Overreliance on digital interactions: Is the insurance industry at risk of a technology pandemic?

When the insurance industry went into lockdown, and businesses’ continuity plans were tested to their limits, there was no other choice but to adapt and to do so quickly. As companies went from a predominantly office-based environment to homeworking essentially overnight, their busy IT teams had to contend with issues surrounding mass migration, cyber threat and the outage of offshore admin support. At this point, there was little option but for businesses to start making their 5-year plans for innovation a reality.

This necessity pushed businesses to buckle down and reassess their previous ways of working and concerns about adopting new practices and technologies; it became clear for many that their pre-pandemic trepidations were not warranted. The progress that the industry has made as a result of the pandemic has, in some cases, sparked changes that will last long into the future.

Bravo Group’s Jaime Swindle, MD of Networks and Products, believes that as a result of these changes, people are being “being smarter, more proactive and more digital in their interactions.”

The technological advancements and developments that we are seeing right now could see a significant boost for the insurance industry in appealing to millennials and Generation Z, who have higher expectations of seamless digital interaction across a wide range of platforms. It could also help the industry to appeal to young talent and those who would benefit from the flexibility that comes with a balance of office and remote working. But is there a danger of the industry becoming too reliant on technology?

Bridging the digital divide

As the business world continues to push innovation and champion new technologies in order to present a more user-friendly, streamlined experience, this approach has already and will likely continue to alienate those who do not have access to or the experience of using the tools required to utilise this technology. This ‘digital exclusion’ affects millions of the poorest and most vulnerable UK residents and has only got worse in the wake of COVID-19.

Over 22% of the UK’s population lack basic digital skills[1] including the elderly and disadvantaged. Of all low-earning households earning between £6000-10,000, only 51% of these have home internet access. Compare this to the figure of 99% in households with an income of over £40,001 and it’s clear where the divide lies; the correlation between poverty and digital exclusion is apparent. Even wealthier families living in rural areas could fall victim to this when compared to those living in urban homes with higher and more reliable internet speeds.

Although many businesses continue to operate both a digital and offline service for their clients, some others are moving their services exclusively online or offering benefits which can only be accessed using their digital offering.

While the insurance industry has been criticised in the past[2] for lagging behind when it comes to embracing new technologies and remaining staunchly traditional when it comes to their communication with customers, this approach may appeal to those without internet access or home technologies. With many brokers continuing to champion a face-to-face approach and the use of telephone communication over email and live chat facilities, the industry continues to serve those who have may have been alienated by other industries who are gradually shifting to an exclusively digital service. 

Even though the insurance industry looks set to continue to embrace new technologies, it’s worth considering the digital divide when it comes to how heavily businesses choose to lean on their digital offering. Innovation is vital to keeping younger generations on board but with this, the industry should fight to retain some of the ‘old-fashioned’ methods of communication other industries are threatening to make extinct.

Overreliance on digital and technological changes 

Over the pandemic, alongside the rest of the world, the insurance industry needed to be reactive. While insurers and brokers were honing their own processes over lockdown, they also spent a huge amount of time helping their clients through these incredibly challenging times. As lockdown eased, it gave the industry some breathing space to consider what lessons have been learnt over this period and how many of the changes that have been made as a result of lockdown can be adapted and implemented into their longer-term business strategies. 

Now that the industry has this space to shape the future of insurance, it’s vital that it doesn’t lose sight of the future goals for its people and culture. While technology can help to improve processes, increase efficiency and make room for new levels of communication, it can only be truly useful if there are real people behind it who have the customer’s best interests at heart. To get this right, the insurance needs to work to strike the fine balance between tradition and technology.

Financial services network, KPMG, notes, “The reality for CEOs and other traditional business leaders is that success in the future will likely be dependent on leveraging the best of the old while evolving into new organizations better able to meet the needs of tomorrow’s customers.”[3]

Commitment to data protection 

As well as ensuring that innovation doesn’t take precedence over a businesses’ people and culture, the threat of cybercrime is also a huge consideration in our increasing reliance on digital processes.

Every business has the responsibility to protect the data that it keeps and, as industries across the globe are increasingly storing this data within their system networks, the battle to protect this data has become ever more difficult to win. This dependence on storing data digitally has risen exponentially as businesses have had to rapidly switch their processes from an office-based environment to facilitate their staff working from home.

Before the COVID-19 lockdown began in March, the extent of cyber threats on UK businesses was rising, according to the Government-led Cyber Security Breaches Survey 2020. Almost half (46%) of businesses and a quarter (26%) of charities had reported having a cyber-related breach in the last 12 months.[4] The type of breach identified has been dominated by fraudulent emails or being directed to fraudulent websites at 86% for businesses, followed by impersonating leaders within an organisation in emails or online. 

As we fell deeper into lockdown, there was a significant surge in cybercrime as criminals took advantage of the new vulnerabilities that arose from both the public’s fervour for new information about the virus, alongside both businesses and individuals increased reliance on technology and businesses’ control and security frameworks being placed under added stress.

The types of attacks which surfaced were suddenly centred around the latest developments of the virus, playing on widespread fear to get people to act in ways they usually wouldn’t. Sites selling PPE that would never get sent were popping up and disappearing overnight; fraudulent emails, texts and phone calls were made, impersonating bodies such as the NHS and the UK Government to try to encourage people to give away information or click links that led to malware and denial of service attacks increased three-fold up to 30,000 per day.[5]

As the lockdown gradually eased, these types of attacks have subsided somewhat, yet there will always be opportunist criminals posing as employees from the Test and Trace programme,[6] or the next latest development that will arise from the ongoing repercussions of COVID-19. While those within the insurance industry can now begin to solidify their cyber security practices as what the ‘new normal’ has in store becomes more apparent, there will be plenty to contend with along the way.

Progression for Cyber Insurance 

However, despite cybercriminals working hard to seek out vulnerabilities in businesses’ digital network, in terms of cyber security, it’s not all doom and gloom. Since 2015, GlobalData’s Thematic Research: Cyber Insurance report shows that the Cyber Insurance uptake amongst SMEs in the UK has risen from 4.3% in 2015 up to 18.8% in 2019. As businesses across other industries look to defend themselves against cybercrime, it’s predicted that there will be a further surge in the demand for Cyber Insurance with the hope that this will accelerate the market faster than could ever be previously forecast.[7]

Moving forward with innovation and culture hand-in-hand  

Throughout the pandemic, the power of technology has become strikingly clear, even more so than before. Through video calls, people were able to stay in touch with colleagues, clients and partners on a ‘face-to-face’ level. Businesses were able to stay open by adapting their service online and many found that they could run their entire operation without a physical workspace. But it also highlighted what could happen when technology didn’t work how it should and the limitations of our technology without sufficient investment.

Richard King, Bravo Group’s Head of Group IT, explained, “Covid-19 has moved the conversation on very quickly in terms of IT. People have realised they need to invest and if they’ve not been investing it comes as a bit of a shock.”[8]

As the industry looks forward into a post-pandemic future, the key to creating an innovative, customer-centric service will lie in ensuring that we shape our service to not only meet short-term goals but also our longer-term strategies; to invest and harness the power of technology in line with our culture and strengths and to ensure that nobody is left behind.

[1] https://www.cam.ac.uk/stories/digitaldivide

[2] https://www.information-age.com/insurance-sector-falling-behind-others-comes-technology-expectations-123464563/

[3] https://home.kpmg/xx/en/home/insights/2018/05/striking-a-balance-how-ceos-can-balance-tradition-and-innovation.html

[4] https://www.gov.uk/government/publications/cyber-security-breaches-survey-2020/cyber-security-breaches-survey-2020

[5] https://www.cam.ac.uk/research/news/lockdown-helps-fuel-rise-in-cybercrime

[6] https://www.thisismoney.co.uk/money/beatthescammers/article-8403125/Dont-fooled-Covid-cons-expose-Test-Trace-scam.html

[7] https://www.lifeinsuranceinternational.com/comment/covid-19-cyber-insurance-sme/

[8] https://www.brokernetwork.co.uk/blog/blog/fast-forward-how-necessity-has-brought-new-technological-possibilities-to-the-insurance-industry/

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