Disruption is probably one of the most overused terms in the insurance industry today. I remember hearing the term ‘disruptor’ during my first few weeks as an insurance journalist and getting really excited, only for my more seasoned colleagues to roll their eyes and reference an email inbox full of ‘disruptor’ press releases.
If we ever decide to produce an ‘overused insurance terms’ bingo card, then ‘disruption’ would be on there, along with ‘innovation’ and ‘we need to close the protection gap’.
Seriously, someone needs to close that gap just so we can all stop having to hear about it.
That being said, while it seems unlikely that the insurance industry is going to be disrupted by one meteoric disruptor (in the manner of the dinosaurs), it cannot be denied that there is a palpable feeling of change in the air.
As Matthew Wilson, group CEO at Brit Insurance, says: “It is universally acknowledged that our market is set to shift in fundamental ways.
“The risks we are underwriting, the companies we are insuring and the ways we transact are all changing. This is without mentioning the different mindsets from newer generations, rapidly evolving ways of working and an ever-increasing focus on the role of business in society.”
The shifts in the market reflect broader societal changes, according to ‘The future of skills in the London market’ report produced by the London Market Group (LMG) and professional services firm KPMG.
“A range of political, economic, social and technological macro trends are dramatically re-shaping society. These include persistently low interest rates, the growth of emerging markets, generations Y and Z joining the workforce, and advances in artificial intelligence (AI),” the report says.
These fundamental shifts mean that attitudes to leadership have changed, with the new generation needing a mixture of hard and soft skills, the LMG/KPMG report continues.
Having the wrong type of leader in place can impact an organisation financially and culturally, says the Lloyd’s Market Association’s (LMA’s) Fiona Temple.
Temple, who is LMA academy director, cites a 2016 Deloitte report, ‘Human Capital Trends’, saying: “Conversely, organisations that are perceived to have ineffective leadership suffer a 19.8% equity value discount.
“Because of this differential, organisations see tangible business benefits from investing in their current and future leaders. Investors will notice.”
While leadership in the market has begun to shift, there hasn’t been a notable change to date, according to Dave Matcham, chief executive of the International Underwriting Association.
“There has been cultural change due to greater diversity of senior management and more awareness of the key issues,” he says.
“This change has been slow with no discernible shift in leader profiles. There are more gay men in senior positions but it may be another decade before a transgender leader appears.”
Change leadership was noted as being particularly vital for senior leaders in the future, particularly in implementing appropriate operating models and ways of working, the LMG/KPMG report states.
Leaders of the future
One of the issues that the market faces in attracting suitable leaders of the future is that the overly hierarchical structure means that new talent can miss out on leadership opportunities, according to Peter Clarke, founder and managing director of digital insurance market directory Insurercore.
Clarke began his insurance career as a graduate in 2012, before leaving his job to found Insurercore whilst he was still in his mid-20s.
“Opportunities for promotion within the industry can be limited for young people. Senior teams are staying in their jobs longer and longer and end up retiring later and later, which has led to a trend of stagnation and lack of change within the leadership of the industry over the past decade,” he says.
The inability to shift incumbent leaders means younger staff lose the ability to test out their own leadership skills, Clarke adds.
This lack of opportunity could lead to youthful talent opting to work in emerging and under-developed markets, such as Singapore or Latin America, where a skills gap in the older generation of (re)insurance professionals means there is more opportunity for young people.
Wilson suggests that another barrier to attracting new leaders into the industry is a hesitancy to recruit leaders from other industries. While there are more leaders coming into the industry from other areas than ever before, the market still has a way to go, he explains.
“Historically, our industry has been guilty of being too insular and a look around the market shows this. We have much more to do, and have much further to go, if we want to foster the right talent for the next decade and beyond.”
In some cases, participants that have entered (re)insurance from other sectors have faced obstacles, says Sofie Quidenus-Wahlforss, chief executive officer of AI-driven claims platform omni:us.
“I would talk about some replacements of CIOs we have observed. It is a difficult role. If they are brand new to the insurance industry, it can be a culture clash.”
“If it is the opposite, however, it is difficult for them to really rethink the journey, which is necessary in many cases for genuine innovation.”
Market initiatives
While the (re)insurance market has certainly not been the most innovative of industries to date, it has acknowledged the potential skills gap in recent years and a flurry of diversity and inclusion initiatives have been set up.
Lloyd’s Dive In festival, set up to champion diversity, has been running for five years now and the LMG has also launched its #londoninsurancelife campaign, which showcases different career opportunities within the industry.
The new D&I initiatives are helping to open up the market to new leaders, Quidenus-Wahlforss says.
“The industry is getting more and more attractive for young talent, because decision makers are open [to] change, disruptive technologies and fresh air,” she explains.
“The longer we are part of this early transformation, the more tangible and exciting it gets. You can definitely see an acceleration of the relevant steps of the big players driving this change overall.”
As Brit’s Wilson notes, however, it is important that organisations are genuinely committed to improving diversity and inclusion.
“At Brit, for example, it is a major priority for me and the management team. While the industry as a whole has a role to play, real change has to happen at an organisational level,” he says.
One way industry initiatives could have more of an impact is by uniting rather than acting separately, says Karen Graves, senior independent non-executive director at USAA Ltd and USAA SA and chair of the Independent Women in Insurance Committee.
“There are a number of great market initiatives that are developing and iCAN (Insurance Cultural Awareness Network) is something that I admire very much – BAME initiatives need to be supported.”
“Back to my point of not operating in a silo – we need to embrace gender, age, educational, LGBT, BAME etc initiatives collectively and then we will see positive change.”
However, while such diversity initiatives are a good idea there is still a long way to go, Temple says.
“They are definitely helping, but sadly they have not yet been sufficient. In terms of gender diversity, for example, only two managing agents are led by women.”
Skills blend
The increasing use of technology means new leaders will need to understand it, but the greatest skill the next generation of leaders will require is understanding how to utilise their workforce to their fullest potential, says Insurercore’s Clarke.
“There will clearly need to be an understanding of technology and how it can be used to drive efficiency, however, their greatest challenge will be whether they can manage the shift from manual repetitive tasks that require human labour and reallocate this labour into roles that maximise humans as a resource.”
Leaders who create a culture that allows people to focus on creativity and networking will get more out of their employees than those who look at technology as an excuse to replace humans and save money, he adds.
Quidenus-Wahlforss agrees that people skills are still key to the next generation of leaders, who require “an ability to embrace vulnerability and an openness to healthy conflicts”.
“I would also say leaders need to be comfortable about being challenged by their team,” she says.
A blend of hard and soft skills is key to the change, Brit’s Wilson adds.
“In practical terms this means skills in areas like data analytics and technology, innovative and flexible mindsets, a desire to collaborate and communicate openly and a broad world-view are just some of the things our future leaders will need to demonstrate.”
With so much set to change in the market, communication and the ability to communicate with people across different ages is key, Graves says.
“We now have five generations in the work place and leaders will need to be able to motivate all colleagues.”
Work in progress
Attracting future talent will also be dependent on creating a suitable working environment, says Clarke.
“The most important change that needs to be made in the industry to attract young talent is workplace culture,” he claims.
A 2018 Bright Network report found that a firm’s people and culture was the most important factor for choosing a graduate role for 39% of respondents.
Clarke says it is important for the industry to embrace flexible working hours.
“As an industry we need to replace the old ways of thinking – for example, people do not need to be in the office Monday to Friday, 9am to 5pm, to be effective.”
The market could also do better at marketing the good it does, in order to attract a broader range of talent, adds Matcham.
“It is important to stress the positives of working in our industry, i.e. the contribution it makes to individual lives and national economies. We can be too negative about ourselves and forget to accentuate the many positives.”
And in keeping with embracing the millennial generation, as well as finding more novel ways to work with younger staff, the industry needs to also embrace technology when it comes to recruiting younger employees, Temple concludes.
“The ongoing shift in potential candidates’ behaviour means that the techniques many firms use to recruit individuals may need to be reviewed.
“An online chat is much easier for a potential employee than the time, effort, and expense required to attend an exploratory meeting, for example. Similarly, an electronic message can be answered 24/7, and is very straightforward for everyone.”
This article was first published in the Winter 2019 issue of Insider Quarterly.
