November 15, 2017 by David Gambrill, Editor-in-Chief
Technological automation is going to significantly change the composition of Canada’s property and casualty insurance industry, reducing the workforce by up to 40% within the next five to 10 years, predicts RSA Canada president and CEO Martin Thompson.
Speaking at the Insurance Institute of Canada’s At the Forefront breakfast in Toronto on Tuesday, Thompson said the rapidly decreasing cost of computing power has given insurance organizations an “unparalleled” ability to process and compute data. This allows insurance organizations to automate certain tasks and roles within the industry, reducing costs and increasing efficiency.
The composition of the industry in the future will change as a result, he said.
“I think what we are going to see is the number of people in the industry will reduce. My view would be somewhere in between 30 and 40% over the next five to 10 years.”
Thompson said the composition of the workforce is also going to change dramatically.
“If I look at claims, I think you will see less claims administration, and more [positions available in] what I call hard-core technical claims,” he said.
Companies using advanced analytics can leave complex, high-level underwriting to insurance professionals, Thompson added. “I think you are going to see a lot of routine underwriting completely automated.”
The current model of insurance includes a great deal of “paper-pushing,” Thompson observed, creating a drag on a company’s costs and efficiency.
“We as an industry have a structural cost problem,” said Thompson, adding that an insurer’s costs are 30 cents for every dollar of revenue collected. “If we are going to survive and start investing in technology, we have to drive down costs in our industry and we have to drive productivity and efficiency up…. We have to use technology to fill the productivity gap.”
Insurance organizations today are challenged to re-think their business model because of consumer demands for convenience, speed, choice and transparency, Thompson said. Many of these consumer demands run counter to the current insurance business model, and companies can use technology to fill in the gaps.
Discussing changes to the current business model are never popular, Thompson said, “but the reality is that if we don’t get control of this, then we are not going to be able to compete. It’s one of the biggest challenges we face.”
Martin is right, couldn’t agree more. Rather than look at technology as a threat, re-deploying workers into areas that make the insurance experience more integrated, open and transparent is how I see this opportunity. So much time is wasted on shuffling paperwork and filling out dumb forms when we could all be focused on value-added services for the client is the real opportunity.
There are costs associated with change. Just look at the turn of the century and the automobile replacing the horse and buggy. Or most recently, electric or autonomous vehicles. 30 or 40% may or may not be the number. Either way, there’s no denying the fact that change is happening and will continue to happen and that the pace of change is accelerating. Some see this as a threat. At ensurco.ca, we’re counting the opportunities change will allow us to take advantage of.
Agreed, in claims, I do believe for the next 10 years people will still want to have their claim discussed with a human. Technology is still refining task processes and currently requires us to adjust resources to address the areas that tie together the processes. With the rapid advancement of AI, in five years, only complex claims will require a professional adjusters involvement. Our challenge in the adjusting world is to constantly evolve so that we know our value and relevance with the carriers’ ever changing expectations.
I won’t argue the point as it relates to personal lines insurance because that division of coverage and handling is becoming more and more static as technology moves on (I will throw AB in as an ‘enfant terrible’). But I will for Commercial where there is a wide range of exposures to cover and some able to take manuscripting. The clientele I deal with cannot be put in one basket of protection with one concept for all. Not going to happen. But if it does, by some miracle of techno-attrition, you have my blessings.