Will the Pandemic Permanently Boost Productivity?

Erik Brynjolfsson, Daniel Rock, and Chad Syverson caused a minor sensation in 2018 when they proposed their “Productivity J-Curve.” It suggested that productivity growth in the past couple of decades has disappointed (at least in part) because investments in general-purpose technologies like AI and machine learning only really bear fruit in combination with investments in intangibles like revised business processes, products, and human capital. In the short term, investments in those intangibles appear as additional expenditures that do not increase productivity or revenue. Later on, they appear as the opposite: rising productivity and revenue, seemingly from nowhere.

The pandemic has led many insurers to alter business processes and train employees on new techniques. Could this produce an unexpected surge in productivity in the years to come?

The lasting shift to digital

The pandemic has seen insurers embrace virtual processes with astounding speed. Many of them have told Novarica that these have also led to unexpectedly robust productivity gains. Many of these gains may be temporary: Employees may initially have worked longer hours without commutes to box their time in the office. Many have taken fewer vacations since the pandemic began because travel is more difficult, and family visits are a potential health risk.

Moreover, such productivity gains likely come at the cost of employee mental health; thus, they are temporary and little cause for celebration. If the gains continue into next year, they will likely reverse as the pandemic subsides and employees commute more, seek improvements to work-life balance, and take vacations. That would be cause for celebration, but managers may also lament the loss of productivity. Or perhaps not.

Businesses are likely to continue some of the virtual processes they’ve implemented this year. What’s more, the “J-Curve” suggests that, if implemented well, some productivity gains could be permanent. There is no reason to shift away from virtual processes that work better than in-person ones. These include remote notarization and e-signature, virtual audits and underwriting processes, improved employee collaboration through cloud technologies (e.g., Office 365), and better video conferencing.

In the past, companies struggled with hybrid models (i.e., some employees in the office and some remote) due to poor technology and patchy employee adoption. Many insurers have upgraded these technologies, and every employee is well versed in their use by now. The days of being unable to hear the person in the back of the conference room are hopefully behind us. These virtual processes, combined with well thought out process improvements that take full advantage of them, can help insurers sell more and cost less to operate.

A further area for improvement may come from increased employee satisfaction. Surveys have shown that most employees want greater flexibility to work from home, and more streamlined processes make life easier and happier for customers and employees alike. Much research over the years has shown that happy workers are more productive (13% more, according to one 2019 study).

The thoughtful return of face-to-face interactions

To say that virtual processes can improve productivity and satisfaction is not to say that all processes should remain virtual, of course. Some customers prefer in-person interaction or struggle with the virtual sort; insurers should not ignore this.

Internally, exchanging ideas is probably still more effective in person than virtually. Humans are social animals and require in-person interaction for their wellbeing; physical proximity promotes good office and team culture. As Novarica’s Boston office moved online, in-person social interactions were lost, and online interactions have not fully made up for this. Still, the pandemic has proved that digital processes can work well in areas where businesses were once skeptical.

In the end, the shift to greater use of digital technologies and the streamlined processes that take advantage of them, combined with more thoughtful and deliberate use of in-person time, may provide a silver lining to this pandemic year. Productivity growth may well remain higher for years to come.

Add new comment

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
4 + 1 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

How can we help?

If you have a question specific to your industry, speak with an expert.  Call us today to learn about the benefits of becoming a client.

Talk to an Expert

Receive email updates relevant to you.  Subscribe to entire practices or to selected topics within
practices.

Get Email Updates