Recently, the Risk Management and Insurance MBA’s had the opportunity to meet with Steve O’Hearn, a Global Insurance Leader and partner at professional services firm PricewaterhouseCoopers. Over the course of his career, Steve has had the opportunity to work in various locations across the world including the United States, Japan, Switzerland, and now Germany. These global experiences have given Steve a unique perspective and a wealth of knowledge to share with the various insurers he works with, as well as our MBA class.
Over breakfast, we had a lively conversation about the future of insurance. During the past several years, the insurance industry has seen an unprecedented amount of disruption. In fact, it seems as if every day a new InsurTech start-up appears, keen to drastically alter the landscape of the insurance sector. In a rapidly changing world, the insurance industry needs to be agile and open to change in order to keep up, let alone capitalize on new technologies and ways of doing business. Due to this rapidly changing environment, Steve shared with our group that there are currently five urgent priorities for insurers: productivity, innovation, growth, regulation, and talent.
We discussed how productivity is a key focus due to the need to cut costs. With low interest rates and a soft non-life market, insurers are struggling to achieve the level of investment income they have had in the past. To assist in cost-cutting efforts, insurers are turning to innovations such as utilizing artificial intelligence to streamline processes in order to achieve sustainable productivity improvements, as opposed to individual, short-term cost reduction projects. Other forms of innovation are also being rapidly adopted by insurers, such as utilizing sensors for a variety of applications from loss prevention to health monitoring, to monitoring driving behaviors. Insurers are also fostering innovation by either internally testing or funding new ideas.
In addition to the current priorities for most insurers, a major topic of conversation during our meeting was trust. The insurance industry has massive amounts of data and strong capabilities in data analytics, modeling, and risk management, all of which could be a huge asset to governments and society when it comes issues such as healthcare, climate change resilience, etc. However, throughout history, the insurance industry has struggled to build trust with consumers. In fact, research shows that only 27% of consumers trust their insurance providers. In order for the insurance industry to be seen and utilized as the asset to society that it truly is, a greater level of trust needs to be built between consumers and insurers.
But how do we build this trust? That is a question the industry still needs to answer. Insurers are taking many different routes, from offering greater services to increasing transparency, but a turning point has yet to be reached. As a class, I believe the education we are receiving at the University of Wisconsin, and the opportunities we have to learn from individuals such as Steve O’Hearn, will uniquely prepare us to address this and the many other challenges and opportunities facing the insurance industry in a rapidly-changing business environment.