Current geopolitical instability, staffing woes, and inflationary pressures are forcing the insurance industry to dramatically improve its operational efficiency through smart technology, says Justin Davies, Head of EMEA at re/insurance service provider, Xceedance.
The insurance and reinsurance industries, like other businesses and consumers all over the world, are struggling with a living crisis, spiralling costs and hiked inflation. On top of this, the Russia-Ukraine conflict is one of several geopolitical confrontations that are leading to anxiety and uncertainty in economies everywhere.
This conflict has led to shortages in everything from wheat to gas, and raw materials which are driving a vicious circle of ever-rising costs. This, Davies pointed out in a recent interview with Reinsurance News, is fuelling a demand from staff for higher wages to help them insulate from the spiralling costs, which is adding further cost pressure to businesses; including staffing costs in the technology sector.
Davies said: “A recent raft of well-funded Insurtech start-ups may be one factor that is driving the demand for tech talent. Whatever the reasons, employers are aware that there are a lot of highly-paid technology jobs open right now and if they want to retain their current staff – not to mention recruit new people – they will need to respond to market forces that are pushing salaries northwards.
“This type of wage inflation is clearly unsustainable, and it is causing some organisations to pause – or at least to seriously reconsider pausing – their recruitment plans because the costs are just so painful.”
According to Davies, there is very little the insurance industry can do about the “perfect external storm” of supply chain pressures, rising inflation, and significant geopolitical instability.
“In this unstable operating environment, the only real options open to carriers are to look at optimising their own operating systems and processes and find ways to use new technologies to make their businesses leaner, smarter, and more efficient,“ said Davies.
He continued: “It has long been observed that the re/insurance sector lags significantly behind other parts of the financial services ecosystem when it comes to adopting technology.
“When the COVID pandemic enforced mass working from home, carriers had to pivot quickly in the way they operated to carry on doing business. Insurers fretting over how to transition to digital working were suddenly forced to confront the need to do this almost overnight.
“The result was a huge acceleration on the road towards digital transformation, and that pace of change has been maintained over the past two and half years.”
Davies emphasised that carriers are now facing the reality that it is now an “absolute economic imperative” that they deploy a whole range of smart technologies. These include artificial intelligence (AI), machine learning, robotic process automation (RPA), and natural language processing (NLP) to automate large parts of the businesses.
Davies highlighted that working with outside partners like Xceedance can serve as experienced guides for many re/insurers’ tech journey, as making these changes can be daunting, and many companies do not have the internal expertise to plan and manage this transition.
He added: “Similarly, carriers struggling to recruit staff in an economically sustainable way are increasingly looking at partnering with external technology providers who can effectively become an extension of their in-house teams to provide support as and when they are needed.
“The insurance industry will face turbulent economic conditions and considerable global uncertainty for at least the next few years. But our industry has famously adapted to every challenge thrown its way, and I have no doubt that if insurers become more tech-enabled they will not only make the operational changes needed to stay in business but will also lay the groundwork for delivering better, and more efficient, services for their customers for years to come.”