PARTNERSHIPS AND PEOPLE: 2022 TRENDS

As 2022 takes shape, this is an ideal time to identify those high-level trends that will have the greatest impact on captives in the months ahead. Undercurrents such as those introduced during the COVID-19 pandemic are magnified among specialty programs, as are the returns that accompany the early recognition and responsiveness to newly emerging needs.

Sedgwick’s industry experts and thought leaders have spent considerable time identifying such insights and what they mean to the captive insurance industry. These observations have been segmented into four categories: people, property, brands and performance. Below is a deeper dive into our views related to each of these categories and how they will affect captives and those they serve.

Views on people

As the world emerges from the COVID-19 pandemic, organizations around the world are facing workforce challenges. The need to attract and retain talent to the captives industry is not new or unique, but the erosion of talent is particularly hard-felt within the sector because of the expertise needed to support and manage these sophisticated programs.

It takes time for newcomers to fully grasp capitalization requirements, taxation strategies, actuarial analyses or domicile regulations that are vital to captive operations. When existing talent exits, those specialty skills are diminished.

Captives were already working hard to attract the next generation of talent before the pandemic hit. This need was compounded when COVID-19 caused many professionals to re-evaluate their priorities and attitudes toward work/life balance. Individuals began looking for positions that offered higher levels of flexibility as well as a greater sense of purpose. Further, the economic disruption and healthcare concerns caused some of the more experienced professionals to elect an earlier retirement than planned, thereby creating additional vacancies.

What this means is that captives have a strong need for succession planning, mentorship and internship programs, clear career paths, and collaboration between teams. Additionally, the captive industry has an opportunity to rethink benefits as a key component of a broader recruitment and retention strategy.

This includes investing in more resources, thinking about how to address new attitudes and expectations, and refocusing on how to facilitate personal and professional growth. Many will look to non-traditional benefits to attract and retain talent while others will make investments designed to leverage learning, experience and technology.

When thinking about issues that impact people, there is an increasing need to prioritize global accident and health programs. As cross-border travel restrictions are lifted, employers will be challenged to prioritize safety and wellbeing of their impacted employees. This includes monitoring vaccination status, as well as local requirements and coverage as they move across sites and across borders. With global programs and migration of workers no longer tethered to desks or offices comes a need for a consistent experience across regions. Captives must find ways to ensure a continuum of care as the locations and needs change.

Moreover, captives should keep in mind that the organizations they serve are also facing many of these same talent and workforce challenges. This should be factored in when looking at new coverages or services to offer existing members.

View on property

Unpredictability in the marketplace has increased interest in captives as a coverage and funding alternative. To fully capitalize on these shifts, captives need to understand trends around property issues and respond to the needs they create.

Supply chain disruption, fluctuations in labor and demand, and ever-shifting restrictions have created shortages and surges in the marketplace that have impacted all types of property claims and repairs. These factors combined with inflation, a hardening market and increasing unpredictability are altering the risk profile of many organizations worldwide. Captives should reassess and determine what changes in coverage, service and resolution their members need and how they can help alleviate these pressures. Undoubtedly, the current business climate will impact a captive’s underwriting strategy and how it delivers services to its members.

Captives should also be monitoring forecasts and predictions related to extreme weather events during the upcoming year. No part of the world is immune to catastrophe, whether floods, wildfires, hurricanes, tornadoes, earthquakes or volcanos. The frequency and severity of natural disasters continue to rise. Captives have an opportunity to help their members respond to these events and help alleviate the damage felt worldwide in business, agriculture, energy and many other sectors across international markets.

From an attitude perspective, there is an increased focus on sustainability in the property claims space. Restoration is growing as a first choice over replacement. Captives are wise to recognize this growing trend and fine-tune their property claims programs and solutions.

Remote property claims strategies have become increasingly popular. This includes use of remote tools and processes used for inspecting and estimating property damage. This became a necessary substitution for many traditional claim assignments during pandemic lockdowns. Bots, drones and satellite 3D imaging are among the new technologies here to stay. These are not replacing human expertise, but rather enhancing a captive’s ability to provide additional options to its members.

View on brands

Captives must also understand the roles they play in supporting their members’ brands and become conversant in environmental, social and corporate governance (ESG) matters. Regulators as well as investors and business partners are asking for more reporting and transparency in the areas of corporate governance, human rights practices, diversity, equity and inclusion, and sustainability initiatives.

Captives should also monitor liability trends and their impact on brand. This industry continues to work through a backlog of lawsuits created by court closures during the pandemic. With an increase in “first notice” attorney representation, many claims are already in litigation when initially reported. This trend, combined with an increase in high-value verdicts and costs rising due to social inflation, makes it important for captives to reassess the claims services they are offering and adjust legal strategies as needed.

Newfound liability risks also lie in the retention of data and files. Guarding privacy and personal data is essential when considering brand protection. There is heightened sensitivity toward the protection of personal information as new privacy laws come into effect around the world. Health data privacy matters become more significant as virtual care, vaccine and testing tracking, and health status reporting become more mainstream or even mandated.

View on performance

Data science and advanced analytics are driving the technological transformation of organizations, including captives, their partners and those they serve. Evolving claims technology is simplifying intake and automating routine processes, freeing claims professionals to focus more on human connection as opposed to busywork and eliminating friction points to speed assignment, triage and resolution.

Tools such as natural language processing, computer vision, deep learning and machine learning can classify, categorize, extract information, and validate relevant data. For a captive and its members, this means more can be done to analyze sentiment, predict behavior and outcomes, and address issues earlier in the claims cycle. These are actions that can impact member services, outcomes and experience.

Additionally, captives should assess advancements in physical technology. This can include electric and driverless vehicles innovation, telematics, wearables and connected devices. It is important for captives to grasp how these advancements relate to and impact coverage, repairs, liability, recalls, safety and compliance for members.

Captives who are looking to maximize performance will collaborate closely and efficiently to break down data silos using smart technology and create and share better data analytics and insights among those managing the program and those they serve. Improving communications and fostering a more streamlined response can elevate virtually any captive claims and productivity initiative.

Conclusion

The captive insurance world is fast-paced, sophisticated and service-oriented. Even so, it is advantageous to take stock and consider the broader trends impacting the worldwide marketplace and, ultimately, the captive insurance industry.

Partnerships will continue to be a significant element of the captives framework. Having the right partners will become more important when scaling up or scaling back, efficiently moving into new markets, seeking technical insight in specialty areas, or looking for expert guidance. Captives today are taking a hard look at outsourced solutions in technology, call center services and repair solutions to meet the demands of the market and their members.

At Sedgwick, we continue to gain greater awareness of how globally integrated our markets are and the preparedness required to mitigate risk across geographies. Captives that are focused and nimble, open-minded to change and inclusive to our global economy will be organizations that see the most success.

Even as we actively advance, Sedgwick’s clients can be confident we will stay true to what’s at our core: our values, our commitment to care, and our promise that taking care of people are—and will always be—at the heart of everything we do.

David Stills is senior vice president, carrier, and risk practice at Sedgwick. He can be contacted at: david.stills@sedgwick.com