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With the spread of COVID-19 right across the world, we're all doing it now. Whether it's from a spare room or the kitchen table, we're working from home, connecting with colleagues through video conferencing calls, and learning to do things differently.

Like every other sector, the insurance industry is in the thick of it. It's learning fast, adapting and evolving. So far, it seems to have gone better than many probably expected. Despite some inevitable teething issues, insurers have generally been encouraged by their ability to adjust.

Of course, it's not that remote working is anything new. A lot of organizations have utilized it to some degree for many years. But it has usually been confined to certain roles and, in some businesses, certain levels of seniority. The real difference here is one of scale. Whole businesses from top to bottom are doing it now, simultaneously, and almost without warning.

The fact that there haven't been any major failures in insurance is something to celebrate in itself. But that doesn't mean there isn't plenty of room to improve and refine the operating model. Insurers have kept the show on the road but of course customers have noticed the difference, with much longer waiting times across contact channels.

In conversations with clients, what becomes apparent is that those insurers who had already started the journey towards a digital transformation of the business have been able to make the huge step-change adjustments brought about by COVID-19 more easily and quickly than others. 

In truth, the insurance sector as a whole was behind other industries, such as banking, in terms of embracing digital and more flexible ways of working. This crisis is forcing them to massively increase the pace and step up.

No going back now

What is clear is that, for insurance and indeed nearly every sector, there will be no going back. What we are seeing through the COVID-19 situation is the emergence of a `new normal'. Its final shape isn't clear yet because the crisis is far from over and the future is impossible to read. But at the end of it, we will be living in a new reality, with different operating models, different value propositions and different employee expectations and experiences.

This brings me to perhaps the key workforce realization that insurance leaders need to make right now: don't think about this as something for the next 12-16 weeks followed by a return to 'business as usual'.

For one thing, no one knows how long and how severely the pandemic will last, or how quickly and to what extent lockdowns can be eased in different parts of the world. So, remote working may be more or less enforced for much longer than just the next few weeks and months, at least in some parts of the world.

But, perhaps more importantly, the principles of the new ways of working that businesses and staff are embracing are likely to be with us to stay. The real-time experiential changes that we are living through will drive a sustained transformation of working models. This is something that progressive businesses were aiming for anyway. As one colleague remarked to me: “It's like a time machine has brought everyone to the future.”

It is also true that COVID-19 is unlikely to be the only shock. There could be others in the future - another pandemic, a financial crisis, a major industry disruption. Insurers need to be prepared and agile enough to cope with whatever the future may throw at them.

Drill down in a few areas of insurers experiencing challenges

While many insurers are generally handling the remote working well, there are a few areas that have experienced more challenges than others. These would be ripe for improvement opportunities moving forward. Examples of some of those areas include:

  • human resources, given the need for EE hyper-care 
  • call centers due to the increased activities around inquiries from policyholders 
  • front office areas like sales support, marketing and distribution as they have traditionally opted for more face to face interactions with clients so coming up-to-speed on technology
  • policy endorsements
  • billing disputes 
  • complex underwriting (specialty risks - taking longer as was done in huddle fashion before)
  • complex claims adjustments and handling
  • reinsurance reporting
  • settling and billing (mostly due to access to systems and complexity)
  • finance resources 
  • offshore processing centers

Learning the lessons - the 5 C's

So, what has been learned so far and how are insurers approaching the challenge at hand? It helps to look through the lens of what KPMG calls the Talent Risk Framework, which sets out five key areas that are critical to managing and equipping a workforce in times of crisis or significant change. These are “The 5 C's” which are:

  • Capacity: Are there sufficient resources in the right locations, and are they equipped to do what you need them to do?
  • Capability: What are the key skills and capabilities required to ensure your workforce operates effectively on a sustained basis?
  • Connectivity: How will teams stay connected, motivated and engaged in this new and emerging environment?
  • Cost: How much will the workforce cost to run as you ensure business continuity?
  • Compliance: What are the regulatory implications of remote working for an extended period?

One of the most striking things that has been seen so far is the gaps coming to the fore are not connectivity or technology gaps but rather are to do with people and management skills. We will cover technology in detail in a separate piece, but suffice to say that while there have been some bandwidth issues, many insurers are coping well with moving to remote connectivity.

A distributed model with smaller, nimbler teams

The deeper challenge is to manage the remote workforce in order to achieve the right capacity in the right areas. This has already manifested itself in the huge spike that many insurers have experienced in inquiries and claims for travel and health cover, as an example, while other areas (such as motor) have declined. So businesses need the flexibility to respond and react quickly. They need a liquid workforce in which resources can be shifted as needed.

This is about the creation of a distributed model that brings the flexibility and functionality organizations need to operate in today's highly uncertain environment. It is something many insurers are having to learn quickly because often insurance organizations are relatively traditional with a high emphasis on presenteeism: the belief that teams of people need to be present together in the same place for the business to function. “I need to see my team to know they are being productive” is a common mantra in the industry. But COVID-19 is teaching us that teams can be set up and engage in different ways and still be productive.

It is also driving the adoption of smaller and nimbler teams - breaking down large functions into small working groups who can self-organize, connect highly effectively, and react quickly to changing requirements. It is proving the model for greater levels of very human interaction and connection on focused areas of work.

However, there are challenges. There are aspects in which remote working struggles to replicate some of the great advantages of face-to-face interaction. Many clients reported that the creativity and spontaneity, the snowballing of ideation, that occurs when a group of people come together to discuss an issue or a problem is very hard to reproduce virtually. This is something that needs further work and exploration to see whether there are solutions that can help.

One other area where the need for a distributed model may also apply is in the use by insurers of offshore processing centers such as in India. Their ability to function has been severely tested by the lockdown there, creating an urgent operational challenge that many insurers have already had to deal with. In the wake of this crisis, we may see insurers distributing more of this offshore work between more locations so as to minimise the operational risks.

The remote management challenge is key

In today's circumstances, it becomes essential to manage the capabilities of the remote team effectively. Do team members understand what the priorities are right now; do they have the tools they need; are the processes and protocols in place to help and guide them; is there sufficient structure to their working day?

It is certainly true that remote management is the hardest part of running a remote workforce. That is why organizations need to pay as much attention to how they are supporting managers and team leaders as to how they are supporting the workforce at large.

Managing a team that is not physically present, ensuring that people feel motivated and supported, helping them to perform at their creative best, looking after individuals' mental and emotional wellbeing in a strange and stressful time, setting goals and assessing performance - there is no real road map for this on the scale that we are presently seeing through COVID-19.

Targets and performance measures are especially hard to set in such a fluid time - without a doubt, pay and reward decisions will be especially difficult this year.

Managing costs, ensuring compliance

This latter is part of the cost equation - and of course it is essential to establish a true picture of the costs of running the remote workforce compared to normal baseline costs. Some businesses may also be considering, or have implemented, measures such as unpaid leave, part-paid leave, or the furloughing of some staff. These are not easy measures to take.

A more flexible and remote workforce could result in the longer-term consideration of other aspects of compensation. In the future, we expect the overall organization-wide split in many insurers of time spent in the office against time working remotely to be roughly 50-50. Some staff may only physically come into the office once a week in the future. Even for call center operatives, we anticipate they may only come in three times a week. This could result in significant commuting cost savings for many staff - so could we see salaries adjusted as a result?

Another big cost area is real estate. We expect insurers and many corporates across the board to review their office portfolios in the wake of the crisis and potentially downscale them.

Working remotely also raises a number of critically important compliance issues that need to be managed. Data security becomes a key concern, with a need to ensure that staff only use approved communication and data transfer methods. Compliance with regulated or business critical processes remains critical: management must ensure that the necessary electronic approval processes are in place, and consider whether any new measures need to be introduced for compliance requirements to continue to be met. It is also essential that staff comply with social media policy and are reminded that phishing scams are likely to be especially prevalent at the current time. Staff remain the first line of defense in the three lines of defense model, and any lapses could have serious repercussions. This must also extend to any contract or third party supplier workforce - how are they being communicated with, are they clear about any new processes or protocols, and who is taking responsibility for overseeing the new working relationship?

An opportunity to embrace the future now

These are times of great change that have been thrust upon the industry. Those insurers that grasp the challenge and leverage fully flexible ways of working will position themselves for a new future. Those that don't invest sufficiently in enabling more digital workflows and that don't design new processes and tools to suit will fall behind and find themselves at a significant disadvantage even when this crisis dissipates.

In effect, the workforce challenge is to embrace the future at an accelerated pace and achieve in weeks and months what would normally have taken years. That is both the opportunity and the threat that COVID-19 poses.

Contributors:

Evan Metter, Principal, Human Capital Advisory, KPMG in the US
Matthew McCorry, Insurance Advisory Lead, KPMG in the US
Mel Newton, Partner, People and Organizational Change, KPMG in the UK
Peter Outridge, Head of People and Change, KPMG China

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