Cass Business School Agrees Covid-19 Will Prompt Faster Digital Transformation

Insurance Edge has run a number of features on Covid-19 impact over the last few months, and guest columnists like Andre Symes at Genasys Tech has also identified the rapid adoption of online business models across the insurance sector.

Most brokers, MGAs and insurers agree that the new normal is 100% digital; more automated claims, quotes set by data stacks, customer admin chatbots, LV trialling Alexa and much more. Here’s the latest from Cass Business School FYI;

Researchers from Cass Business School suggest that Covid-19 will act as a catalyst for the industry-wide adoption of new digital initiatives in the insurance industry. They also suggest that the pandemic has uncovered the value to firms of having a Chief Risk Officer (CRO) to navigate strategy and identify opportunities.

The study, authored by Cass alumna Sarah Ruberry MSc, FCA, ACII and Dr Cormac Bryce, Senior Lecturer in Insurance at Cass, 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 a global pandemic has triggered business continuity plans across the world and has bought about a wholescale change in working practices for insurers. With a ‘new normal’ yet to be defined amidst the challenges of evaluating an evolving cornerstone within the insurance industry, speed and efficacy of data has become increasingly important.

A survey and interviews across nine insurance companies of different sizes found that one in three Chief Risk Officers (CROs) were either not looking at Digi-change – the implementation of insurtech and other data-oriented digital initiatives – or not implementing it.

‘Risk Intelligence’ through Skills, Knowledge, Experience, Education and Training (RI-SKeet) was also found to be largely lacking from board level downwards, emphasising resource limitations and unsatisfactory board engagement.

Insurance Edge had a quick scan of the research paper and one very telling quote stood out, which sums up much of the mindset in SOME big insurers;

One CRO commented that ‘most risk functions are looking at downside risks so the same goes for the boards. Boards are mainly there to manage regulatory risk. They obviously get the digital world and all these reports of cyber-attacks. In my experience the challenge points from the board have been around the downside risk of DigiChange which has largely been cyber in the last couple of years’.
Those Boards that are engaged have been asking questions such as ‘whether we would be doing  certain activities if it wasn’t mandated by the regulator?’

 

The research makes the following recommendations:

  • 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’.
  • The role of a CRO is more important now than ever, and companies must have an active individual to navigate the difficulties while seeking opportunities in a timely manner. CROs can also support areas of the business where delivery on strategic objectives has been suboptimal.
  • There should be a greater focus on realistic stress test and scenario planning that considers the possibility of a potential second COVID-19 outbreak and our susceptibility to future pandemics. However, firms should not lose sight of other emerging risks – such as cyber-crime and climate change – that are evolving simultaneously.
  • Commercial insurers cannot afford a ‘wait and see’ policy on technological modernisation, especially when forward looking competitors are already adapting and adopting.

Lead researcher Sarah 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 Digi-change solutions can building a lasting strategic advantage.

“Insurers who can facilitate adequately priced risks through the efficient mining and analysis of data will be better positioned than their peers moving forward.

“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 and a paradigm shift and similarly, insurers should refocus their Digi-change lens.”

Read a full version of Risk, Strategy and Digi-Change and the Role of the CRO.

About alastair walker 10506 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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