TechTalk: Brain drain hits claims sector – but will AI hamper the hiring of new talent?

According to financial website Investopedia, the slang term ‘brain drain’ can ”refer to the movement of professionals between corporations or industries for better pay or opportunities”.

Insurance industry commentators – such as Claims Consortium Group chief executive Matt Brady – believe brain drain is hitting the claims sector, with technical expertise and skills leaving the market and not being replaced.

Speaking exclusively to Insurance Times, Brady explained: “There is a diminishing pool of expertise across simple and complex claims in personal and commercial lines.”

Brady believes that the claims sector is primarily experiencing a lack of skills across two key areas – technical knowledge and expertise, with older, more senior staff leaving the industry through retirement, and soft skills, such as empathy.

To combat brain drain in the claims sector, Brady emphasised that the industry must hire and retain staff from the widest possible talent pool, which reflects the varied population of insurance customers.

In February 2024, John Bissell, executive director of the Chartered Institute of Loss Adjusters (Cila), said that three-quarters of the body’s members were male and half were over the age of 50. This indicates that the majority of these professionals are from the same demographic, suggesting a lack of diversity.

“When you think of the image of the insurance industry and in particular claims – typically if we refer to that demographic described by Cila – people outside [of this description] may not feel welcome,” Brady added.

However, he stressed that the claims sector is trying to make job roles more interesting for those entering the field, to help it tap into the whole talent pool instead of just a small demographic.

“If your workforce does not represent the people you are engaging with, it’s hard to be empathic,” Brady explained.

”Claims start with something unpleasant and you need to put yourself in that customer’s position. Unless you can relate to that person and apply the rules of insurance, you are only doing half the job.”

Where are the entry level jobs?

For Eddie Longworth, founder and director of Jel Consulting – as well as Insurance Times’ Claims Champion of the Year 2024 – the onset and increased use of artificial intelligence (AI) across the claims sector could throw a spanner in the works when it comes to engaging new, diverse talent.

Longworth explained that entry level roles in the claims sector typically focus around the first notification of loss (FNOL) process, however this is often the first element of the claims journey to be digitised and taken over by AI. Therefore, entry level roles in claims could reduce over the next five years.

Paul Stanley, chief executive of insurtech 360Globalnet, agreed that over the next five years, 60% of all claims across all lines of business will be handled by machines.

Longworth questioned, therefore, how the claims sector could employ and retain more senior, skilled people if lower level jobs were being done by AI because this dynamic removes one route of career progression.

He continued: “You haven’t had a chance to assess someone doing a basic job. The first problem of AI is that it attacks the route into claims. It may be a good thing – it saves money and gives consistency, but nevertheless it closes doors.

“For people with skills in claims, they will need to have a whole new type of knowledge to do with the application of AI to their job, [which] they can’t or shouldn’t learn by themselves.”

Longworth noted that the “fundamental question” was how to “marry” the benefits of AI with ”some of the negative effects and make it work”.

He added: ”One of the elements firms must look at is retention of the best people and the need to provide them with career development opportunities that AI will open up for them, rather than seeing it as a negative.”

Digital claims handling

Loss adjusting firm Sedgwick, however, has used the introduction of technology to provide opportunities for its employees.

In 2023, it invested £3.5m to upskill 81% of its staff. In turn, this created 334 internal promotions across every level of the business.

Richard Sheridan, strategic development director of Sedgwick UK, noted that although “technology is helping to digitise the routine administration aspects of the claims management process, making it faster and easier for everyone”, he believes that “technology will never replace the skills and human touch of a top end adjuster”.

Instead, he feels that technology ”is speeding up the development of next-generation talent”.

The majority (80%) of Sedgwick’s customers use its document upload facility on its online portal. For one of the firm’s clients, 20% of online claims are concluded without the intervention of a human.

Sheridan said: “Technology is challenging traditional methods and driving innovation in claims management. It’s speeding up the process for smaller, low value claims and developments in AI are set to create further improvements in the near future.

“A forward thinking approach to tomorrow’s technology is essential for every potential employer.”

For Longworth, having the right balance between humans and machines is tricky.

He said: “It’s about having a balanced scorecard of objectives. You need to have more than one set of outcomes and one of those [outcomes] must be about the influence of human resource and soft skills. Don’t forget the claims industry is in competition with other industries, not just itself.”

For Brady, the claims industry needs to “embrace more technology and data to be able to catch up with other sectors that it is competing with”.

He continued: “There’s a mini revolution occurring with lots of collaboration in insurtech. It’s understanding that if we can bridge that gap of expertise with technology, it will really transform the claims industry.”