3 minute read 5 Feb 2021
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How to sustain digital transformation and manage human capital

By Tapestry Networks

Professional services firm

Tapestry Networks creates an environment where leaders learn from one another, explore new ideas, and collaborate to solve problems.

3 minute read 5 Feb 2021
Related topics Financial Services Insurance

Insurance leaders reflect on the future of work, digital technologies, changing talent needs, and renewed focus on diversity and inclusion.

In brief
  • The pandemic has jolted the industry into focusing more on digitization and increasing its investment in technology and innovation.
  • Demand for people with IT and digital skills is outstripping supply, making it imperative for insurers to attract these coveted workers.
  • The human resource function must adapt to changing times, perhaps creating a new employee advocacy role.

COVID-19 pandemic has served as an inflection point for insurers – forcing them to consider new possibilities for the future of work. They have rapidly scaled technology deployments and shifted many of their interactions with customers onto digital channels. This demonstrates the potential for rapid digitalization, but also highlights the challenges to achieving genuine transformation.

The sudden shift to remote work has also led to a renewed focus on diversity and inclusion, and the greater need to develop talent and human capital strategies for a very different future of work.

During virtual meetings on 3 September and 8 September 2020, Insurance Governance Leadership Network (IGLN) participants met to discuss the continued digitalization of the insurance industry and changing talent and human capital needs of the insurance industry. The following themes emerged from these discussions:

  • Digitalization has only accelerated
  • Acquiring and developing talent is critical to effective transformation
  • The pandemic is speeding the transition to new ways of working
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Chapter 1

Digitalization has only accelerated

The pandemic has further catalyzed digitization by adding a sense of urgency that was lacking

Digital transformation has been a longtime imperative for the insurance industry, driven by technological innovations, changing customer expectations, and competition from new entrants. As one director said, “The pandemic has accelerated what was already in progress, with no pause in investments in digital technologies.”

At the same time, the COVID-19 pandemic has exposed gaps in digital capabilities, especially in products, distribution, and the need to upgrade underlying legacy systems. Insurers will need new kinds of partnerships to accelerate progress, attract new talent, and build new skillsets.

The pandemic hastened trends already in motion

Insurance leaders were pleasantly surprised at their firms’ ability to transition to remote work and stabilize operations in the early weeks of the pandemic. One participant observed, “I think the transition was easy because we had already become increasingly digitized as a sector over the last 10 to 15 years.

Before the pandemic, we were concerned with ratings and financial strength rather than digitization, data, and customer needs.
IGLN Participant

1. Changing customer expectations

The pandemic is accelerating shifts in customer expectations and changing insurers’ relationships with their customers. This entails new uses of technology to drive more customized, simplified customer experiences and the development of new types of insurance products.

A director suggested insurers need a mindset shift to adapt to changing expectations, “Customers do not necessarily want a new insurance product; they want a custom solution to their problem.” Another participant said, “Customers want more personalized products rather than generic, one-size-fits-all products. We have to change what we offer to meet the expectations they now have.”

2. Increasing digital distribution

With business travel and in-person meetings impossible, insurers have needed to transition to digital distribution channels. Some have found that many of their products can be sold digitally, which can be seen as an enabler for productivity and efficiency of distribution to connect with customers in more ways.

Participants, however, expressed concern about the limitations of digital distribution, especially given insurers’ lack of experience in forming relationships through these channels. One participant said, “Many insurance brokers are not digitally native. They do not have the skills to sustain relationships they built on the golf course or by clinking glasses.” A director observed, “While we were able to automate our back offices seamlessly earlier this year, our customer-facing operations were challenged – making it difficult to grow our business.” Addressing this challenge will require even greater investment in digital interactions and capabilities.

The pandemic reinforced the need to expand technology investments

Despite the economic uncertainty, insurers recognize the need to continue making digital investments. One director said, “I suspect companies are now thinking that if we do not increase spending on digital, then we have no future.” Participants noted the importance of investing now, acknowledging the time it takes for digital investments to produce returns, and the need to absorb the costs of these investments upfront. Addressing any shortcomings may involve thinking differently about partnerships that can quickly enhance digital capabilities.

The acceleration of digital transformation efforts is underscoring for some the need for insurers to address the limitations of underlying legacy systems. One EY participant said, “It’s hard to build new technology platforms on an existing legacy base.” While many insurers have continued to layer modern applications on top of older platforms, a participant cautioned that this may deter future progress.

Insurers are increasingly taking advantage of partnerships with startups and other tech providers to enhance and scale their capabilities. As one director noted, “The fact that major incumbents talk about partnering with new entrants is itself reflective of a major mindset change. We would never have had the discussion even two years ago.”

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Chapter 2

Acquiring and developing talent is critical for transformation

Talent is the greatest barrier to digital acceleration.

It’s one of the paradoxes of the digital age, where insurers are automating processes and adopting advanced technology, a skilled and engaged workforce remains a critical differentiator. While COVID-19 may have temporarily paused the industry’s “war on talent,” three key talent issues remain:

1. High demand for technology and related skills

IT, data science, analytics, and related skills remain scarce, and the shift to online sales and remote working, along with the acceleration of digital transformation across sectors, means those technical skills remain in great demand. The pandemic may lead more people to seek stability by remaining in their current roles, so insurers face stiff competition for tech talent.

2. Attracting and employing new tech talent

Recruiting tech talent remains a challenge for insurers. As one director said, “Smart tech talents like agile working models and big returns. That is not what they get in the insurance business.” In EY team's experience, cultures that reward risk-taking, promote “test-and-learn” thinking, and offer opportunities to innovate gain an advantage in attracting the tech workers they need.

However, even if insurers are able to attract these coveted workers, a director cautioned that technological skills must be paired with industry knowledge to be effective. We believe a clearly articulated societal purpose – such as protecting families, businesses, and communities from unprecedented risk and promoting wellness – can also attract younger generations of workers. The opportunity to “make a difference” matters to this group.

3. Reskilling current employees

Finding more employees who understand how to best deploy new technologies in insurance requires recruiting more tech-savvy talent while also bolstering the technical skills of current employees at all levels. A participant said, “You cannot just recruit a few thousand ‘tech people’ into the sector who are then put into IT or innovation teams in a corner. You need everyone from the chair of the board to the CEO to the fund managers to the claims processers to understand and develop new digital skills.”

The key to solving this issue is through upskilling employees over a long-term horizon as jobs and necessary skills change in the wake of technological advances. We believe this requires defining clearly defined career paths and establishing leadership development programs for the most promising employees. It’s also important to convince employees that it is in their interest to acquire new skills over time and identifying industry-wide approaches to ensure consistency and applicability if people move from one financial institution to another.

Beyond specific technical skills, insurers must also train their people to “work digitally” – that is, collaborating remotely within multifunctional teams, scanning many different data sets, and making decisions based on insights provided by AI or analytics packages.

Small business owner checking financial documents
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Chapter 3

The pandemic is speeding the transition to new ways of working

Signs point to increased productivity, improved morale, and heightened employee engagement.

COVID-19 brought the future of work to the present, as the entire workforces went remote. A participant predicted, “I think one lasting effect of this will be the realization that remote work can be productive.” An EY professional said, “Initially, silos came down, there were more meetings in a virtual environment, and there was greater collaboration. That was a silver lining in the short term.”

Insurers are now moving to the next phase of pandemic response: re-examining what has worked and what can be retained in a world likely to include a mix of remote and on-site workers. They are also addressing the personal challenges employees face when they are not physically together.

What should insurers be doing over the next 18 to 24 months?

  • Develop new models for working

    Even before the pandemic, companies were looking to make changes to work models to respond to changing employee expectations and to attract and retain talent. The relative ease of pivoting to remote work has convinced some skeptics that remote work can be effective. Leading insurers are now identifying what a sustainable model should look like to make their organizations more efficient, productive, and attractive by developing new work models and new priorities for office spaces.
  • Ensure employee well-being and equity

    While the benefits of flexible working are likely to drive future models for work, the effects of the ongoing pandemic on some employees offer lessons for ensuring that employee well-being is integrated into long-term approaches. One director said, “The mental-health issues right now are stunning. I think companies will have to reassess how they can become a part of the solution and not a part of the problem.” An executive noted, “It is ironic that employees have less work-life balance now that they are working from home and managing kids who are also at home instead of at school.”
  • Embrace flexible work styles

    The sudden and effective shift to remote work is pushing insurers to make flexible work arrangements more permanent options. According to an EY professional, “People are no longer constrained by location. You can attract a whole new pool of people, but what will stop another company from poaching your key talent?” Another EY participant said, “There is far more beneficial to a genuinely flexible work model that allows for fluid schedules and job sharing than simply allowing remote work; however, remote work is the key to unlocking this flexibility.”  
People are no longer constrained by location. You can attract a whole new pool of people, but what will stop another company from poaching your key talent?
EY participant
  • Create flexible work models and workspaces

    While participants expect some flexibility to become permanent in the industry, they are trying to develop a model that balances flexibility for employees with the needs of the company. An EY professional emphasized the need for insurers to develop a coherent vision for the future of work and the best use of office space, rather than simply responding to pragmatic concerns. “Insurers should be driven by their ambition for the future of work and not by real-estate costs,” he said.

Diversity, equity, and inclusion have taken on a renewed urgency, elevating these issues to the top of the insurance agenda. IGLN participants have been engaging in challenging conversations to bolster progress in these areas.

Flexible work models raise new human capital challenges

Despite the advantages of flexible working arrangements, insurers must now address a range of obstacles if they are to create sustainable flexible work models, including preserving corporate culture, reevaluating management approaches, and recruiting and onboarding new talent.

  • Maintaining corporate culture

    Insurers have long recognized the importance of corporate culture to the success of any organization. Inculcating, monitoring, and maintaining those cultures will be challenged by large-scale remote work over the long term. One director asked, “How do you ensure that remote employees are still embracing company values?” Participants identified practices aimed at maintaining culture in a flexible work environment, including frequent communication with employees; monitoring culture remotely: and creative employee engagement.
  • Reassessing management styles and roles

    IGLN participants noted that while some managers have adapted well to a remote work environment, others have struggled. A more permanent shift to flexible, hybrid models will require different kinds of leaders and leadership models. One director said, “We have to equip leaders to work in a variety of settings. We are going to need a lot of flexibility.”
  • Developing innovative approaches to onboarding

    Insurers acknowledge the challenges of onboarding new employees who may work remotely. One director said, “Onboarding talent in a virtual environment is complicated. They lose the mentorship aspect that is present in normal working environments.” Another added, “We have to carve out a special time to meet new hires one-on-one virtually so we can start to establish that level of trust and comfort.

Summary

Digital transformation has accelerated with COVID-19, forcing insurers to rapidly scale technology deployment. The shift to remote work has created gaps in the talent pool and highlighted the need for technical skills that are already in great demand. Acquiring and developing talent is critical. However, insurers also need to develop a coherent vision for the future of work that ensures the well-being of their employees.

About this article

By Tapestry Networks

Professional services firm

Tapestry Networks creates an environment where leaders learn from one another, explore new ideas, and collaborate to solve problems.

Related topics Financial Services Insurance