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Insurance industry: The future of work is now

How the pandemic is accelerating the future of work in the insurance industry

Compensation Strategy & Design|Executive Compensation|Future of Work|Insurance Consulting and Technology|Talent|Total Rewards
COVID 19 Coronavirus|Insurer Solutions

By Tony Toury , Arpha Suwansatisakorn and David Sims | October 2, 2020

The insurance industry is expected to emerge from the pandemic with a more agile, cost-effective and high-performing workforce.

2020 has been an unprecedented year for the insurance industry. As the COVID-19 pandemic lingers through the year and probably beyond, most of the insurance industry continues to see a significant downturn due primarily to:

  • Strain on investment portfolio due to a low interest rate environment
  • Increase in direct claim costs
  • Delayed payments
  • Decreased premium volume
  • Coverage disputes
  • Economic recession

COVID-19: Impact on insurance lines

The COVID-19 pandemic has had negative implications on commercial insurance lines
Insurance line Outlook
Commercial Workers compensation Negative Increase unemployment and reduced payrolls
Property Negative Focus on cost cut by customers
Professional liability Negative Higher risk of allegations
Motor Negative Sales contraction
Specialty lines* Negative Reductions in global travel, trade and new construction
Personal Auto Stable Stalled new business, improved loss ratios in the short term
Homeowners Stable Personal property insurance levels remain resilient

*Includes aviation, marine, construction, event cancellation, and credit and surety

Most lines under property and casualty are well-capitalized and will continue to maintain or increase premiums due to COVID-19, elevated catastrophe losses and the lower interest rate environment. Life insurers, on the other hand, are facing headwinds as policyholders are laid off or earn less. As of the second quarter earnings, expense management and smaller claim payouts have proven to be a remedy to declining revenues. However, many companies reported anticipating an uncertain environment in the coming 12 to 18 months and intend to focus more on operational and cost efficiencies.

As it relates to human capital, some companies pledged not to lay off any employees at all, while others have gone through pay and/or workforce reductions. In the short term, these actions are beneficial to the bottom line. However, the COVID-19 pandemic accelerates the need to think about future of work strategies. As organizations migrated to remote working – some committed to remote work only during the pandemic, while others plan to continue to have a portion of their population working from home – we found 60% of insurers anticipate making adjustments to how work gets done, including primarily exploring new ways of working and leveraging technology as immediate priorities.

What should insurance organizations do in 2021?

In light of this extraordinary pandemic, the economic impact is expected to be felt for at least a few years. Some conveniences, such as buying certain goods and services 100% online, are here to stay. As a result, insurance companies will need to accelerate their journey in meeting customers where they are.

The evolution of insurance companies’ operating models must include changes to how and where work gets done, especially as more employees will expect to work from home more regularly. We found that 20% to 25% of insurers have already taken steps to redeploy workers to support another function or shift when and where work is done (and that over half have at least been considering taking these steps). Recruiting critical talent will be ever more fierce as nontraditional competitors are able to recruit for remote positions.

Digitalization

Insurers must continue to accelerate the implementation and adoption of technology that serves customers, from premium selection to claim processing, by enhancing virtual assistance features as well as making mobile and web applications easy to navigate. Using similar technologies, HR should rise to the challenge and provide a consumer-grade experience to employees. This could be accomplished by making HR programs more accessible to employees and making remote work a seamless transition.

Jobs reinvention

Jobs such as customer service representatives, claim representatives, underwriters, actuaries and claim examiners are being disrupted by advanced technologies. Many of these roles will need to be repurposed or reskilled. Items to focus on include jobs that are experiencing strong or unpredictable spikes in demand, positions likely to be disrupted by technology or change due to customer needs or demands (e.g., safety), high incumbent jobs with attraction and retention challenges, or those primarily held by a shrinking workforce (e.g., close to retirement).

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Rewards programs cost savings

Employers will need to rethink their rewards programs in light of the digitalization of work combined with job reinvention. For example, many of the current sales incentive programs may inadvertently incentivize selling in traditional mediums as opposed to embracing the technology platforms provided. With the headwinds that the insurance industry faces, now is an opportune time to revisit base pay, incentive plans, executive compensation, and other recognition and benefit programs.

Optimizing compensation spending is top of mind for executives. And it doesn’t have to be a net-loss exercise. Conducting a conjoint analysis such Willis Towers Watson’s Total Rewards Optimization or Total Rewards Prioritization help employers understand which reward areas drive employee behavior. This helps maximize return on investment on compensation and benefit dollars.

If these issues aren’t complicated enough, 2020 has also brought inclusion and diversity issues to the forefront. Some of the issues are not new (like the lack of diversity in actuarial talent) but have taken on added importance and a more serious call to action than before. Willis Towers Watson has been working with insurers to develop their fair pay agendas to remove equal pay issues, comply with local regulations and ensure a fair and inclusive benefits program.

Conclusion

COVID-19 will accelerate and further evolve ongoing trends in digitalization, job reinvention and rewards optimization. This is a critical turning point that will differentiate high-performing companies of the future.

Authors

Director – Rewards

Lead Associate, Executive Compensation (New York)

Director - Executive Compensation