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INSURANCESeven Key Trends Shaping the Future of Work in the Insurance Industry By Ben Pring and Michael Clifton The Center for the Future of WorkThe Work Ahead is a research series providing insight and guidance on how businesses and jobs will evolve in an economy of algorithms, automation and AI. In this installment, we look at the insurance industry. Our research shows that insurers are highly aware of the need to rethink their processes, technology foundations and business models to succeed in the digital future. Indeed, the industry itself will be nearly unrecognizable in the next decade due to digital change. Insurers that choose to move past their inherently risk-averse and change-resistant natures will reap rewards that will measure in the trillions for the entire industry, according to our research. 2 | SEVEN KEY TRENDS SHAPING THE FUTURE OF WORK IN THE INSURANCE INDUSTRY THE WORK AHEAD3THE WORK AHEAD IN INSURANCE Long regarded as something of a sleepy backwater in the business world, the $5 trillion global insurance market is in the early stages of fundamental change that will upend business as usual. Over $1.6 trillion of new value is set to be created through the application of a digital mindset and a new generation of digital technologies in the next three years alone, according to our research. Insurance providers, traditionally averse to rocking the boat (and focused mainly on collecting insurance premiums), must rethink what they do and how they do it in the face of change driven by data, automation, arbitrage and artificial intelligence (AI). In a world of abundant data, in which wearable devices can generate individual health profiles and customized premium quotes, and auto policies can be based on actual driving performance, historical norms increasingly seem exactly that: remnants of a bygone era. Insurance companies and the executives that lead them face unprecedented challenges and opportunities as the work ahead generates a scenario in which “digital” is no longer simply a new channel to sell old stuff but is the very business itself. To understand this “digital-first” environment and the changing shape and nature of work in the insurance industry, Cognizants Center for the Future of Work surveyed 168 insurance executives across the major geographies of the world in the first quarter of 2016. We asked a range of questions covering respondents views on skills and technology priorities, the benefits and costs of digital transformation, digitizations significance to the organizations they represent, and the personal importance of digital technologies. (For more on the study methodology, see page 24.)4 | SEVEN KEY TRENDS SHAPING THE FUTURE OF WORK IN THE INSURANCE INDUSTRY THE WORK AHEADThis report is part of The Work Ahead series, which covers key topics on our digital future, including new technologies, changing business process models, and the state of digital transformation in Europe, Asia Pacific and industries such as healthcare, financial services and manufacturing.Insurance industry respondents, whose views and opinions are presented in this report, convey a strong awareness of the need to think and act differently that the norms and standard operating procedures of the past are increasingly unfit for purpose in a future of ever higher expectations for speed, transparency and ease of use. In a time when instant gratification literally cannot come fast enough, many insurance companies are teetering on technological, business process and skill set foundations that are being stressed beyond their ability to cope, let alone offer a competitive advantage. Inherently risk averse and resistant to change, insurers now find themselves facing unprecedented levels of change in their customer base, their employee ranks, the competition and the available technological tools. Insurance has been a “steady as she goes” environment for as long as anyone of working age can remember. The work ahead sees this set to change. 5Key FindingsOur top research findings can be categorized in the following seven themes, which are explored in detail in this report:The impact of digitization on the work of insurance will be profound. The insurance industry of 2025 will be quite unlike the insurance industry of 2017.The economic benefits of digitization will be extremely positive. In a three-year time span, the projected impact of digital transformation on insurers will be $1.63 trillion.Your job will change significantly by 2018. Working with AI and automation-based technology will change what humans do in the insurance workforce.The skills you need to succeed in your job will change materially as well. What got you “here” wont get you “there.”At the heart of all this change will be a new generation of technologies that you and your company need to master. The insurance industry is increasingly a technology mediated one, and the technol-ogies driving this are changing faster than ever.There are many obstacles on the path to digital transformation, but they are surmount-able. Despite the many challenges ahead in leveraging the upside of new technology, there is no going back to a pre-technology-based industry.The “dark side” of digital is real, but the genie is not going back into the bottle. The digital world is our new reality and, though not perfect, cant be wished away. Trying to reverse time or course is not a winning business model. 6 | SEVEN KEY TRENDS SHAPING THE FUTURE OF WORK IN THE INSURANCE INDUSTRY THE WORK AHEADThe consensus view that the world of insurance is changing and set to change further appears to flow into respondents perspective on the work that insurance companies perform.7DIGITAL DISRUPTION AND THE WORK OF INSURANCE Although the insurance industry is perceived as conservative and cautious immune to the fads and fashions of management gurus, academics and consultants senior leaders surveyed for this study present a compelling case that they are fully aware of living in a time of tumultuous technological-driven change. Beyond awareness, their responses also suggest they are working hard to leverage the incredible opportunities introduced by a new generation of pervasive technologies and to mitigate the very real challenges presented by “software eating the world”1 and the world insuring itself. Two-thirds of insurers (61%) believe that digitally-driven transformation is the key to their organizations commercial future. Given the raft of socio-economic-political-environmental issues that insurers face, this consensus view reveals senior industry leaders belief that the future of insurance work will look quite different from the present as a direct result of digital technologies and behaviors. Relative to responses from executives in other industries we surveyed, these findings place the insurance industry in the middle of the pack, further confounding the widely held view that the industry is “asleep at the digital wheel.” Healthcare payers, under enormous pressure from customers and investors to modernize creaky business practices and supporting technology (or lack thereof), ranked the highest at 74% of all the industries under investigation; surprisingly, retailers, already well down the path to an omnichannel, digital-first future, ranked the lowest, at 57%. (Of course, because healthcare payers operate within the insurance industry, their high ranking further reinforces the notion that insurance, overall, is primed to change significantly going forward.2 )1 Marc Andreessen, “Why Software Is Eating the World,” The Wall Street Journal, Aug. 20, 2011, wsj/articles/SB10001424053111903480904576512250915629460.2 See the Research Methodology section of this report for further details on industry definitions and demographics. 8 | SEVEN KEY TRENDS SHAPING THE FUTURE OF WORK IN THE INSURANCE INDUSTRY THE WORK AHEADThe consensus view that the world of insurance is changing appears to flow into respondents perspective on the work that insurance companies perform. Approximately 97% of respondents i.e., almost everyone we surveyed, without exception agreed with the statement that “the required skills to succeed in my industry are going to change significantly in the next three years.” Figure 1 further details respondents views on the top five changes that will materially impact the future of work in insurance over this period. Figure 1 can almost be regarded as a manifesto for how the work of insurance will change both for the corporation and the individuals working therein. More “strategic,” “specialized,” “automated,” “augmented” and “technical” work presages a future that demands new skills and mindsets. In other words, what got you to where you are today wont get you where you want to go tomorrow. For a corporation, being more strategic and specialized may mean targeting a micro-vertical niche say, bio-chemical research intellectual property protection rather than continuing to pursue large, undifferentiated marketplaces. Being more automated, augmented and technical may mean reducing costs in back-office business processes through the deployment of robotic process automation (RPA). Insurers such as AXA France and the Lincoln Financial Group are said to be upskilling middle-office workers with new generations of AI-infused collaboration tools such as Slack and Tableau.3Correspondingly, for employees, these dynamics will mean learning to leverage these new tools and migrating from repetitive, routine, marginal value-add tasks that can increasingly be performed more quickly, accurately and less expensively by software. Keeping an Eye on AI Respondents also agree the industry will be forced to reinvent itself, and that everyone from the loftiest executive perches to the lowliest janitorial cubbies will be required to reconsider how their contribution will remain fit for purpose. Figure 2 shows a ranking of the technological forces creating this upheaval. The Changing Nature of WorkThe top five changes that will materially impact the future of work in insurance from 2015 to 2018.Work will become more “specialized”Work will become more “strategic”Work will become more “automated”We will work more with machines that “augment” us Work will become more technical 12345Response base: 168 insurance executivesSource: Cognizant Center for the Future of WorkFigure 13 This information was revealed through our study.9Figure 2 clearly shows the industrys consensus of the central role of data and analytics both now and even more so over the coming years in shaping business models and commercial opportunities. In many ways, this is not a surprise, but the research confirms something profound: Without a data-centric approach at the core of what an insurance company does and how it does it, competitive irrelevancy looms. The harvesting, interpretation and monetization of the data generated by every digital interaction (what we call a “Code HaloTM”) is the foundational building block of being an insurer in the 21stcentury. (For more on this concept, please read our white paper “Building a Code Halo Economy for Insurance.”)Without a data-centric approach at the core of what an insurance company does and how it does it, competitive irrelevancy looms.What is more surprising is the pace at which AI has come to be seen as an important technology for leveraging big data. Between 2017 and 2020, a new generation of leaders will separate from the pack by injecting AI and its sub-components (e.g., machine learning, neural networks, decision theory, etc.) into the algorithms that produce actuarial models and premium quotes. AI, having long germinated in academia and research labs around the world and consequently still regarded by many as a curio not fit for primetime is quickly becoming a very real tool for those who recognize its power to solve the next set of business challenges presented by huge volumes of data. That AI ranks in mid-2016 as the second most important technology/business dynamic impacting the future of insurance illustrates that senior leaders are highly aware that digital disruption is real. Further, it reveals that the double-edged nature of new technologies i.e., their ability to create powerful new potentialities and to undermine “business as usual” is a phenomenon to be taken seriously. The Major Technology/Business Dynamics Impacting the Future of Insurance Through 202012345Artificial intelligence Business analytics/big dataPublic cloud infrastructure and applications Cyber security and information privacyTalent shortages Response base: 168 insurance executivesSource: Cognizant Center for the Future of WorkFigure 210 | SEVEN KEY TRENDS SHAPING THE FUTURE OF WORK IN THE INSURANCE INDUSTRY THE WORK AHEADIt is clear that insurers business and operating models are being fundamentally challenged by new customer expectations, particularly around speed and personalization. In fact, “personalized risk management” is a concept that is set to gain traction over the new few years. With personalized risk management, an individual, family or small business understands the most important risks to cover, and uses analytics, data and risk management techniques such as insurance, self-insurance or risk transfer, to manage those risks in a targeted way. The ability to meet these expectations will increasingly distinguish relevant from irrelevant insurance suppliers. As this trend progresses, the market will increasingly move toward what large insurance brokers (such as Marsh and Aon) do for large corporations but at an unprecedented scale, for millions of households and thousands of small businesses. This dynamic will pose a significant challenge for many insurance companies that still dont understand their customers and segments in sufficient detail due, in part, to the structure of the industry, in which agents and distributors still hold incredible market power. The advent of big data and analytics will drive change over the next few years, and AI will add further momentum. Large insurance providers will begin to understand their end customers in more detail through natural language processing and analysis of relevant structured data from databases and unstructured data like claims notes. They will also use machines to help humans make more rational recommendations or decisions in ways heretofore impossible. These technologies will also reduce the need for rote/repetitive work, which will either be automated or sourced externally. Employees will need to add value that machines or external sourcing alternatives cant.Of course, an intellectual understanding of where the market is going isnt the same as action/preparedness to act on these trends. We believe the ideals reflected in the survey responses will take years to ring true (three to five years at leas
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