Delivering and responding to diversity and demographic change requires dynamic responses
The pressure on the insurance industry to deliver genuine diversity across all sectors and at all levels will continue. Several initiatives are already running but benchmarking against other sectors shows further progress is needed, especially as new laws will make shortcomings at individual firms more visible. The UK gender pay reporting regulations will force insurers to publish pay information by gender. Recent surveys suggest this is likely to reveal stark differences in pay between men and women working in the insurance industry and confirm a lack of women in senior roles, despite a handful of recent highprofile appointments. The law comes into effect in October 2016. All UK companies with more than 250 employees will have to carry out a review and publish their gender pay information from April 2018.
A wide range of other factors will also drive the diversity agenda, including the ageing population and the increasing ethnic diversity in many regions. Insurers, as major employers, will be expected to show how they are responding to these developments.
Insurers will also face challenges to ensure appropriate cover is available at affordable prices for an active older population. This will especially impact travel and motor insurers.
Embracing artificial intelligence in legal services
The huge complexity of financial regulation, especially for firms operating across multiple jurisdictions, is an area that could soon enjoy significant benefits from the use of artificial intelligence (AI) or smart apps.
Smart apps can connect complex content – legislation, regulations and case law – and expert analysis to generate precise, immediate answers. These are potentially invaluable to firms with complex financial transactions where the breach of local or international rules can have significant financial or reputational consequences. In the US, one smart app is already providing instant advice on HR questions, drawing on the law in 50 different state jurisdictions.
The ability of AI to carry out extensive research work will produce a hybrid professional services model – part-AI/ part-human – improving the efficiency of legal services and potentially reducing the costs. Clients will come to expect instant online access to first-line knowledge, enabling them to be more focused when subsequently seeking specific advice.
Peer-to-peer insurance is gradually finding its feet
The sharing economy is developing in insurance through peer-to-peer insurance. It will continue to grow in all developed economies over the next few years with several launches planned for 2016 and 2017. Defining the relationship between them and established insurers will be a major challenge, one that is already attracting the attention of regulators.
At one end of the spectrum, peer-to-peer insurance looks like a form of mutual insurance, especially for larger risks. For smaller, well-defined personal risks, policyholders form small groups, usually online. A part of the insurance premiums paid flows into a group fund, the other part to one or more insurers. Minor damages to the insured policyholder are first paid out of this group fund, possibly replacing an excess. The only requirement is that all group members must have the same type of insurance.
The peer group can self-insure to a point and partner with an insurance carrier to deal with catastrophic and unexpected losses. The peer-to-peer insurance concept carries no costs other than the special insurance, although many schemes require a flat-rate contribution, part of which is refunded at the end of the year if there are no claims. There is scope for dispute – and litigation – if the legal basis of the scheme is not dealt with properly at inception.
Claims apps will put policyholders in control of claims
The development of sophisticated but easy-to-use claims apps will gradually transfer control of claims from insurers to policyholders. They will be ruthlessly transparent, allowing policyholders to track the progress of a claim, and the advice and instructions between insurers and service suppliers, including loss adjusters and law firms. They will dramatically reduce the amount of on-site time in the case of physical damage claims as video, pictures and other supporting material will be uploaded instantly. Greater connectivity of vehicles, machinery and buildings will enable a lot of data to be transferred automatically. This will shorten claims settlement times and set new customer expectations for speed and efficiency – an interesting development as the Enterprise Act comes into play.
This will raise issues around privacy and data ownership, whether the apps are developed by third parties or – more likely – those with an interest in managing the claims process, most likely insurers. Protecting these new digital processes against fraud and data leakage will also be a major challenge.