The insurance industry is one of the oldest industries in the world, dating back to the third and second millennia B.C. An industry with such deep roots in human civilization has thrived by continually transforming to changing circumstances. Still, the insurance business faces unique obstacles today such as natural catastrophes of increasing severity and frequency, shifting economies and evolving human needs. To help overcome these hurdles, property and casualty insurers are searching for solutions to four key industry challenges – even as the coronavirus (COVID-19) pandemic continues to disrupt consumers’ lives and the global economy.
- Disruption of on-site underwriting, inspection and adjustment due to COVID-19
In the property and casualty insurance industry, underwriters, inspectors and adjusters traditionally visit properties on-site to take measurements and determine damages. However, policyholders, affected by shelter-in-place orders and wary of infection, are opting out of on-site visits. In response, insurers are quickly adopting new technologies like virtual surveys that use third-party integrations, or other do-it-yourself solutions where policyholders take photos, answer basic questions and provide measurements on a shared platform.
- Shortage of insurance professionals
Within a few years, industry experts estimate a severe global shortage of professional adjusters. Studies indicate that 25% of professionals in the insurance industry have retired or are about to retire.1 The majority of adjustment professionals are 55 years old, and firms have struggled to recruit millennials, who tend to gravitate toward working with emerging industries and technologies. This leaves a considerable experience gap within an industry already short of workers. A shortage of such magnitude will limit the industry’s ability to respond to claims, especially in the aftermath of natural catastrophe when there is a surge in the volume of claims. Despite these troubling indicators, firms are beginning to adapt to these changes and are incorporating new digital technologies to increase efficiency and better engage the next generation.
- Commoditization of insurance
A commodity is defined as “a good or service in which wide availability typically leads to smaller profit margins and diminishes the importance of factors other than price, such as brand name.”2 Smart tools that aggregate market data and the ability to shop for insurance online has led the insurance space to become commoditized. These resources allow insurance shoppers to see a quote from a variety of carriers in one place, forcing carriers to compete on price. Commoditization continues to pressure carriers to find new and creative ways to reduce their loss adjustment.
- Customer satisfaction
A recent survey of over 15,000 policyholders in 30 countries indicated just 40% of property claim customers had a positive experience.3 According to the same survey, the two most important factors contributing to a positive experience were the speed of the settlement and the transparency of the claims process, followed by the accessibility of the insurer and the frequency and timeliness of communication regarding the status of their claim. As insurers continue to grapple with these challenges, new tools are emerging within the industry, offering solutions by:
- Incorporating do-it-yourself solutions that increase resiliency to pandemics, cut expensive on-site costs and increase efficiency
- Better engaging millennials and encouraging them to join an industry faced with a shortage of insurance professionals
- Encouraging carriers to discover new ways to reduce losses due to the commoditization of insurance
- Enabling insurers to better connect with policyholders and increase customer satisfaction
Solving these four industry challenges will ensure that the global insurance system continues to function amid a changing world.
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[1.]Griffith Foundation, https://www.griffithfoundation.org/uploads/McKinsey-Talent-white-paper-FINAL.pdf