7 Insurance Industry Challenges & Tips For Solving Them

Adapting to business trends quickly can be challenging if you have to balance working with legacy systems or strict regulations. But taking the steps to push your company forward can make all the difference in staying competitive.

Below we’ll explore the biggest challenges in the insurance industry that will be key to account for in the next decade so your organization can continue to scale up.

Three professionals discuss insurance industry challenges.

1. Transitioning Retiring Professionals and Attracting New Talent

Looking at one of the largest employed groups, agents, the average insurance professional’s age is 46+ years old. Today, that group makes up 66% of the agent population. 

Many baby boomers are reaching retirement age and exiting, while Gen X still has a decent amount of working years left. But guess what? Neither group is the largest working generation anymore. According to PEW research, as of 2020 Millennials are now the largest generation, and that accounts for the workplace too.

What does this imply for insurance organizations? It’s twofold. 

First, to attract millennials who are now the new workforce majority, companies will need to review and revamp benefits. Millennials value more than just salary and perks, although those certainly matter too.

Second, insurance companies will need to retain talent. Millennials are more prone to job hop than prior generations, so it’s crucial to build a strong company culture. Without it, insurance organizations will face losing talent on both sides (recruits and retirees), crippling their effectiveness.

How To Overcome It?

Start investing in building a strong HR function. Doing so will help you be in a better position to meet your growth goals and ensure you’re hiring and keeping the right people to support that.

2. Upskilling Your Team

Even when you have the right talent, making sure you give them support to upskill is just as important. Some of the benefits of fostering team skills include:

  • Improved customer service because you can provide what consumers want.
  • Heightened efficiency and productivity because you can leverage the latest technology.
  • Enhanced innovation because employees can introduce positive changes.
  • Increased retention because your talent feels valued and receives new opportunities.

On the flip side, putting this into practice can be a challenge. Insurance industry professionals can feel caught between the fast pace of new technology, the slow pace of legacy systems, and the limitations of strict regulations. 

None of this however should impede upskilling. Instead, focus on small steps your organization can take to promote continuous learning.

How To Overcome It?

Even if you’re not ready to implement new technology or processes, start upskilling early so your team is ready for the change. A few practical areas our experts recommend leaning into in the next decade include:

Data Analytics 

  • Learn Power BI, Tableau, or other relevant data tools.
  • Doing so can benefit work in underwriting, claims management, or risk management. 

AI and machine learning

  • Consider courses or certs in AI fundamentals.
  • Doing so may impact how your team provides customer service or spots fraud.

Product Trends & Regulation Changes

  • Send your team to educational industry workshops or through courses and certification programs.
  • Doing so will help you stay competitive and compliant.
An advisor discusses insurance industry trends.

3. The Technical Transformation Of Core Systems

Even if you’ve made small strides to update certain pockets of your business, the next decade will demand more impactful change in the legacy systems you use. Updating only a few at a time will inhibit your ability to keep up with industry and scale.

You’ll need to make sure all your core systems like claims management software, policyholder portals, or administration and underwriting programs are up-to-date and cloud-based. 

If you don’t accomplish this, you won’t be able to leverage the latest technology (like AI) to its fullest extent. You’ll also fall behind competitors who have invested in their systems and are operating with increased efficiency. 

Common Issues When Updating Legacy Systems

Data ManagementCompliance ConcernsCost vs. ROI
• Systems are complicated and inflexible, making it difficult to integrate with new technology, leading to data integration issues.

• There’s the risk of losing important data or critical functions in the process of upgrading.
• Insurance already has a lot of regulations you need to consider when updating.

• Upgrading your technology means you’ll need to know and be compliant with all the latest data security and privacy regulations. 
•Because legacy systems are inflexible, they are more expensive and time-consuming to work on.

• Upgrading only makes sense if it leads to increased efficiency, saves costs, and improves profits.

How To Overcome It?

As you undergo the process, consider working with a risk advisory team who can help you understand the pros and cons of different approaches. Doing so will allow you to set up a strategy that’s compliant and avoids potential pitfalls that burden you with unforeseen costs. 

Plus, it alleviates the pressure for your team who may be new to understanding and learning some of the regulations at play. 

4. Complex Revenue Recognition Challenges

While this isn’t a new issue, figuring out financial reporting, particularly how you recognize revenue, continues to be tricky for insurance companies. Unearned premiums, policy durations, and claim reserves all play a role in that process and can all be unpredictable.

The complexity of factors involved in financial reporting also has a direct impact on your bottom line, so they need to be handled with careful judgment and accurate estimation. Things may also be more complicated if you’ve undergone any sort of M&A transaction.

How To Overcome It?

Consider when working with experts can help set you up for success. Getting guidance around financial reporting or with tax advisory can help make sure you don’t end up with a penalty for an insurance regulatory compliance issue or leave money on the table.

5. Catastrophic Claims Management

Whether it’s natural or man-made disasters, a catastrophic claims management event can significantly strain the insurance industry. Changing weather patterns or threats of increasing violence are all leading to increases in this area of claims and it’s important to make sure your company is ready.

When a catastrophic event occurs, the influx of claims coming in can quickly overwhelm your team. Because of the surge, you may:

  • Struggle to scale up service to handle serving people, especially during a time when they’re more vulnerable and emotional.
  • Encounter difficulty reaching unsafe locations that need assessing for insurance claims.
  • Deal with increased fraud activity.

How To Overcome It?

Consider a plan that helps shift relevant staff to focus solely on claims processing for the affected areas and any incentives you could offer for voluntary overtime. You also could create a list of temporary staffing agencies that would be a good partner to assist with bringing in temporary adjusters.

The technology you use can also have a significant impact on how you process catastrophic claims. A self-service platform or any automation in place will help reduce the workload of your team and help collect key data that exposes fraud. Investing in drones may also help in instances where it’s not safe to physically assess the location for claims.

6. Data Silos Hindering Collaboration

If you’ve only upgraded your systems in a few places, you’re more likely to run into data integration issues. Your old and new systems won’t talk well to each other, for example, your CRM and policy management/claims tools don’t share information, which can lead to inefficiencies.

As a result, each department may be collecting data using their own methods, which can lead to redundant or inconsistent information. It can also slow down data sharing because your team can’t fully leverage the features of new technology. 

How To Overcome It?

Working with cloud-based solutions that centralize data storage and access is a great place to start. Doing so will connect activities like policy management, claims, and underwriting. 

Also, consider working with IT / Cyber risk experts who can help you create a solid data governance framework. Doing so will establish the boundaries of data collection and help you communicate them across your organization.

7. Price-Based Competition

The rising cost of claims based on labor, materials, and other factors can make it challenging to offer attractive pricing to customers. But aside from that, the rise of price-based competition has only increased alongside the internet, which has given insurance organizations a wider reach.

Many of those online players have focused on commoditization, with a focus on price being their value proposition. Going head-to-head with these companies can start a dangerous price war or lead to profit loss if you’re not able to support price cuts internally. 

How To Overcome It?

It’s important to determine what your unique value proposition is and how you share that message with consumers to compete against the price-based players. 

Like many challenges in the insurance industry, technology plays a role here too. The right investment in technology can help increase your efficiency and automate manual processes, helping to reduce operational costs so you can offer competitive pricing.

A virtual and in-person team connect with an insurance industry advisor.

Future Disruptions In Insurance

Looking ahead, the next decade in the insurance industry is going to reward those who are agile. Factors like the economy or AI are going to demand more rapid change than prior decades.

Additionally, we expect to see new regulations introduced around AI and new frameworks aimed at helping maintain the solvency of insurance businesses while also protecting consumers. And while these challenges can apply to the industry as a whole, there may be others that are top of mind for you. 

Whether you’re looking for help with accounting technology, facing data integrity issues, or simply trying to determine a strategy that helps you meet insurance regulatory compliance criteria, Centri can provide the expertise as you need it, on demand.

We’re one firm with many experts and our multifaceted skill sets allow us to offer you a wide range of accounting and advisory services all in one place. Because we specialize in multiple areas, you’ll have access to the latest information and strategies that can impact your business and help it grow.

Want to explore the ways we can help you rise to the challenge?

John Swanick

Senior Director | Insurance Practice | CPA

John is a Senior Director at Centri Business Consulting within the firm’s Insurance Practice. He has over 38 years of public accounting and management consulting experience serving both public and non-public clients within the Financial Services and Insurance sectors. View John Swanick's Full Bio

About Centri Business Consulting, LLC

Centri Business Consulting provides the highest quality advisory consulting services to its clients by being reliable and responsive to their needs. Centri provides companies with the expertise they need to meet their reporting demands. Centri specializes in financial reportinginternal controlstechnical accounting researchvaluationmergers & acquisitions, and tax, CFO and HR advisory services for companies of various sizes and industries. From complex technical accounting transactions to monthly financial reporting, our professionals can offer any organization the specialized expertise and multilayered skillsets to ensure the project is completed timely and accurately.

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