The proliferation of technology usage within insurance is ironic. The industry historically labeled as a tech laggard now has more InsurTech available than insurance companies often know what to do with.
Executive SummaryStart small with analytics and new technology deployment or embark on large-scale systems overhauls? That’s one of the complex decisions carrier executives face as they continue planning out digital transformation in 2019. Here, Insurity’s Clyde Owen offers insights about the three components of digital transformation necessary to support the improved customer experience.
To make matters more complex, there are different ideologies about how to select and deploy the various technologies that promise to transform everything from internal operations to customer service, risk assessment, pricing and distribution. A portion of the industry touts an incremental “start small” approach to analytics and technology system deployment, while others believe that burgeoning data growth mandates a forklift overhaul.
Insurance is unlike many other industries. Retail can drastically improve customer experience by augmenting front-end processes, but insurance has an elaborate sales funnel with ever-changing regulations, more data processing involved in the core business and additional stakeholders. There is no silver bullet for making the right tech decisions in an organization, but there are three components of digital transformation necessary to support the improved customer experience.
Cloud-Hosted Core System Platforms With Digital Processing
Sunsetting legacy systems was an initial step toward insurance digital transformation. But carriers have become smarter about their changing needs and are aiming higher to match an increasingly data-intensive environment. Disparate on-premises core systems that include policy administration, billing and claims were the answer for “right now” but weren’t built to process new information across systems at an adequate pace. Insurers require a unified platform through API-based microservices architecture that allows incoming data to seamlessly flow between policy, billing and claims systems to create a holistic view of an insurance company.
Celent labeled 2018 “The Year of the Platform,” and Novarica said that 63 percent of insurers are looking to migrate to the cloud in 2019. The cloud provides improved security and scalability for new products or functionality without substantial upfront cost or additional IT infrastructure. Data visualization tools and dashboards are improving because of the platform approach, capturing data and tailoring insights to specific stakeholders in the organization including managers, underwriters, adjusters and sales teams in order to inform decision-making at a granular level. Additionally, the ability of platforms to auto-fill state regulatory information is becoming a tremendous asset for insurance carriers compared with manual inputs that create a drag on an otherwise streamlined process of handling policies and claims.
Newer integrated core system platforms aren’t promising to predict the future or know exactly where an organization is heading, but they are built to easily adjust as strategies and goals evolve.
Predictive Analytics for Underwriting and Claims
The value of predictive analytics (PA) for underwriting is well known within the industry and has been instrumental in improving net underwriting profit in commercial lines through better risk assessment and pricing. But there are other emerging use cases for PA, including claims. When investing in PA for any application, the insights are useless unless they are baked into the workflow and provide real-time insights to stakeholders.
For instance, many predictive model outputs are still aggregated on a spreadsheet. It’s an equally familiar and antiquated practice that provides information for better decision-making but doesn’t promote efficiency and speed.
PA is an important solution to integrate within a platform to help companies make quicker and more forward-looking decisions. For example, using it to triage claims helps a carrier better allocate its adjusters according to complexity. PA can notify insurers whether a claim is more likely to become a jumper claim, meaning more susceptible to litigation and skyrocketing costs. It also can more easily identify fraudulent claims, supporting the adage “an ounce of prevention is worth a pound of cure.” Collectively this helps an insurer decide if a veteran or novice adjuster is the better fit in a given situation and can significantly improve reserve management.
While digital platforms and predictive analytics streamline operations and decision-making, insurance purchasing is the last component needed for a solid digital foundation. It is the most widely visible aspect of digital transformation but is not entirely effective without the aforementioned back-end processes. What significant value is provided to a customer experience when the information submission process is expedient and intuitive, yet quoting and binding still take a few days to a week?
Front-end systems can leverage artificial intelligence to pre-fill information without asking much of the customer. We understand how important our service is, but many consumers still consider it a necessity instead of a valuable product. As such, it’s important to make the purchasing as simple as possible and promote transparency through the use of policyholder portals.
An often overlooked aspect of improving customer experience is through billing flexibility. One example of how it can influence customer satisfaction is within the burgeoning small commercial market. Small businesses tend to have the lion’s share of funds and resources allocated to other functions, and they appreciate flexibility in billing that are table-stakes in other industries. Workers comp is required in most states, and billing for insurance is typically offered only with one option: one-time payment. Flexibility in terms of payment method (i.e., credit card, check, etc.), the timing of payments and accessibility can go a long way when small businesses are comparing coverage options.
These three core components of a digital-first insurance company should be considered the “essentials” to promote a tech-based organization and culture. Improving culture requires everyone to see the added value, which is why ease of use should always be top of mind. Many other emerging technologies can improve the experience, but it’s important that insurance companies have a unified digital infrastructure in place to keep pace with industry changes.