Innovation: Is Reinsurance Doing It Wrong?
Today, innovation is arguably the lifeblood of progress in any industry, including reinsurance. It drives efficiency, enhances competitiveness and provides opportunities for growth. Now, I would never wish to fearmonger a company by stating something vague, such as that failing to innovate risks falling behind - this is not the case for some. And this attitude is what leads to digitisation for the wrong motives. But what can be said is, for the reinsurance sector, innovation is a particularly interesting feat due to the increasing complexity and unpredictability of risks, as well as the disruptive forces reshaping insurance overall.
As a digitisation consultant in reinsurance, naturally I'm concerned with the scepticism about whether traditional reinsurance models and practices are adapting quickly enough to digitisation. Whatsmore, are we going about it in the best way?
Areas for Innovation in Reinsurance
Realistically, there are many areas I could go into detail about here; underwriting, product development, distribution channels. However, my main interest is in claims and so claims management is what we will focus on.
Claims processes are often complex, time consuming and prone to errors and fraud. Innovation through digitisation and automation can offer promising solutions to these challenges. Consensys uses the example of Blockchain in insurance, which can provide a decentralised, immutable ledger that securely records and verifies transactions. In the context of reinsurance, this means streamlined claims management processes, enhance transparency and improve efficiency.
Reinsurance companies can create a shared, closed and protected record of claims related information, including policy details, loss events and settlement transactions. Many software providers already offer these types of services to insurers and reinsurers. The AdvantageGo and DOCOSoft partnership is a recent one which springs to mind. This style of working with claims could reduce the risk of fraud and dispute, while also accelerating claims processing and settlement.
And we haven't even touched on automation. For example, claims settlement processes can be automated based on predefined criteria and triggers which not only improves the overall customer experience but also reduces administrative overhead and costs for reinsurance companies.
Barriers to innovation
One of the main challenges facing reinsurance companies is legacy systems and infrastructure. Many of these systems were built decades ago and are ill-equipped to handle modern data analytics, artificial intelligence or any other emerging technologies. Hence, companies may struggle to integrate new solutions into their existing operations which, these days, could cause inefficiencies and delay innovation.
And then there's our company cultures to think about. There is an inherent resistance to change within traditional organisations, with established companies being reluctant to deviate from long standing practices and processes. It works for them - why change? Well, this is a fair point perhaps, but also there may be a lack of awareness or understanding of the benefits of innovation. This can stem from senior leadership and key stakeholders or it could even come from the employees of a digitally enthused senior leadership team. Resistance can be found in all corners of an organisation attempting to innovate and overcoming it, no matter the root cause, requires a concerted effort. Getting into the ‘how’ would be lengthy and perhaps a topic for another blog, but it does involve a deep dive into company cultures, experimentation and rewarding risk taking within the organisation.
The way forward
Finding a way forward will require specific routes for different reinsurance companies. This is where the support of a consultant becomes invaluable. However, if I was to give some general advice it would be this.
Firstly, invest in your talent, THEN invest in the technology. Recruiting and/or retaining top talent is becoming increasingly cited as a top priority for re/insurers. We can see this through the likes of Deloitte’s ‘Putting the Nectar in the Sector’ report and also articles such as this piece by Burton Recruitment. There is good reason for this. Learning and development are crucial for evolving markets - insurance is exactly that right now and it doesn't show signs of slowing down yet. Keep a workforce that's interested in and good at what they do. These will be the people who help your innovation ideas succeed.
Next, bring in the technology. Bring in what will help your team do better. This doesn't need to be everything on the market. One can find new technology on the market every day. It's impossible to keep up and, after all, it's also not necessary. The basis for technology deployment must be real business challenges, requirements and needs. By investing in your talent and technology, you will be able to exercise a more agile and flexible organisational structure fit for innovation and any digitisation plans you may have for the future. No diving head first into digital chaos - set the framework up and the rest will come a lot easier.
If you'd like support setting up your framework for digitisation, don't hesitate to get in touch: www.buondrius.com/contact