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Insuring the Future: Digitization, Disruption, and Trust

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Today, life and health insurers face a common obstacle: To protect more people, carriers must embrace more technology. RGA sat down with Mike Emerson, Executive Vice President and Head of U.S. and Latin American Markets, to discuss how digitization is disrupting the competitive landscape, why recruiting and retaining talent is so important, and what the future may hold.

How is the fast pace of change affecting the insurance sector, particularly in the area of attracting and cultivating talent?

I’ve been in insurance a long time, and never before has the pace of change been faster. With so much in flux, along with the prospect of unforeseen disruption, it’s hard to think of our industry as mature.

Yet when it comes to recruiting talent, we tend to be apologetic for the perceived staidness of insurance. Insurance industry innovators are deploying new technologies, applying big data and predictive analytics, and looking for ways to deepen customer relationships. Billions of dollars are flowing into this sector. On top of this, we are a purpose-driven industry: we protect people. A lot of great things are happening in insurance, and we need to recruit talent from this perspective.

At the company level, we know employees are placing greater value on diversity and inclusion, flexible work schedules, and a clearly articulated path for professional development, along with assistance in moving down that path.

Turning to customers, how do we overcome misperceptions and strengthen relationships there? 

The industry is in the midst of discovering what it will take to materially alter the customer experience – from sales through post-issue. It’s undeniable that many consumers today will not tolerate a customer experience with the friction historically built into the insurance process. They expect their insurance company to deliver an experience more like what they receive from their favorite retailer, and a one-size-fits-all approach may not work. Some want a do-it-yourself experience, while others may prefer some level of human interaction. Companies will need to decide whether to provide services across this spectrum or focus more on their core service delivery.

By the same token, focusing solely on reducing friction is not enough. To borrow the line from the movie, Field of Dreams, “if we build it” – that great customer experience – the consumers still might not come. We need to expand awareness of what our industry does – and how we help people. We need to build trust, so that a potential customer is willing to step into the purchasing process with the insurer. 

We also need to move faster. A stream of incremental advances has moved us forward; however, attracting and engaging customers accustomed to functioning in a digital ecosystem will require a true transformation. Companies are feeling real pressure to invest in the customer experience, modernize their underwriting, and in some cases, experiment with distribution and engagement models.

There have been a number of competing claims about transformative technologies and tools. What is real, and what is a distraction?  

The greatest impact will not come from a single technology, but through the development of a thoughtful architecture that utilizes a variety of new tools, including efficient and scalable cloud computing, programming languages such as Python oriented to data science, and easier interoperability via application programming interfaces (APIs).

RGA has adopted several new technologies to support its strategy. In underwriting, for example, we have incorporated new data sources and advanced analytics, all supported by a flexible and scalable modular architecture. Our underwriting experts have analyzed digital health data (DHD) for years and have transformed hundreds of thousands of health record codes to numeric underwriting severities. This could not have been accomplished without a modern, digital platform that enabled administration of the codes and efficient access for clients through an API.

From a longer-term perspective, we are researching, partnering, and testing technologies not yet adopted within our industry. As an example, work is underway to understand how the power of distributed ledger technology, or blockchain, can be deployed in the life and health industry. We recently partnered with an insurer for a proof of concept application, and we expect use cases to emerge over the next several years.

All of these new technologies rely on the availability of customer data and trust in the industry’s ability to secure it. How should the industry approach questions of data privacy and security?

Data is our key asset, and so trust must be our key value. Our dependence on data will only grow moving forward, and we simply cannot afford to lose customer trust in our data security and privacy practices. In the future, I believe we will underwrite very differently than we do today. The industry is in a highly evolutionary state – the ability to rely on alternative data sources and digital health records in the underwriting process will likely be ubiquitous in 10 years. We need to make this transition responsibly, in a way that protects the core tenets of insurance, risk pooling, and customer privacy.

Technology can also help strengthen bonds of trust with customers by enabling a new level of engagement – ideally leading to customer acquisition. We are accelerating underwriting with some success, and we are taking the right steps to redefine our relationship with the consumer at every stage.

What role will insurtech entrants and tech companies play in driving this disruption?  

Actually, disruption will most likely be driven from within the insurance industry – but in partnership with others. We realize the importance of the incumbent and the value insurance brands bring to the space, particularly in the life and health sector, where we make long-term commitments. However, we also recognize that we need to change and become more consumer focused, and that change may include technology, product, or business model adaptation. Insurers, reinsurers, and insurtechs are partnering now more than ever, and as we look ahead, these partnerships could serve as a great jumping-off point to disrupt ourselves.

So what will the insurance industry look like five years from now, or 10 years from now?

Insurance markets will converge. For example, big data will provide more protective value to simplified issue products, and fully underwritten products will be issued more quickly through accelerated underwriting – the two markets converging in their value proposition to the consumer. Distribution will rely on channels where trusted relationships can be built: For example, why can’t a digital sale of a fully underwritten individual product be made through the group sales channel? The way we think about our current product-driven organizational structures is bound to change.

I also expect the industry will look very different from today. I hope we will have created an elegant user experience, closed the protection gap, and increased trust in our industry. What we do matters, and I hope, and expect, we can build these connections with consumers.

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