical spaces that employees can use intentionally for group meetings and other scenarios that enable in-person team bonding.
  2. Technology investments—Insurance companies are infusing their digital strategies with new ways of working, and innovative technologies are at the center of such efforts. Insurers continue to explore the use of automation and emerging technologies—such as data analytics, process mining, virtual agents and intuitive interfaces—to reduce costs and improve the customer and employee experience. Investments in these technologies help streamline sales, underwriting, billing, claims and corporate transactions across the enterprise to reduce total cost takeout. Other technological investments include advanced predictive analytics and artificial intelligence around claims probability, scenario analysis, customer risk profiles, and underwriting and pricing models.
  3. Employee upskilling and development—Job reinvention is required for the upskilling and development of employees. Insurers realize that to enable digital transformation, their talent strategy must prioritize critical insurance roles in technology, analytics and actuarial, with flexible work options aligned to key business priorities.

As automation, 5G, artificial intelligence, augmented reality and virtual reality become more prevalent in the industry, it’s important for companies to have a well-planned upskilling strategy to build a workforce familiar with these technologies. Many of these roles don’t exist today, but will be needed to support personalized customer experiences, immersive employee training and flexible career paths.

As automation, 5G, artificial intelligence, augmented reality and virtual reality become more prevalent in the industry, it’s important for companies to have a well-planned upskilling strategy to build a workforce familiar with these technologies.

For example, some companies are using AR/VR to train claims adjusters, presenting multiple claims scenarios through simulations to help them collect vital information when estimating damages. This can align employees’ needs with real-time collaboration. If done thoughtfully and combined with flexible work options, this approach can reduce operating expenses, break down silos, and deliver significant value to the organization and employees.

The current economic environment is cultivating a culture of innovation and transforming work in a complex business world. For insurance, whether by design or out of sheer need to maintain a competitive advantage, workforce transformation is driving insurers to rethink their strategies related to talent. The current moment is a prime opportunity for the insurance industry to redefine and reinvent how the work gets done.

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