Researchers from Cass Business School in London have suggested that COVID-19 will act as a catalyst for the industry-wide adoption of new digital initiatives in the insurance industry.
The new research has also suggested that the pandemic has promoted the value of firms having a chief risk officer (CRO) to navigate strategy and identify opportunities.
The research study, authored by Cass alumna Sarah Ruberry and senior lecturer in insurance Dr Cormac Bryce, found that insurance organisations often prioritise inward-facing, prescriptive digital strategies, often to the detriment of an outward-facing integrated strategy to target upside risk.
The rapid acceleration of COVID-19 to the level of a global pandemic has triggered business continuity plans across the world and has brought about a wholescale change in working practices for insurers.
A survey with interviews across nine insurance companies of different sizes found that one in three CROs were either not looking at digital change – the implementation of InsurTech and other data-oriented digital initiatives – or not implementing it.
‘Risk intelligence’ through skills, knowledge, experience, education and training was also found to be largely lacking from board level downwards, emphasising resource limitations and unsatisfactory board engagement.
Ms Ruberry said, “This research has implications for the future development of InsurTech and FinTech more generally.
“In a hardening market, chasing down frictional cost drops down the agenda. However, investing in the right solutions can build a lasting strategic advantage. Insurers who can facilitate adequately-priced risks through efficient mining and analysis of data will be better positioned than their peers.”
She said, “A year ago, the insurance industry would have dismissed the idea of a wholesale working-from-home model and new business not needing to be conducted in person. COVID-19 has created an opportunity.”
The recommendations made by the research team included:
• Insurance and reinsurance firms should focus on transforming the traditional perception of risk as the ‘second line of defence’ into a value-identifying ‘second line of opportunity’
• Commercial insurers cannot afford a ‘wait and see’ policy on technological modernisation, especially when forward looking competitors are already adapting and adopting.