This article is by Hesus Inoma, Founder & Chief Innovation Officer for InsurTech WeSavvy and one of The Digital Insurer’s Digital Innovators for Europe at our Global LiveFest 2018 virtual conference in November. In this article Hesus looks at how the ‘Human Capital Stack’ within insurance might no longer be fit for purpose and proposes new roles which will be founded in technology driven business model enhancements.
It is now widely accepted that the insurance industry globally will need to reassess its approach to decision making in the manufacture and distribution of products and services in order to compete with tech businesses seeking to transform traditional financial services. As the industry embarks on the journey of becoming more tech savvy, this will lead to Workforce Transformation and Education Transformation which in turn may lead to the re-invention of the insurance industry brand. In this piece we will look at how the “Human Capital Stack” within Insurance might no longer be fit for purpose and a “New Stack” will be proposed with new roles.
Much of the conversation to date has been on how traditional business models within insurance need to transform to stay relevant. But little attention has been paid to the types of individuals, skillsets, attitudes and mindsets that are required to drive this transformation from within. In order to influence a shift from a pure “Risk Bearing” business model to a “Prevention and Proactive” risk model (we refer to this as “Population Lifestyle Management”). This requires a shift in the traditional understanding of roles of various functions, a transformed approach to how the customer is viewed and understood, and a thorough grasp of the opportunities that can be reaped from embracing tech solutions. It also requires trust and loyalty from prospective customers.
I often make comparisons between the world’s best loved brands like Google, Amazon, Apple and the more traditional financial services brands and highlight how we can learn a lot from how these organisations are structured, organised, governed and marketed. We need to look at various Human Capital Stack changes leveraging the structure and organisation of tech brands with a view to mirroring and re-engineering their successful business models and strategies.
The traditional Human Capital Stack of an Insurer, as with other types of Financial Services Providers, is broadly based on roles encompassing Underwriting, Actuarial, Sales & Distribution, Marketing, Claims & Operations, Legal & Compliance, Finance, Audit and Asset Management. All of whom are governed by various layers of seniority, managed by an Executive group and governed by a Board of Directors.
Traditional Human Capital Stack and Value Chain
These functions usually operate in silos of one another, are not always integrated with cross functional processes and don’t often seek to prioritise diversity of thought, skillset and customer view.
With this in mind, we should see a more integrated and inclusive Human Capital Stack within Insurance in the future. I have concentrated on the more core component roles across front office and support and have not unbundled Finance, Internal Audit, Asset Management or other support functions. This does not mean that there are not transformative role changes that could be made in respect of these areas.
Dynamic & Multi Faceted Human Capital Stack and Value Chain
Transformation from Traditional Roles to Dynamic & Multi-Faceted Roles
- Sales & Distribution >>> Identity & Lifestyle Custodians
- Claims & Operations >>> Provenance & Data Integrity Custodians
- Underwriting >>> Behavioural Scientists
- Legal & Compliance >>> Smart System Governance Advocates
- Actuarial >>> Data Scientists & Algorithmic Coaches
- Marketing >>> Community Builders
2 New Editions (Overarching the Stack)
- Experience Designer
- Ecosystem Architect
Within this New Stack, certain roles will evolve and change from more traditional roles into more dynamic multi-faceted roles.
Identity & Lifestyle Custodians
Traditionally, Sales & Distribution issue data to customers about the product in order for the product to be sold (“Push Model”). Products being designed and distributed leveraging IoT and Big Data the flow of data will be in the reverse (“Pull Model”). The customer will send as much data as possible constantly for the product to be designed and tailored in a way that best suits their lifestyle, activities and needs. The Sales & Distributors teams will be on the receiving end of enhanced data sets from customers and will use that data and hold custody of it, to inform more personalised and dynamic policies.
Provenance & Data Integrity Custodians
Provenance & Data Integrity Custodians will be key in a dynamic data-driven IoT environment. Operations and Claims will be tasked with validating the sources and integrity of the data that will be crucial to counteracting fraud risk and to testing the reliance on the data to inform smart decisions/contracts.
Underwriters will have access to far more data sets and real time data than ever before. In a world of enhanced and more alternative data sets, the role will evolve to meet the need to understand granularity of customers’ behaviours, understanding what drives the customer from an intrinsic and extrinsic perspective and therefore perceiving risk and managing it from a more proactive, preventative and inclusive basis. Additionally, more diverse skillsets will be added to the function whereby a more psychological assessment of behaviours, needs and wants will inform the product governance process, including at design and target market analysis stages.
Smart System Governance Advocates
Compliance and Regulatory professionals will need to be more informed of the technology stack, algorithms and risk assessing and governing the data and management thereof. Given that successful IoT models are inherently customer centric, the more value add activities of the future compliance function will be seen in the stress testing of the systems, algorithms and maintaining continuity of service and managing the risks associated therewith.
Data Scientists & Algorithmic Coaches
The Actuarial role will transform in to more of a Data Scientist. While the traditional role is predominantly relating to gathering and assessing data, a more dynamic and role will involve increased data manipulation, data mining of insights and managing more complex and alternative data sets. In an AI driven business model, the data fed into the training of the AI model will be the determinant of the success of that business model. Not all AI models will be equal some AI models will be smarter than others.
Marketers will become Community Builders working closely with the Experience Designers promoting the well-being and safeguarding of the company’s brand and reputation. They will ensure that the bond between the customers, company and community is built on trust and integrity. They will look across the organisation to ensure that it is structured in such a way that the promise can be delivered upon.
New roles that will become prominent in the future Human Capital Stack:
Designers of the customer’s journey, through interaction with other functions across the entity, will be central to holding all functions together. They will have a holistic and integrated understanding of the mechanics of the organisation and determine the value added by each function to the end service and product offered to the customer. The Experience Designer will tell the customer the story of the organisation, they will understand what makes the experience enjoyable for the customer and will inform how all other functions integrate into making sure that the customer gets the desired experience. In addition, the Experience Designer will represent the voice of the customer in the organisation. They will advocate on behalf of the customer’s needs, priorities and experience to make it as optimal, as possible, from a customer’s perspective.
Similar to the Community Builder, Ecosystem Architects will work closely with other stakeholders within the Insurance community including InsurTech businesses, Distributors, Platforms, Reinsurers, Brokers to ensure that any synergies that can be made across services and across the ecosystem can be made efficiently and effectively. They will act as Ecosystem integrators to ensure that adjacent ecosystems, and core future stakeholders are integrated into the business.
Looking at the above role descriptions and skillsets required, it looks as though the Insurance Industry, in the search to re-invent itself and in the quest for digitalisation, will have to compete with the Tech industry and other progressive industries to attract STEM (Science, Technology, Engineering, Mathematics) skilled professionals.
The challenge within the industry will be in overcoming the perception by graduates of what the industry has to offer. As it currently stands, only 2% of soon to be graduates would consider insurance as a career. Insurers will have to be Savvy, Socially Intelligent and promote an adaptive/growth mindset/attitude.
We can anticipate that an organisational shift will have to be made to position Insurers to compete with market counterparties in the future. This will help to enable reassessment of the approach to decision making in the manufacture and distribution of products and services. It will also enable Insurers to compete with tech businesses seeking to transform traditional financial services. In order to begin the transformation to attract the necessary talent there will need to be a fundamental change in education, culture and talent acquisition.
From a practical perspective, it’s time that the Insurance brand becomes far more hip!
P.S. You might also enjoy my earlier pieces:
- Insurance Trends for 2018
- Internet of Things – Adjacent Possibilities vs The Existing Reality
- InsurTech – Transforming the industry from within
- Black Friday …. is a $4.7 Trillion industry up for grabs?
- The Future of Insurance lies within InsurTech!
- Has the insurance Industry failed our youth?
- The Insurance Tale of Mary!
- Can an industry that has never innovated for decades change?