Why the insurance industry must batten down its hatches
I’m struggling to remember a time when our industry faced quite as much change as it does today – navigating how to operate in a post-COVID world, coupled with the pending pricing changes following the Market Study are fairly seismic shifts. But, there are further changes coming down the line that also have the potential to fundamentally alter the way our industry operates.
The recent and high-profile ransomware attacks on segments of the market, has once again placed the importance of operational resilience in the spotlight and now, with the FCA mandating effective resilience through its PS21/3, “Building operational resilience,” from next March, it’s a clear message that what we collectively have in place, is no longer enough.
While building and maintaining a resilient business has always been key, what five to 10 years ago might have been the addition of a new server to support file backups, is a very different story today.
We have certainly made great strides in the development of service-oriented architectures that give us the ability to easily ‘plug in and play’ new partners and data concepts for example – a significant shift from hindering and crippling legacy systems. However, the new legislation will materially change the relationships that both insurers and intermediaries have with third-party suppliers and therefore, technical agility will be paramount. For the first time, we are responsible for the resilience of our partners, and with the market dynamics of the insurance industry comprising of complex supply chains and huge eco systems, the size of this new challenge should not be underestimated.
It would be a mistake to think operational resilience simply sits with our technology teams. For these changes to truly have an impact, they must be interpreted and implemented business wide.
So, where should we begin?
Relationships with partners and suppliers will now go beyond simple contractual agreements and it will be more important than ever to ensure any partner has a clear cultural alignment to your organisation. For example, you need to understand if they are the kind of business that would lose sleep over their customers in the same way you would. Similarly, close collaboration across your entire eco-system is key, with all players in agreement on how you should work together. Finally, businesses must now have strong partner continuity plans in place. If a third-party supplier was to cease operations, could your own business manage and if not, have you got other suppliers ready to replace them? Not only that, but how quickly can a new supplier be plugged into your business?
I think we can all agree that the learnings from the pandemic were significant – whether from a people perspective and having to make changes to the way our teams operated, or from a customer standpoint. The success in our collective response came down to one key factor – the ability to react in a rapid and agile way – something that, historically, our industry has been unable to achieve. It’s this knowledge that will help us to navigate the next phase of becoming more operationally resilient.
While these changes will be significant, intermediaries are in a strong position to support insurers and partners through the changes. Unfortunately, the increase in outside cyber and ransomware threats is only set to continue, and so businesses must be in a position to respond. Customers’ expectations are continually evolving and it’s no longer good enough to simply be resilient between the hours of 9am and 5pm – the landscape has changed and so must the industry.
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