Solomon Philip is Shift Technology’s Head of Market Intelligence
The European insurance industry is facing a staffing crisis. The International Labour Organization (ILO) reports that EU labour force participation rates are anticipated to fall by 2.6 percentage points by 2030. As such, it is no surprise that 69 percent of companies globally report talent shortages, representing the highest figure in more than 15 years. And it only gets worse. Europe’s working-age population is shrinking due to ageing. It is projected that 13.5 million - or approximately four percent - of the workforce will exit the labour market by 2030.
Further complicating the situation for insurers is that the insurance industry in general, and critical positions in claims and underwriting specifically, is not seen as “attractive” to younger workers. In fact, it is indicated that up to 20 million workers may seek employment in fields such as software engineering, recruiting, talent acquisition, and digital marketing, none of which meet the majority of staffing needs for insurers. Gig work also rose substantially in 2022, contributing 20-30 percent of all jobs. This form of employment is often attractive to young workers due to the flexibility offered.
The Impact of Higher Cycle Times on the Policyholder Experience
How quickly a claim can be settled - from first notice of loss (FNOL) through payment - is often more important to European insurance customers than cost of premiums when it comes to policyholder satisfaction. And the industry average claims cycle time is going up. In 2022 it took insurers an average of approximately 18 days to make policyholders whole following an incident. In 2021 it was 15 days, representing a nearly 10 percent increase year-over-year. Slower cycle times lead to suboptimal claims experiences for customers which becomes a driving factor customers cite when switching their coverage.
Increasing Claims Volumes and the Staffing Gap
2023 is shaping up to be a tough year for European insurers. Extreme weather conditions, flooding, wildfires, and something as simple as increased travel following COVID has caused the number of claims to skyrocket. And as claims volumes continue to climb, cycle times do too, increasing carrier costs and customer frustration. Traditionally, these conditions would lead to insurers to staff up the ranks of their claims professionals. This strategy is not so effective in 2023. As previously addressed, the insurance industry is finding it incredibly difficult to hire the number of workers it needs to meet current, and perhaps more importantly future, claims volumes. Further, even if new employees were there to hire, insurance is an incredibly nuanced and complex industry. Fully training and onboarding new employees is estimated to take nearly two years.
A New Approach
New challenges require new approaches. And advances in technology, specifically artificial intelligence (AI) are already helping insurers adapt. AI-powered solutions are supporting “digital-first” claims processes that reduce the operational burden for carriers by creating a self-service experience for claims.Digital FNOL empowers policyholders to file a claim as soon as a loss occurs. Mobile apps or web portals provide a reliable channel for status updates. These solutions also empower real-time claims payout for claims with high confidence of legitimacy. Fundamentally, AI gives insurers the tools required to simplify the customer journey by commoditizing aspects of the workflow which in turn can enhance the organisation’s resilience to handle growth in claims volume and complexity.
AI is also paving the way to allow insurers to explore add-on capabilities which not only further differentiate aspects of the claims lifecycle but also free employees to focus on more complex claims. AI supports digital adjustment through the use of photo estimation mobile apps. Generative AI can be used to more accurately and efficiently mine police statements, witness reports, medical invoices, and other documents - a typically time-consuming and complex process - for data relevant to the claim. AI can also be used to comb third-party sources to help determine the claim's legitimacy, the liability of the insured, and the extent of damage, to name only a few.
Finally, embracing new technology to improve the claims process creates an environment where next-gen, tech-enabled jobs can be introduced. Roles such as digitally enabled claims handler, complex claims handler, digitally enabled quality assessor, claims technology product owner, and claims prevention specialist may be just what the industry needs to attract young talent back to insurance.
There is little question that insurers are facing a perfect storm when it comes to the combination of increasing claims volume and a declining insurance labour force. But it is not all doom and gloom. There are new technologies and approaches that are enabling insurers to automate those processes that make sense, assign existing staff to the most critical claims, and deliver an exceptional customer experience.