The insurance industry is one of the oldest and largest industries in the world. With roots in Europe dating back to the 1600s and in the United States in the 1700s, it has had a significant role in the world’s economy. For a very long time, it was one of the most stable industries. Today, however, the industry is facing a period of high disruption, some of which will benefit insurers and their customers, while others will be challenging to navigate.
The Disruptors
- Increasing Cyberattacks – No industry can fully escape a potential cyberattack, and some industries are being specifically targeted by cyber threat actors. Insurance is one of those targeted industries due to its housing of large quantities of valuable, personal customer data. Cybercriminals are trying to steal this sensitive data, a company’s intellectual property, as well as money through ransomware attacks. In addition to the financial losses stemming from a loss in productivity and the costs associated with restoring Information Technology (IT) services, there are potential penalties and fines associated with failure to comply with cybersecurity legislation, including a loss in customer confidence, and brand damage. To mitigate their losses, insurers are establishing comprehensive cybersecurity plans which include implementing best practices such as regular penetration testing, vulnerability assessments and employee training. They are deploying multi-factor authentication, encryption, and other advanced technologies including Artificial Intelligence (AI) and Machine Learning to detect and protect against potential financial fraud.
- Digital Technologies – Apart from their role in cybersecurity, digital technologies are being used to improve business processes across multiple areas including underwriting, customer service, and marketing. Applying digital technologies elevates these areas with more seamless, accurate and efficient operations that benefits insurers, their employees, and their customers.
- Regulatory Compliance – Increasing regulations require more stringent measures. In the area of cybersecurity alone, federal legislation such as the Gramm-Leach-Bliley Act, Health Insurance Portability and Accountability Act, and the Security and Exchange Commission have all amended their compliance requirements. On a state level, the New York State Department of Financial Services has issued several new requirements with which insurers must comply. In other areas, there are heightened requirements pertaining to the use AI, preventing bias and discriminatory practice, evidence-based benefit design, increased oversight over network adequacy, and data reporting, among others.
- Greater Consumer Expectations – Consumers expect personalized, customer-centric products, and services, convenient communications delivered through channels they want to use (e.g., digital platforms, customer portals, and mobile apps), competitive pricing, and improved customer service including more expedient claims processing.
Other disruptors which are impacting all industries include today’s economic uncertainty and climate change.
Taking a proactive approach to address and best manage the risks and exposures associated with these disruptors will enable insurers to gain the resiliency required in a highly dynamic marketplace.