Streamlining Insurance Operations for Future-ready Enterprises

Abstract

For insurance organizations, staying ahead of the curve in a highly competitive and dynamic environment is critical. As digitalization expands, insurers are compelled to adopt technology solutions that have revolutionized the global economy. To benefit from this new phase, it is critical to streamline operations, introduce process excellence best practices, invest in developing a multi-channel ecosystem with the customer at the center, and bring about a digital transformation to your legacy systems.

Breaking Barriers

As digital channels become increasingly relevant for connecting with customers, insurers in pursuit of high performance need to develop a customer-centric and digital mindset, making key changes to their operational processes and becoming a truly digital enterprise. Insurance companies often struggle to cope with these changing business paradigms, especially in view of their legacy IT systems and pre-existing business processes, which actually hamper growth efforts. Insurance companies need to shore up their IT infrastructure and look at technology as a key enabler of new business processes and transformation.

Transforming a business model is a delicate balancing act that requires visibility into business operations, applying industry best practices to bring in process excellence, and introducing relevant technology to support the changes. It needs an agile, flexible information management platform that can seamlessly unify all the existing applications, business processes, and the knowledge workers for a smoother transition. Above all, a robust, well-defined, and comprehensive change management roadmap is critical to the success of such major transformation.

Digitalization Magnifies the Need for Streamlined Operations

Insurance companies across the world are rolling out a broad array of digital initiatives. The digital revolution has blurred the boundaries between IT, marketing, customer service, and even between virtual and brick-and-mortar services. The always-on, digitally equipped customer is bypassing traditional modes to reach out to the insurance provider via multiple channels, and expects a seamless interaction regardless of the channel. Most executives recognize that they are on the threshold of a once-in-a-generation opportunity to both reduce costs and foster new streams of profitable revenue growth.

Multi-channel Mix Remains Vital: While the shift towards digital continues to grow aggressively, developing your IT strategy around multi-channel is vital. Today’s customer may use multiple touchpoints to interact with an insurance provider and yet seek a seamless and singular experience even as he switches channels. Developing a synchronized, multi-channel ecosystem requires persistence, deep domain knowledge, and a continuous focus on process improvement. Insurance providers must be able to leverage both brick-and-mortar, as well as digital channels effectively if they are to remain viable.

Customer Retention is a Challenge: Today’s customers are spoilt for choice and ensuring a premium customer experience and increased loyalty is becoming a challenge. Customers are more aware of the market dynamic, know what they want, and are skilled enough to look for and switch to an alternative provider if their expectations are not met. A seamless and premium experience, loyalty recognition, and competitive pricing of products are some of the key expectations of the customers. From adapting service capacity based on customer demand, to offering diverse customer management services, insurance providers must focus on enhancing the customer journey with dynamic, personalized, and reliable solutions.

Legacy Systems are Inefficient: Being one of the early adopters of information technology, the insurance industry is rife with legacy systems that are used extensively and often are detrimental to new technology adoption due to incompatibility of systems and interfaces. Gartner estimates that more than two-thirds of global life and P&C insurers still rely on legacy systems (some dating to the ’70s or ’80s) to a significant degree to manage their core processes. The back-office system still works in silos and is not efficient enough to keep up with the demands of the front-office.

Barriers to Effective Operational Optimization

So, what is it that really prevents insurance companies from ensuring streamlined business operations and processes? Here’s our take on it:

• Many insurers are operating disparate, inefficient, legacy platforms, with isolated operating models aligned to that particular line of business
• IT budgets have been aggressively cut without proper assessment of whether the company has the right functionalities and frameworks to service customers effectively
• Inconsistency in operational management in organizations within the company and no single, unified, 360-degree view of the customer
• Meteoric growth of digital and social media which has accelerated the rate at which customers share information and feedback with peers
• Paper-intensive work makes business processes sluggish; documents are still collected and distributed physically as insurers have not been able to make complete use of electronic media
• Deficient customer experience with inaccurate and delayed claims/ payment processing resulting in lack of trust between sellers and buyers

A Look at the statistics below :

Source: SMA, KPMG, PWC

Source: SMA, KPMG, PWC

Industry Best Practices for Streamlining Operations

The digital disruption that has transformed global industries is set to bring about a paradigm shift in the way insurance companies conduct business.

Digitalization and process excellence is an ongoing, companywide initiative and requires a significant shift in both capabilities and mindset. To become a genuine digital player, insurance companies need to offer a differentiated consumer experience, and transform infrastructure as well as operations.

Strive for Operational Simplicity: By digitizing customer-facing processes as well as critical support functions, insurers can reduce complexity, lowering costs, and increasing their ability to respond to change including introducing variable pricing. This will enable insurers to provide the advice and quotation to customers via a channel of their choice, as well as offer self-service.

Use ‘Shared Services’ Model: In the last few decades, insurers have invested heavily in operations and technology, incurring largely fixed costs to build massive, highly complex IT Infrastructures. Now as more and more applications migrate to the cloud, information is available anywhere, anytime and at a very low cost. If you have more standardized and streamlined processes, you can use the cloud to move to a low variable transaction cost model that scales exponentially.

Go ‘Green’: Insurers are struggling with paper-intensive business processes. Not only does it slow down the process and increase the customer response time, it also makes it difficult to keep track of these paper documents. With an increase in business correspondence, there tends to be higher mail volume, which will only get unmanageable over a period of time. The storage cost of keeping the paper will also increase. There are some other downsides like papers getting lost or damaged. Some key benefits of converting documents to electronic format include:

• Traceability and accuracy of all communication is significantly high
• IT-enabled processes are more reliable, productive, and not manpower-intensive
• Documents are filed and handled in a more systematic manner by switching to email-based delivery of letters, intimations, and notices
• Improved efficiency and reduced costs by ensuring a paper-less environment

Benefits of Operational Streamlining

No business is too large or too small to reap the benefits of streamlined operations and process excellence. With insurance companies under immense pressure to service a more informed and active customer base, ensuring operational efficiency and agility is the only way forward. These complex challenges mean creating a structured and well-defined customer-centric workflow to make the most of your resources.

Achieve Cross-Channel Excellence: It is imperative to create a single 360-degree view of customer interactions and operate seamlessly across channels, leveraging customer information and analytics to identify the best channel to interact with them. A centralized data repository that tracks every customer transaction, should be created to provide single customer views.

Become Customer-centric: The digital operating model promotes a customer-centric approach over a product-centric one. By applying analytics to draw actionable insights from the data deluge, insurance providers can offer more personalized products to meet the customer expectations. This data can be easily extracted from internal and external sources like social media. The product and services can be tailored to specific channels and even segments.

Increase Customer Self-service Options: By increasing the self-service options for customers, the overall customer response time can be reduced drastically and customer satisfaction can be enhanced. The self-service strategy must reflect and address the higher level of competence that customers today have. There is a higher sense of self-reliance and psychological reward when a customer is able to carry out activities with autonomy.

Seize the Day

Understanding your customer is a key driver for sustainable growth and requires a focused strategy, an actionable plan, and rigorous execution. To meet high customer expectations, companies must accelerate the digitalization of their business processes. Digitalization involves more than just automating processes. It is critical that insurance providers reinvent the entire business process, including cutting the number of steps required, reducing the number of documents, developing automated decision-making, and dealing with regulatory and fraud issues.

Operating models, skills, organizational structures, and roles need to be redesigned to match the reinvented processes. Data models should be adjusted and rebuilt to enable better decision-making, performance-tracking, and customer insights

By digitizing information-intensive processes, costs can be lowered by up to 90% and turnaround times improved dramatically. Insurers who can lap up this opportunity fast will reap the reward of greater market share and customer loyalty.