While COVID-19 has helped push the insurance industry faster into technology, it has also led to an increase in cybercrime and other risks, the recent LIMRA and LOMA Canada conference was told.
Based on PwC’s latest Insurance Banana Skins survey, which rates risks facing the insurance industry according to industry members, the introduction of new technology and cloud computing have raised the potential for hacking and other cyberattacks, making it the industry’s No. 1 risk in Canada.
“[Cybercrime] will become a forever increasing trend in the insurance industry,” said Dave Harris, Partner, Actuarial Services, PwC Canada, noting that it is applicable to property and casualty insurance and reinsurance as well as life insurance.
Second on the list of risks is technology itself, which Harris said continues to be high for both Canada and the rest of the world. For Canadians, he said, it’s a balance between the pressure on margins and how best to invest for customer needs.
Talent shortage
The lack of human talent has also become a major concern within the Canadian insurance market. The latest Insurance Banana Skins survey shows the fierce competition for employees with analytic skills and knowledge in data mining, accounting and actuarial changes.
There is also concern around the ageing workforce and what that could mean for skill gaps down the road. “This continues to be a huge opportunity, but obviously a huge risk for the insurance industry.”
Compliance and regulation
With some major international accounting changes coming up, there is also some worry regarding compliance and tighter regulations, said Harris. “There seems to be quite a burden on insurance businesses and the ability to thrive and innovate and a lot of this is coming back to regulatory requirements.”
Climate change is said to be another global risk for insurers, particularly when it comes to claims experience and payments with incidents like forest fires and flooding taking place more frequently around the world. Harris said there is also a societal expectation that insurance companies will be able to help support these large claims and catastrophic events.
Despite the risks, Harris said the insurance sector has come out of the pandemic “quite resilient” and relatively well advantaged in comparison to other sectors.
But the industry has to keep its eyes open. Mathew Lawrence, Partner, Financial Services Consulting Group, PwC, noted the major changes that have taken place in the past five years in North America when it comes to changing demographics. There are now more members of the Millennial and Gen Z cohorts, all who want more seamless, digital tasks, particularly when it comes to the Great Transfer of Wealth.
Digital capabilities
At the same time, the insurance industry has made great investments to its digital capabilities, as well as enabling employees to work from home, both of which are credited with making many workers more productive.
On top of this, he said the environmental, social, and government (ESG) movement is putting pressure on businesses to be more socially responsible. Lawrence added that Canada has “lots of room” to improve on this and many people want to be with companies that also feel ESG is important in their lives.
“Underpinning all of these elements is really cyber security and the ability to maintain a resilient structure.”
Communication and collaboration
There are other issues that the industry must look at as well. For example, communication and collaboration remain essential – even critical – for the industry to keep moving forward, said Kartik Sakthivel, Chief Information Officer at LIMRA and LOMA.
“While being agile isn’t a tool, it also isn’t necessarily a process. It’s a mindset predicated on communication, collaboration and trust and transparency and those things have been ingrained in our cultures over the past several years. I think they have paid off rich dividends in this hyper-virtualized world that we lived in.”
But while many carriers adopted an increasing number of tools, sometimes they weren’t worked to their greatest advantage. However, once platforms like Zoom and Webex came into being, insurers realized they had the ability to use all the tools they had for clients and financial advisors, said Sakthivel.
Coming out of the pandemic, insurers need to make sure they’re avoiding old bad habits, maintaining the company’s culture with committed leadership, educating its workforce on everything from cybersecurity to data and continually developing soft skills for employees.
If advice is part of an insurer’s business, management must ensure that what clients say in terms of feedback is essential, said Mark Hardy, Vice President, Direct Life and Health, TD Insurance.
“Don’t be dismissive of customer feedback that can be super helpful and be open and accepting to the input,” he said. It may be that the insurer can’t do anything about an issue right now, but making sure it accepts the feedback is step one to getting there.”
Employees then have to be taught how to translate that customer feedback. “It’s a very challenging space in a sense because you can do a focus group, you can have people simulate the process, but it’s never the same as what you’re going through in that experience.”
