The COVID-19 pandemic has caused massive shifts in how businesses operate, with remote work being one of the most obvious changes.
According to Jason Barg (pictured), partner at financial services investor Lovell Minnick, businesses (including insurers) quickly realized that a remote working environment was putting strain on their workforce. The dispersed teams made communication difficult, causing delays in underwriting, data gathering and risk analysis.
To help overcome these issues, many companies are boosting their risk mitigation capabilities through automated solutions driven by data.
“Automated decision-making software allowed companies to easily combat this challenge through reducing the amount of required communication between teams and implementing rules or algorithms to fulfil the task instead,” Barg told Corporate Risk and Insurance.
“As a result, firms can provide a fully baked risk analysis with little-to-no delay caused by human interactions. The same software can also be used to enhance human decision making by providing informed analyses that can help determine the proper course of action for larger-scale business objectives.”
Automation, Barg said, enables companies to take care of monotonous and time-consuming tasks while reallocating human capital and direct resources to areas of the business that could benefit from increased support. This greatly increases operational efficiency, while reducing the risk of human error.
However, many companies may encounter challenges when implementing automation in their risk functions.
According to Barg, change is difficult, especially in highly-regulated industries such as insurance, with many major legacy players in the sector.
“Many companies use outsourced help to facilitate a true digital shift. Those who try to perform a digital transformation entirely on their own may struggle,” he said.
“This is where the value of an experienced capital partner may be a good fit for a company that is looking to make a significant shift towards digitization. It’s no secret that overhauling a business’ infrastructure and internal processes requires a financial commitment, and the expertise and network that an investment firm with deep roots in this industry can offer is another added benefit.”
Predictions for post-pandemic recovery
Barg predicts that automation is a trend that is here to stay, and companies that are not able to adapt will face a host of challenges.
“At the same time, we predict an increase in outsourcing to service providers as carriers will want to focus on what they do well, while allowing best-in-class service providers to handle tasks that the business may not be as familiar with,” he said. “Outsourcing will allow insurers to navigate the new frontier of insurance with the industry’s top service providers in areas of compliance, claims management, data and back-office solutions while being most efficient with time, cost and resources.”
This shift, where many companies will upgrade their digital capabilities, will drive investment in the sector.
“As the market continues to evolve, there will be a large opportunity for private investors to support companies that are ready to digitize their processes and those that are looking to capitalize on this market shift,” Barg said. “As a result, we’ll see expanded service offerings, stronger software capabilities and more robust technological infrastructures from insurance companies that are supported by capital partners. It’s an exciting time for the industry and for investors!”
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