Hugh Hessing has spent his career in senior leadership roles and over a decade delivering transformation consulting in Financial Services. He joined Aviva, the largest general insurer in the UK, in 2006, overseeing various parts of its life and General Insurance business, before becoming Chief Operating Officer of Aviva UK in 2018. Today, Hugh is a senior adviser to insurtech and financial services companies, focusing on growth and sustainable profit strategies.
With the world as we know it changing, we spoke with Hugh about his thoughts on digital transformation, automation, and “putting the customer at the heart of everything whilst sustainably improving revenue and efficiency.” Check out part 1 of our interview below.
Do you think that insurance has been slower than other industries when it comes to embracing digital transformation?
What’s interesting is that insurance sometimes gets tagged as “risk-averse” but it’s actually an industry that specializes in pricing and taking on risks that no one else would. It’s a risk business – and a highly specialized one. When people say, ‘I will cover your billion dollars satellite and you only have to give me $10 million,’ that’s a bigger bet than anyone in any industry is taking. So, the industry is not so much risk averse as it is change averse. It still runs in effectively the same way it has done for hundreds of years, which makes people a bit resistant – why change something that’s working?
But today, that’s shifted; there’s no such thing as leadership roles now that don’t involve significant levels of change. If you’re not changing, you’re dying faster than your competition. You’ve got to constantly be prepared to look at new models, options and ways to continuously improve your business. Sometimes this may be disruptive and certainly transformative in nature.
What should insurance executives be thinking about right now, given the current pandemic and economic downturn?
I’ll start with the immediate impact of COVID-19 in relation to automation and digitalization in the insurance industry. The answer really depends on where an organization stands and its level of digital maturity. What I’ve heard and seen firsthand is that those firms with the highest levels of digital functionality for their customers, who had also invested in automation and a more flexible infrastructure, served their customers best when the pandemic first hit. Their employees were able to work from home sooner, and their customers could access information and data pertaining to their policy when needed; there was better customer response at organizations where digitization maturity was exhibited.
As an example, one company I work with had about 40-50% of its clients using online self-service functionality for personal lines contracts. In the 3 weeks immediately after the lockdown went into effect, when they were struggling to get staff to work, that percentage jumped to around 90%. Because the company had invested in AI and automation and had strong digital assets, they could continue to meet customer demand during this period. In contrast, companies that didn’t have this digital maturity struggled to service customers.
The medium to long term outlook for the economy will show a significant contraction and the insurance industry will have to respond to that like all other businesses. As consumers and companies see incomes fall significantly all of us are having to look at our cost base.
Costs will be number 1 on nearly every insurance company’s agenda; beginning with the cost of claims. Travel and Business Interruption exposure will be the main focus for major insurers. The other 3 priorities that vie for equal billing, dependent on the company, will be the cost of distribution, the cost of serving customers, including the investments in technology platforms to best serve those customers, and then the ancillary costs of finance, marketing and the like. All of these areas are being closely reviewed by every executive team up and down EMEA, and they have to find the inches to be able to retain their margins, so that while their top line is being impacted they know the corresponding impact on their bottom line.
When it comes to investing in cutting-edge tech, how do you balance limiting expenses during a downturn and investing in future growth?
I follow a sustainable cost reduction playbook every time I have to do this, which has been many times. You have to do the things that you believe offer sustainable improvements to your efficiency. Two areas the UK consumer market has pushed heavily over the last 10 years and directly impact a firm’s sustainability are self-services for customers and building digitized functionality. And yes, there are still some laggards, but almost every major consumer insurer in the UK has probably halved their cost base in the last 10 years through digitization and automation. And therefore, cost has been driven in that way.
As I mentioned earlier, insurers don’t necessarily go looking for change, but COVID highlighted some of the changes that were being introduced, which accelerated its adoption.
One of my colleagues is the Chief Operating Officer of a very big global commercial lines insurer. They’ve been doing a lot to digitize their contracts processing but faced challenges with getting their front-line team to utilize the tools. The thought of not being in a face-to-face environment and still transacting business was seen as an anathema. That changed in 3 months, and COVID drove what probably would have taken 5-10 years in terms of adoption. Now, industry-wide we are seeing adoption increase as companies begin to actually utilize and leverage their technology solutions.
For more expert insight, check out part 2 of our conversation!
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