OpinionInsurers need to reconcile their desire for automation with their slow adoption of tech
Insurers need to reconcile their desire for automation with their slow adoption of tech
Modernizing insurance operations can make insurers’ pricing models agile, coordinate efforts across lines of business such as pricing, rating, and underwriting, and aid planning
With inflation, cutthroat competition, and changing circumstances like climate change making pricing models out-of-date faster than ever, insurance companies across the globe must embrace innovation to stay ahead. If insurers continue to rely on existing technology, they could miss out on new opportunities. An additional challenge in the Israeli insurance market is that customers are being drawn from traditional carriers via new and different approaches offered by disruptive models.
Modernization prioritized in strategy but not yet in action
Modernizing Insurance Operations, a global Earnix survey of nearly 300 executives from insurance carriers shows that carriers recognize modernization as critical to their business. The need for insurance operations modernizations was listed as one of the top five organizational priorities for 87 percent of surveyed insurance companies, with four out of five companies planning to update their infrastructure in the next two years.
However, while modernization was ranked as a priority, insurers still struggle to implement. Nearly 90 percent of survey respondents said they have not fully developed and executed their operations modernization strategy. Additionally, none of the respondents had fully executed it.
Legacy technology alone is not enough
The survey found that using legacy technology alone can hinder insurers’ abilities to meet customers’ expectations, quickly create product offers, and achieve their goals. Nearly 30 percent of respondents said that the most challenging aspect of legacy systems was the overall lack of flexibility and difficulty to personalize offers. Another quarter of respondents cited a talent shortfall, as experienced employees are needed to maintain and use legacy systems.
Other concerns were slow time to market (18%) and too many manual updates (16%). Legacy technology can also make it difficult for insurance companies to take advantage of emerging innovations, such as machine learning, AI, data modeling, and advanced analytics.
Advantages of modernization
Keeping models and teams up-to-date
Most insurers still use multiple manual steps to change rating and pricing models, coordinating between siloed teams and business models. These manual efforts are time-consuming, error-prone, and lack the visibility for insurers to understand changes and improve future strategies. Additionally, data is not shared between lines of business, such as pricing and underwriting, creating an additional barrier and decrease in efficiency. 52 percent of survey respondents said their IT infrastructure cannot efficiently process their volume of data. Additionally, three quarters (81%) of insurers need anywhere from one to six months to implement a significant rate change using their current models and processes. None of the respondents could move a change into production in less than a month, and four percent required a year or longer. This emphasizes the need for insurers to find solutions that will effectively process their troves of data so their speed to market with new products meets customer demand.
By modernizing operations and automating workflows, insurers can eliminate manual processes, advance speed time to market, decrease or eliminate sources of error, and offer pricing models that are flexible, agile, and adaptable for the future. Data can be moved easily from pricing to rating and underwriting and can be used to inform a holistic business strategy. Modern pricing solutions can also unlock value by enabling employees to spend more time on meaningful and revenue-generating tasks.
Ensuring customer retention
Consumers demand fast, highly personalized communications and offers via their preferred channels. With an increasing number of choices, these customers can take their business to competitors who can deliver. It’s key to offer customers a bundle of coverages that meets their needs and covers them properly. 97 percent of survey respondents reported that there is an important need for improvement in the way they offer add-on endorsements and 90 percent stated their product personalization overall needs automation and efficiency gain. Improving customer experience was the number one process or technology identified as crucial to insurance operations modernization (30%). Offering greater personalization was tied for the second most popular response (28%).
The customer benefits of modernization can attract and win new business, increase profitability, maximize customer retention, and improve the company’s competitive advantage.
Enabling increased innovation
New trends require new ways of thinking and acting, and insurers must adjust. Technological innovations such as data analytics, AI, and machine learning can deliver game-changing capabilities to those insurers willing and able to take advantage of them. They can provide the data to inform strategy, address uncertainty about future claims costs, offer usage-based product offerings, and adjust to evolving trends.
Success requires reprioritization
Modernizing insurance operations can make insurers’ pricing models agile, coordinate efforts across lines of business such as pricing, rating, and underwriting, and aid planning. It can also solve a frequently evolving array of issues such as uncertainty about future claims and costs, inflation, and customer demands and retention. To ensure business success, continued competitive advantage, and the flexibility necessary to keep up with changing customer expectations, insurers will need to reconcile their desire for automation with their slow adoption of the available technology. The need for modernization has been identified but requires tangible action for insurers to reap the benefits.
Dror Pockard is the Chief Strategy Officer at Earnix