State of insurance digital transformation

This is an annual survey of insurance business leaders that looks at the key trends driving digital transformation in the insurance industry, including how insurtechs are reshaping the industry and if/how insurers are working with and taking advantage of changes insurtechs bring to the industry to help drive innovation. Emphasis is placed on how the digital transformation journey is tied to improving the customer experience.

Transcript:

Janet King (00:10):

Yeah, so thank you for having me here today. I'm excited to be here to talk about this research with Nate. It's been fun to be back in San Francisco. I haven't been here since before covid, so it's certainly nice to be back on the west coast. And in such a great city. We conduct a number of original research surveys every year from a wide range of topics like we talk about DEI, we talk about innovation readiness, we talk about tech priorities, but this particular piece of research on the state of insurance, digital transformation has become an annual initiative and a bit of a cornerstone for all of the research that we do. So we're excited about sharing that with you. And I think before you and I start chatting, I think it would be helpful if we just provided a little context around the research and what we did. And one thing we always do every year is that we provide our survey participants with a definition of what we mean by digital transformation. And really that's just to make sure everybody's thinking about it through the same lens. And so you can see what it is here, but just really thinking about how an organization uses tech to remake their processes, pursue new business models, or create new business value. So if you're successful, digital transformation strategies should be delivering those ongoing benefits to the business. And then one more little housekeeping slide. So this year the research was conducted in March. We had 139 digital transformation stakeholders participate in the research and they represent a mix of perspectives from carriers and brokers and agencies as well as some Insurtech as well. And our goal every year is to try to understand some of the trends that are shaping the industry with respect to digital transformation and to allow all of you, and to provide all of you, I should say, with kind of a peer-based perspective. So you can see what's happening within the industry, how your plans compare, and maybe what you should be thinking about as you move your initiatives forward in the future. Anything to add to that, Nate?

Nathan Golia (02:15):

No, but I did. How much do you have the breakdown for the 139, what it was?

Janet King (02:20):

I think it was right off the top of my head. It was a hundred Carriers. I think the majority were carriers somewhere around maybe 80. And then we had some brokers and agents and some Insurtech as well.

Nathan Golia (02:33):

Yeah, I had to write the research report and I couldn't remember that.

Janet King (02:35):

We should remember this.

Nathan Golia (02:36):

Sometimes we're grouping the carriers and brokers together and sometimes we're splitting them apart. But yeah, just to get the idea.

Janet King (02:43):

Yeah, The majority of the respondents are carriers and then brokers and agents, and then we have a smaller number of Insurtech answering this year. Excellent. All right, so let's dive in. And I think I wanted to start today with a look at the industry regarding digital transformation progress and get Nate's thoughts on this. Because what we see is that most of the stakeholders that do this, answer this research for us kind of fall in that middle section of the chart, which is where they basically agree that the industry is taking an incremental approach to digital transformation in the interest of not changing too fast. And that's been pretty consistent for the last couple of years, but we have seen a growing number who are popping up on that left side of the chart, a growing number who believe that the industry is moving beyond that and really delivering products and services that take advantage of the full breadth of data and analytics and all the other technologies that are available to create real business value. But we don't have enough yet to really be at the tipping point. It's around what Foreign 10 overall. But what we do see is that almost half of the brokers and agents believe that to be true. So they're slightly more optimistic. Now, notably, one thing I want to point out Nate about that is that while they are a little bit more optimistic than the carriers, only 28%, so just about one in four believe that insurance agents are being successfully integrated into that digital transformation journey. So I guess I want to know from your perspective, Nate, if you're surprised by any of those findings and the fact that so many see changes incremental and also what you think needs to happen for brokers to be more integrated into that.

Nathan Golia (04:33):

Well, I think that it's interesting covering this for over 10 years and it sometimes I'll go back and read an old article I wrote, what I'm trying to research something, just see where it's common. I be shocked at how rudimentary a lot of what was being described was compared to how things are now. And I'm actually, I think that it'd be interesting to, I wish we don't have all these things broke down. It'd be interesting to see what's the person's attitude, who answers that it's incremental versus not because maybe if you've been around for a long time and it has been incremental, but I bet if you were to look back at some of your old pictures or something like that, you'd be shocked, excuse me, how things looked. I once looked at a article I wrote and where I'd taken a picture of my agent's office and they still had big beige CRT monitors. And that was the point of the article that was, but that by now, I don't think that's even close to how that is. Now I can text my agent and stuff like that. So that's interesting. I think there might be some people who are all, I think also with agents especially, there was a little bit of a conventional wisdom that Insurtech was going to rapidly disintermediate the insurance agent. Everyone loved to say insurance agent, like a travel agent or something like that. But I think that the unique structure of the insurance industry has really kept agents as they were a crucial component of the distribution, the distribution chain. And so maybe they're, the reason so many of them are feeling that it's rapid is that carriers have been circling back like, okay, we've updated our processes internally incrementally, now it's time to really get with the agents and jumped up and they're probably experiencing a more rapid change than the average carrier employee is. So in terms of successfully integrating them, that was a topic that we covered in our agents track yesterday. If you got a chance to check that out, I did one of those sessions. We had two others ones after that, which is just about that question. What does it mean to incorporate, what does it mean to digitally transform the agent channel as well and how our agents and carriers working together and how are their dynamics changing between each other and between customers. And I think there's still a little bit of uncertainty about who owns exactly what and what's going to be turned over to the digital channels and what's going to be a core competency of the live agents. So that's why maybe a little bit of sort of slow feeling that at the end of that for them.

Janet King (07:07):

And it's interesting, we'll see later in some of the data when you look at the technology adoption, which we'll close out with that. But it's interesting to see what agents and brokers are investing in because I think it does really show this rapid acceleration, particularly among that part of the ecosystem, which is great. So regardless of the perceived pace of progress, regardless of where you think the industry might be today, what we're seeing is that customer experience really still remains at the heart of most digital transformation journeys for carriers and brokers. So this question was asked just among the carriers and brokers that took the survey, and it's the most cited priority. You can see nearly half rank it as the area of their business that's most often the target for their digital transformation initiatives. And it's cited as a top target three to four times as often as the other things we see here like underwriting, distribution, product development, and claims. So Nate, what do you think about CX as sort of the enduring north star for transformation and what does that say to you about how things are progressing in the industry?

Nathan Golia (08:18):

Yeah, if you looked at last year's version of this graph, the customer experience was about the same. I want to say, yeah, I think it was about half people picked first and then underwriting was about, was a much higher, I think closer to 30 something percent. And then those other three areas that we cited were lower. And so to me, what was really interesting about this year is that customer experience sort of stayed the same as about half of insurers would say just if you ask them the question, what's the thing you're looking at the most, they're going to say customer experience. But seeing the shift underneath it was interesting. And I think we'll get to that in a second in terms of what the Insurtech we're investing in. But I think it's going to remain this high because I think that that's, especially in a lot of the business lines where we have focused readership, these small commercial and small and general personal lines, everyone's got that insurance and it's really just about moving it around among customers and trying to have that best experience to be luring customers away from competitors and retaining them more than anything. People are really focused on that. And that's seen more as a customer experience overall initiative rather than saying, okay, well let's really about claims. That's how we retain people. It doesn't seem to be quite that much of a link. So unless some people might be thinking the customer experience in claims or in underwriting might be what they're working on, but they're seeing it as an overall customer experience initiative, which is, it's just an interesting fact there.

Janet King (09:50):

And I think that's a really good point. They're related. They don't sit independently of each other. And when you look at the goals that carriers and brokers are setting and what they're, what's guiding those digital transformation strategies, I mean, you see things like improving the customer experience, delivering operational efficiencies and driving growth is being at the top of the list. So that kind of aligns with where you also see them targeting their efforts for the business. But what was interesting this year is that the number of insurers who cited minimizing risk as a digital transformation goal has almost doubled year over year. So what do you think is contributing to that?

Nathan Golia (10:33):

Well, this is why I was so surprised by the previous slide that there was still like, yeah, they're minimizing risk, but they're still saying customer experience, number one, you'd think something like underwriting would be something where they're investing in because they want to minimize risk for all those reasons I talked about in my opener, we've got economic economic situation that is on both ends. You've got a supply chain supply chain which is driving up claims costs, which is also extending claims cycle times that's making those things more costly. And also you have a financial environment that is making money a little bit harder to get. So you'd think that insurance companies would be working minimize risk. In fact, you could say that just this week here we've seen that, we've seen State Farm and Allstate, we'll talk about no longer writing new business here in California. So what I think we'll see is that there might be like, okay, I'm answering the customer, I'm answering my priority based on what's been happening, but I know that the next thing is that we're going to be minimizing risk and that's really where we're going next. And that'd be interesting to see how much that goes up next year.

Janet King (11:39):

And that State Farm Allstate thing is interesting, right? Because it clearly they're focusing on the customer experience for key segments of their customer base, but causing feeling like others are just not worth the challenge. And it's interesting because we also saw some interesting shifts among Insurtech, which I think you just noted. And so we're seeing more than two times as many year over year who are indicating that they're targeting underwriting or rating operations of their customers with their products or services. So how do you explain that and how do you align that with what we're seeing from the others?

Nathan Golia (12:15):

And that was what was so funny because like we're going through the findings about a couple months ago, just like I'm looking through it and seeing how these things, trying to think, well, what, what's really going on here? What is this telling us? Remember I said that last year that underwriting was number two on priorities, and it's like this seems like the Insurtech responded to that. They were like, okay, one thing that we hear a lot about is a sort of misalignment where companies are coming in and they're talking to carriers and they want to have carriers as clients, but the carriers are saying, Hey, we don't have, this is not what we're looking for. I'm looking for something in this area. And to see that responsiveness to last year with underwriting being a much higher priority for carriers to now seeing how much it's being delivered by Insurtech, maybe that's why it fell down the carriers side, they were fighting solutions and they were able to move those into production was a high priority, but also they could be also in Insurtech are also much more savvy. Every year the Insurtech community gets more savvy. There are more people leaving the insurance industry or leaving the carrier side, I should say, to start Insurtech. And the Insurtech that have been in the industry for a while are learning the industry better and they're seeing all those other pressures. And I bet they're anticipating that there will be a focus on underwriting discipline among carriers. And it's good to see that they're being able to anticipate rather than trying to continue to produce something that isn't on the top list for carriers. Right.

Janet King (13:38):

Yeah, I would agree with that. So Monday, we had this really great panel on talent optimization. I don't know how many of you in the room were there, but it was a really lively conversation. There were a lot of comments, and I think it really struck a chord with a lot of people. And so it's not surprising that here we're also seeing staffing challenges come up as one of the key things that insurers, specifically carriers and brokers are telling us is really impacting the direction of their digital transformation strategy. And that's followed by budgets and inflation, which are also top concerns. But really, I wanted to talk about staffing a little bit because I think there's so much interesting stuff happening there. So how often is talent coming up for you, Nate, when you're chatting with folks in the industry?

Nathan Golia (14:26):

I mean, yeah, it's really at the top of the list. Earlier this year when we did a deep dive into claims, usually the thing I kick off the year with is just like, let's look at the claims organizations and what are they looking at as they're resetting for a new year of claims basically.

Nathan Golia (14:51):

Yeah, it's too dangerous. I need to get duct tape over my mouth. Crap, I made that joke and I forgot. Okay, no, never worry. Yeah, so I talked to a several chief claims officers and I said, well, what is your big priority? And they said, this year, you know what it is, we just need people. And it was like, we need claims adjusters right off the bat. We've got a lot of claims and we're backlogged and there's a lot of catastrophes that are impacting us and we just don't have enough adjusters, but we also need claims data scientists we're hiring high level tech positions in the claims organization. And that was true at a large top 10 carrier. It was true at a super regional carrier that interviewed, it was true at an Insurtech that I interviewed. They all sort of had that same perspective that we need people up and down. That's just in one section of the insurance value chain. Obviously there's still, there's a need for new underwriters and there's especially a need for new agents, especially as agents are not, like I said, being wholly disintermediated immediately. And that's, I think that the insurance talent challenge, there's a lot we talked, it was, like I said, we did the session on it. There are a number of organizations out there that are really focused on it for this reason, trying to get to get people into the industry and into the industry to fill in to backfill jobs that are being left by retirees. So yeah, definitely comes up.

Janet King (16:21):

And so we dug into it a little bit deeper in this particular research, and there's some interesting stuff that we found. The first thing was we asked them how specifically, how actively are you recruiting for digital IT or tech roles? So not every role, but just in that kind of bucket, how actively are you recruiting? And what we found is that only about one in four carriers and about one in three brokers or agents report that they're actively recruiting for those roles. Most of them are falling into the somewhat actively recruiting, and we'll talk about some of the strategies they're putting in place, but just at a high level, does that surprise you given how much need there is for talent?

Nathan Golia (17:00):

I do think sometimes it's that one of those, well, how do you perceive very versus somewhat actively? Somewhat, yeah. There's some companies where there's always jobs open and they might say like, okay, yeah, we've posted a couple more of these jobs, but be some of these people are especially answering this survey who are like, no, I'm trying to hire an entire team right now. I'm trying to hire four or five people to fill in. So they might consider that very active. I think that what you're seeing is that there's not real, the economic, I guess would the real thing to take away from this is that economic situation is not impacting the insurance industry's desire to lure high quality, high quality tech and digital employees to work for them directly. And I think that's something that the other side of that coin is that there are tech and digital employees at tech companies or more specific, very specific tech companies that are being laid off, that are being let go. And the insurance industry is saying, please come to us. We will pay you, we give you what you want. Because they want those skills internally and that, so that's what I think is the understanding of this whole question is that the insurance issues actively recruiting even as some of those roles are leaving other areas.

Janet King (18:18):

And I think what I wasn't really surprised by is the kind of roles that they're looking for. So what we saw was for both carriers and brokers, they're looking for application developers, cybersecurity database administrators, cloud management roles. But the really big difference here was that leading the list for carriers specifically was that hunt for data scientists, including people with AI skills. So it was 52% compared to just 11% of brokers. So thoughts on that, Nate?

Nathan Golia (18:46):

I mean, I don't think that's surprising anyone in the audience. I think that is one of the highest priority targets for insurance companies and has been for several years now. We've done a nut, some reporting, we've had dig in sessions, we've had web seminars if you've followed us for the past several years on actuarial science and data science, where they intersect, where they clash and how that is impacting insurance going forward. But yeah, definitely as part of that minimizing risk, you see start to see that theme of insurers trying to build out these really robust data organizations in order to meet those challenges.

Janet King (19:26):

And to your point, they're taking a lot of different steps to get there. So this question was asking them, again, focusing on carriers and brokers, but what recruitment strategies are you employing to attract new talent or fill those roles? And what we see is that many of them are really starting with existing employees. They're focusing on internal retraining and skills development as kind of one way to close that gap, but a sizable number or targeting high performers outside the industry. To your point, Nate, they're looking to capitalize on talent that's been made available by layoffs at tech firms and just other kind of adjacent industries. So I think it's a really interesting approach. And what do you see as some of maybe the advantages or pitfalls to that approach?

Nathan Golia (20:14):

Well, I think when you're looking at insurance agents, that is, they're definitely targeting high performance in their industries. They're looking for people who have demonstrated sales success, probably in other industries where the sales environment might be softer, whereas in insurance, everyone is always going to need insurance and it's always pretty, always opportunity. So they're looking for people there. We did actually post or ask the question specifically, are you targeting the laid off workers from the big tech companies? I think it was Allstate who had announced they had made a big announcement about how in one of their earnings calls about that, and that was what we started digging into it a little more and seeing that. But yeah, I think when we see the really high, those sort of statistically significant, is that correct? Yes. When you say that that jump from number one to number two, I have to be careful. She actually has Yeah, no, that's right. Statistics, knowledge, and I don't that people are doing internal retraining because there it's tech jobs are one thing, knowing tech is one thing, but knowing insurance is another thing. And I can tell you after 13 years of being an insurance journalist, just only recently feel like you really begin to have an understanding. And I think that taking people with insurance knowledge and trying to chain them up into digital into more digitally focused roles is something that we'll go see a lot of insurance companies do for that reason.

Janet King (21:35):

Absolutely. Another area, Nate, that we've talked about a lot is just sort of tech and certainly sentiment around Insurtech. This is something that we looked at in this particular piece of research. We also asked about it in a piece of research we did at the start of the year about kind of what's on the tech agenda for insurers. And in both of them we saw that the industry sentiment around Insurtech is really pretty positive, which is great. Most are saying that they perceive their Insurtech partners to be developing truly transformative digital solutions. So more than 60% of carriers, 70% of brokers, and of course Insurtech themselves, gave themselves much higher grade. 85% said they think they're being transformative.

Nathan Golia (22:21):

Probably shouldn't ask them.

Janet King (22:22):

Probably shouldn't ask them, but we always grade ourselves a little higher on those things, right? But what do you see coming from the Insurtech community, Nate, that you think's going to be truly transformative?

Nathan Golia (22:32):

Well, I mean, I think that seeing the indication that they're responsive to carrier carrier priorities is really important. Like I said, that was the thing, especially right up to the pandemic, right before the pandemic, I remember speaking to a couple insurance carrier side tech buyers and they were like, I'm walking around these conferences, I'm reading the literature and I'm just not seeing the thing I'm looking for. And I think that when we saw what we saw with that underwriting, that underwriting focus compared to last year and the understanding that that's coming down the pipe, and a lot of Insurtech came in with, the other thing to understand I think maybe would be that, especially towards right up to the pandemic, Insurtech was really heating up and there was lots of people coming in looking for easy opportunities. Now I think that you're seeing the true believers who are sticking it out and who are entering, if they're coming into still live in Insurtech or they're coming in now, it's because they are true believers in the industry. And I think that we'll see that alignment continuing to tighten between the carriers and Insure Tech.

Janet King (23:41):

Great. So our last data point this morning, and then maybe we can take some questions is we know that they think Insurtech are going to lead the change. And what we are seeing too is that most carriers and brokers are still leaning into those technology investments. So even in spite of economic uncertainty and geopolitical tensions, things like that, we're still seeing significant majority of companies increasing or maintaining their tech spend. But we wanted to understand where they're investing new or incremental resources over the next 18 months. And so if you look at the light blue bar that shows you where carriers are planning to make investments in the other bars for agents and brokers. So for carriers, cloud is topping the list along with advanced analytics. And then for the agents, which is what I was referring to in the beginning, what we're seeing is incremental investment in cloud digital payments and chatbots or other customer interaction technologies. Yeah. So what do you think about that?

Nathan Golia (24:43):

Well, let's talk about carriers first because you're still seeing, Hey, a lot of these companies, they've had big internal IT organizations for a long time and moving that into a cloud formation is still going on. It's kind of amazing after all these years to see that cloud is consistently one of our highest cited focus areas, which I think is, it might be easy to assume a lot of that work had been done, but maybe not for all the legacy lines or all the legacy policies. And it's seeing that analytics number go way up. I mean, that's always going to be a big thing, but especially like I said now with changes in the macroeconomic market, you definitely got to bet that in at data for agents, it's good to see them investing in some of the sort of easy to implement customer interaction technologies, advanced customer direction technologies. I think that agents are changing their view of what their role is and where their value is. And it's not in, I remember even, I want to say about six years ago when I lived in Utah, I found out that the address on my home insurance policy was wrong, and my carrier at the time did not have a self-service portal for me to change that. I did have to write to my agent and ask them to call the carrier and update it. Has anyone lived out west where your address is just coordinates? My address was 903 West 10 20 North.

Janet King (26:16):

Were you insuring your neighbor's house?

Nathan Golia (26:17):

No, I was insuring 903 West 10 20 South, Which the reason I figured it out was because I got a surcharge for having a trampoline, and I looked at my backyard and there was no trampoline, so I looked closer and I saw it. The upshot is just that my agent was, that was silly agent's role and was seen by the insurance company as the agent's role to, hey, if they're updating, they got to make a little just a clerical error. That's up to you guys to fix. Now we're seeing that being done more interactive through digital channels and agents are focusing more on relationship building and upselling and things like that. And I think you started to see, again, a tighter alignment between Insurtech agent, customer, and carrier.

Janet King (27:04):

I think the lesson there is we all need to check our policies to make sure they all have the right address and information.

Nathan Golia (27:08):

Could not believe in that.

Janet King (27:10):

Be proactive. So any closing thoughts? But if we have time, we can take a question or two.

Nathan Golia (27:16):

No, I'm happy. Does anyone have any questions about how the research, I think you'd like to hear us ask in the future? Anything like that? I'd be happy. We would definitely love to get some input on what you want to know about, I don't know if we can get a mic to him, but you can ask. Yeah,

Audience Member 1 (27:32):

So there's basically three groups, your Insurtech, your carriers, and your broker. Is there any insight or a way to ask around what would make life easier for say, a carrier to work with a broker than an Insurtech or an Insurtech with a carrier and a broker or a broker with the carrier, the Insurtech, to really understand what the other ingredient be really useful or do you have any insight to share?

Janet King (27:57):

Yeah, that's a great question. We do have some insight in, and if you catch me after, I can send you a copy of or get that insight from our tech priorities research that we did in January. So in that particular research, we did ask what insurers are looking for from FinTech or Insurtech like, so what's important in that priority and as they move through the buying journey, how do those factors shift? So we have some good insights there. I can't recall specifically off the top of my head right now how that happened. But what was really interesting was that as people move from consideration to purchase, evaluation, consideration, purchase, as they move through that cycle, what they're looking for really changes. So from an Insurtech partner perspective, there's a real opportunity and need probably to shift messaging and approach as you kind of work through that relationship with people. So I do have that and I can share that with you after. But I love that question and we should definitely add that.

Nathan Golia (28:59):

We're always trying to figure out a way to quantify that too. And I think tech priorities was insurance and banking, just insurance and banking.

Janet King (29:08):

It was insurance, banking, wealth and mortgages. But we have a specific data cut just for the insurance sector.

Nathan Golia (29:13):

But you can also see what I'm saying in our research, how it compares to those other financial services. And yeah, one thing, yeah, it's really interesting. I mean, penny and I have talked about this, how fintech's works with banks, how Insurtech work with insurance companies, and then in the mortgage side they have a new little community of their own digital transformation happening. It's interesting to see how those things are shaping up.

Janet King (29:36):

Great question. Thank you.

Nathan Golia (29:37):

Any other questions?

Janet King (29:40):

Right there.

Audience Member 2 (29:42):

So you guys mentioned that one of the research says that carriers and broker, they feel that underwriting is underwriting and rating any research. How are insurance?

Nathan Golia (29:59):

That's something, She said that some of our research has indicated a priority for underwriting on carriers, and you wanted to know how Insurtech were meeting, what specific things insures were doing. We sort of take those data points and we take them into the editorial organization and then we follow the trends and we will report that editorially. That'll probably be hitting that a little bit later on in the summer, but that's how we sort of handle that thing. But we will, that also will in inform next year's survey. We'll, we'll probably ask more about that specifically. That's how we do that.

Janet King (30:33):

Absolutely. Did you have a question? Yeah.

Audience Member 1 (30:36):

It's probably a entirely selfish disclaimer, but for the advanced analytics, you may not have captured it data. Do you have a sense for how much of that is in house and how much of that is partnerships?

Janet King (30:48):

That's a good question.

Nathan Golia (30:50):

For agencies specifically or for cares?

Audience Member 1 (30:53):

How much would the advanced analytics push? You talked about kind of a shortage of resources.

Nathan Golia (30:57):

Yeah. I'm sorry, I'll repeat the question for your question is for advanced analytics, how much of it is being done versus how much is being done with partners? Can we quantify that?

Janet King (31:11):

We don't have it, this research, but again, I need to go back and look at that previous piece of research to see if I could extrapolate anything for you there. But it's a really good question. It's another thing we should really lean into next year on this

Nathan Golia (31:24):

One. Yeah, anecdotally, it's a healthy mix though too, right? Even internal, they'll build internal organizations, but they will go and get partners through those organizations as opposed to just contracting out the data work. So insurance companies clearly want to keep some of that in house. I do. They didn't give us a timer today, so I'm sorry to be rude. I'm going to check the time because I want to get Nicole and Beti up here for our final session. Are we good to go? Yeah. Excellent. Thanks everybody. Janet, and I'll be around to chat. Our final session is with Nicole Gunderson from Manchester Story and Beti Cung from CSAA. And thank you very much.

Janet King (32:03):

Thank you.