Data inputting, data processing, risk assessment, tendering, contracting and claims processing are all being put on to electronic systems, thereby making redundant a large proportion of the 300,000 staff who are employed in insurance in the UK. While banking has so far shed about 85,000 jobs since 1990 - with more losses to come - insurance has been relatively immune.
Back office staff in brokers and underwriters will be particularly vulnerable, but one United States insurer has outsourced claims handling to low-waged, though highly skilled staff in County Kerry in the Irish Republic. Provided the communication links are in place, data handling can be conducted anywhere in the world, electronically.
The banking and insurance union, Bifu, is also unhappy that some of the larger insurers are using new technology as an excuse for requiring sales staff to work from home, enabling them to close regional offices.
Until now, attempts to introduce electronic trading to the Lloyd's market have been more of a burden than a benefit. Development of EPS, the electronic placing system, has been slow, and even after six years of evolution many brokers resist using it. Some in the industry despair of ever making EPS work effectively.
But a major new electronic communications system, the World Insurance Network (WIN), being introduced by the big six international brokers (Alexander & Alexander, Aon, Johnson & Higgins, Marsh & McLennan, Sedgwick and Willis Corroon), could even threaten London as the world underwriting centre. Brokers can now place risks by electronically tendering for best prices, without the need for a lead underwriter or requiring personal meetings or contract signings.
Joanna Francis, an insurance analyst at James Capel, says: "We are seeing the beginning of a change in the way the insurance industry works. WIN will cut back considerably on the number of staff employed, especially in the back offices and among placing brokers who are physically going out doing the business. It will dramatically reduce the number employed in the industry. A lot of back office jobs are very mundane, and don't need a great deal of brain power."
Conventional theory, especially as put forward by Microsoft, says that the Internet and other forms of electronic communication will lead to "disintermediation" - in other words, the elimination of brokers, replaced by direct selling. But travel on the Net is still not easy, leaving a potential market for the broker who is an expert in both the product and digital technology.
The Net might eventually be seen as the saviour of smaller brokers, especially competitively priced specialists. The Insurance Policy Trading Company has already introduced its Endowment Direct service on the World Wide Web, allowing traders to bid for endowment policies. Prices are better and contracts completed quicker than under traditional systems. Other niche brokers may find the Net improves their communication and marketing skills.
Another challenge to insurers' existing ways of doing things comes from artificial intelligence, software that mimics the human brain to make decisions in the same ways that we do, only better. It can be used to detect fraud, manage risk, assess risk, and set premiums, and threatens the traditional role of the underwriter.
One thing is certain, insurance will never be the same again, and some will rejoice. As Ms Francis says: "The old way of doing business has gone for ever. As an industry it has an amazing ability to bury its head in the sand. It is the last bastion of the old way of doing business, particularly in the UK."
The UK Insurance Technology Exhibition and Seminar Programme is at Olympia Conference Centre, London, on 18-19 June.Reuse content