Blog Article

Collateral damage – Digitization kills the Underwriter and Claims Adjuster

Posted by Christian Weiss

Christian Weiss

25 years ago, our parents told us to apply for a job at a bank or in insurance. This was considered a safe bet. Nowadays banks and insurance companies are not known for job security. According to a recent US study, there is a high probability that important job clusters in insurance will disappear within the next few years. For example, there’s a 99% chance that Underwriters will be impacted by digitization, possibly even be made redundant. Sales agents have a 92% chance of the same thing (Frey and Osborne 2013).

But it’s not all bad news. Digitization is creating new business models, products and services which require new skills to develop and implement. While jobs are being replaced in some areas, they are being created in others.

One of our clients is a mid-sized regional insurance company in Europe. They are changing how they do business by automating as many standard cases as possible and moving the issuing of policies and claims management of the remaining standard cases to Eastern Europe. Only the governance and management of complex insurance cases will remain in Western Europe.

The driver for this is not downsizing. Our insurance client is changing the locations of specific administrative and operational job clusters. Of course, fewer people than before will be employed at the Western European location, but at the same time, other job clusters in Western Europe will gain new accountabilities requiring new and different skills.

Let’s go back to the example of the Underwriter. His or her expertise is very valuable, but human assessment of risk is being challenged by new more sophisticated data analysis methods and tools. Changes to how we use and interpret information will make these jobs either redundant or change the scope and skill requirements.  At the same time we also see new roles being established. For example, there will be a need for expertise to develop and implement new insurance-related products and services together with partners in other industries. Key skills of this role will be the identification and management of partners and the common development of innovative cross-sector products using the new opportunities of digitization. Another new role in the IT department is the Integrator. The complexity of the current systems landscape in many insurance companies – with a lot of old, proprietary systems – means there is a need to move to new systems on different platforms and at the same time integrate totally new systems. This is a complex task and specific roles focusing on the integration task will be a must.

Is the industry prepared for this change? In a word, no. There is a tendency to over-emphasize the system side, putting the IT department in the leadership role and worrying less about the related people implications. If people are being considered at all in this transformation, the focus is on quantitative numbers and technical skills. This is important, but soft factors are becoming even more important in the age of digitization. Creative and intellectual capabilities are needed to develop new ideas, concepts and strategies. System thinking is needed to work effectively in a highly networked and collaborative environment. Leadership is becoming more important and refined in a digitized world. Working together with other people (customers, employees, partners etc) is now a basic skill requirement and becoming even more important as organization structures and the borders between organizations grow blurry.

 

There is no doubt that Insurance companies face big challenges. With their traditional risk aversion, they move slowly and with a technology focus. Digitization does not allow this speed – it is fast and substantial. New technology means new players are able to move rapidly into the sector and are shaking it up. Are the leadership teams in the established insurance companies able to actively steer the change and overcome the force of inertia?

 

Doubts are warranted whether many insurance companies will be able to avoid major collateral damage from digitization, as their strategic workforce management capabilities are often below par as a recent study conducted by Korn Ferry shows (Korn Ferry, 2016).

 

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