Underwritten by SBO: A Conversation about the Skills-Based Future of Insurance
Things in the insurance world do not move quickly. So when Forrester published a case study on EPAM’s groundbreaking work as a skills-based organization (SBO), we wondered how well the concept might apply to insurance. How does the journey to becoming an SBO look like for an industry that has traditionally been prudent, cautious and patient — to put it kindly — when it comes to digital transformation? Our experts, Steve Tesler, Practice Lead, Insurance Consulting and Eric Fenton, Principal, Business Consulting, Insurance, and Sandra Loughlin, Chief Learning Scientist, shared insights into the issues currently facing the industry and how an SBO framework offers a working solution.
The insurance industry is facing a range of issues that are affecting carriers and insurers everywhere. At the core of these issues are problems related to retirement, knowledge retention and technology.
The industry relies heavily on skills and knowledge, and much of the knowledge is built on a foundation of individual worker knowledge. As Tesler says, “The guidelines and regulations can be taught but the more qualitative aspects of decision making are skills that are developed through experience and intuition.” And the nature of this knowledge means that is inherently more difficult to teach and train. “While insurance processing is governed by guidelines and compliance regulations, there is also some amount of subjectivity involved in decision making,” says Tesler. This is a key reason why the apprenticeship model has remained popular in insurance.
While apprentices may get invaluable on-the-job training, they might also miss out on learning tacit and implicit skills and knowledge that are equally, or more, important. “Part of what many organizations do badly is teach people how to think about the conditions affecting their decision,” says Loughlin. “Teaching that skill requires an expert who can say, ‘In this situation, there are five paths that I see. Here are the trade-offs. I would pick this one, because X, Y or Z.’ It's very different and much harder to teach.”
The Retirement Dilemma
Despite these issues, the apprenticeship model has worked well enough in insurance to have been maintained for decades. But what happens when there is a mass exodus of employees — like when an entire generation of senior knowledge workers retires? It’s already happening, with about 50% of the industry due to retire by 2028. This ongoing mass retirement will continue to have a ripple effect throughout the industry, and even within individual companies. According to Tesler, the knowledge these workers bring with them is complex: “It’s not only about codification of the institutional knowledge needed to underwrite a new submission or adjudicate a claim; it’s also about knowing where the data is or how to get the information needed from legacy technology.”
According to Fenton, “The mass exodus will create a talent gap so deep that the application of AI will hold the most strategic means for an organization’s to migrate to a more modern architecture and gain the full potential of AI in operational use.”
Underdeveloped Tech Stacks & Data Best Practices
Although cutting-edge tech is not a panacea for an industry that has famously lagged in new tech adoption, one powerful aspect of AI, Fenton says, is the fact that it excels at “capturing legacy knowledge and using it to infuse tacit knowledge back into the organization.” Of course, that requires that an organization already have its legacy and tacit knowledge codified — one of the SBO’s greatest strengths.
Successfully adopting the latest and greatest technology, while attractive to businesses, requires a substantial shift, and not just in their tech stacks. As Tesler says, “The old adage of ‘garbage in, garbage out’ is very true here. While it’s true that the industry has underinvested in technology, it’s also true that they haven’t mastered all of their legacy data, therefore restricting their ability to achieve the benefits of AI and GenAI.” Loughlin agrees: “To leverage AI for operations across the business, you’re going to need to build that same data infrastructure anyway.”
A Leadership Disconnect
Another looming point of friction throughout the industry is one that is quickly becoming a reality in many companies. As Tesler says, “Senior insurance leaders were learning their craft before the internet, before AI. Today’s emerging knowledge workers have grown up surrounded by digital technologies.” This will likely lead to friction, Fenton says: “As younger leaders take over, they won’t initially understand or want to lead legacy processes on top of aging technology. New leaders will want focus on migrating to a newer, more flexible and AI-ready infrastructure.”
In her experience working across industries, Loughlin sees parallels in insurance: “Leaders, executives, are most worried about people, usually because they don’t know what they’re going to do with them.”
The Strategic Opportunity Behind SBO
With so many lurking issues for the industry, it might seem as if dozens of solutions would be needed to correct course. Loughlin suggests, however, that becoming an SBO provides a roadmap for organizations to solve most of their underlying problems: “The whole skills-based concept is essentially to start documenting two different things. One is, ‘What skills do you need the organization to have? What skills do you need a specific role to have?’ And then, ‘What skills does any one individual have relative to what they're supposed to have?’ Then, when you have that, you can figure out how to close the gap.”
While it may appear as though successfully becoming an SBO would start with the people organization, she warns that focusing on the HR side of the equation could undermine a company’s efforts before they begin: “The whole concept of skills-based organization is nothing more than data-driven talent decision-making, because if you don’t have data, you’re going to be flying blind.” Fenton notes that in insurance, “Talent acquisition can’t be a static footprint, but one that changes in real-time due to an organization’s interconnection of business insights to skills and strategic operations.”
Maximizing the Value of Knowledge with AI
Once insurers are willing to embrace the SBO concept fully, AI and GenAI can be utilized to provide new methodologies and efficiencies that improve the business case for both. As Fenton notes, “Regardless of a carriers’ maturity with, or adoption of, AI, developing an SBO can help address core business functions and the underpinning technology enablement.”
And while there are many potential use cases for AI in the development of new products or services, Loughlin advises against ignoring the other benefits of AI: “With AI, the value is going to come in reducing your costs, increasing your understanding of your own business and enabling more insight-driven business decisions.”
The Business Advantage of Skills
Despite the problems currently facing the insurance industry, the opportunity for companies who embrace the SBO concept is enormous. The insurers and organizations that are willing to embrace the task of codifying knowledge and skills and using them to power their own AI usage will find both immediate benefits as well as long-term advantage. In short, the SBO is not only good strategy, it’s a necessity for successful AI adoption and use at scale in insurance.
