The insurance industry may appear quite traditional from the outside, but it’s an industry in the early phases of what promises to be significant change. According to research by Deloitte, the combination of sustained economic growth, rising interest rates, and increased investment income made 2018 a strong year for insurance companies. While 2019 is expected to be similarly strong, several trends have the potential to create substantial disruption in the insurance industry if companies do not adequately prepare their next generation of leaders to meet the challenge of changing circumstances.
3 Trends That Will Transform the Insurance Industry
By far the most important trend facing the insurance industry is rapid changes in technology. Many insurance companies have been running on legacy technology systems that are decades old and are in the process of making the switch to newer equipment and software. But technological change isn’t just about replacing old computers and servers; it’s also about changing the way people do their jobs on a day-to-day basis. As companies transition to modern IT infrastructure that incorporates cloud computing and Internet of Things devices, many of the organizational policies and procedures associated with the older systems will need to be reviewed and, in many cases, replaced. New technology will also alter the way people buy and use insurance, so companies must put careful thought into how it will change the way they do business and engage with customers.
In addition, technology makes remote work in a virtual environment more viable than ever before. Virtual teams consisting of members from across the country (or even the world) allow companies to leverage their most valuable resource, their employees, to develop innovative solutions through ongoing collaboration. Technological integration can also break down traditional silos within an organization, enabling cross-functional teams to work across departments and bring unique perspectives to the major problems facing insurance companies today.
The insurance industry is currently undergoing a major demographic transition, with as many as 400,000 employees expected to retire over the course of the next five years. Considering that the average insurance agent is 59 years old, the industry’s workforce will certainly look very different very soon. This trend promises to seriously alter the makeup of insurance companies.
Although only about 4 percent of millennials express interest in working in the insurance industry, that figure is sure to rise as the combination of high salaries and minimal job requirements make insurance a more appealing destination. Millennials also place a high value on diversity and gravitate toward careers that allow them to make a difference in their communities. With the insurance industry’s good track record on promoting diversity and the opportunity to have a direct impact on customers’ lives, there is good reason to believe that millennials will be more drawn to careers in insurance in the future.
This recent trend in the insurance industry will also create significant advancement opportunities for younger employees. High-potential leaders will be able to move into higher positions more quickly than ever before, providing them with a chance to guide insurance companies through periods of major change. The primary concern for these companies will be to identify the high-potential candidates who can fill out their succession pipelines and avoid the risk of talent gaps as existing leaders transition into retirement.
Millennials are not only going to have a major impact as employees, but also as customers. While they generally have higher incomes than previous generations, millennials are more likely to be saddled with debt and hold fewer assets that require an investment in insurance policies. On average, they’re starting families and buying homes later in life than their parents. At the same time, young adults are living with their parents longer and aging parents are moving in with their children, creating many new opportunities for insurance companies to engage in new conversations that identify the needs of today’s customers.
Companies need to take these changing dynamics into account as they design leadership development programs. Emphasizing the same skills and knowledge for the insurance market of the early 2000s will likely result in missed opportunities and misguided strategies. As the user experience of buying insurance changes to better accommodate customer needs, leaders will need new skills to pursue innovative solutions that drive engagement and growth.
As insurance companies prepare high-potential employees to assume leadership roles in the near future, they need to consider the skills they need both for today’s insurance market and tomorrow’s. In many cases, this will require some organizational changes in order to create the adaptability that will allow aspiring agile leaders to make the decisions necessary to put insurance companies on the path to success and sustained profitability.