Can Smaller Insurers Transform? - Insurance Thought Leadership

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April 4, 2018

Can Smaller Insurers Transform?

Summary:

Although smaller carriers may not have the desired resources, they can move faster than larger organizations on certain initiatives.

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I don’t think any of us would dispute that the insurance industry is facing an inflection point, with changing market conditions, emerging technologies and startup insurtech companies. In an environment in which both personal and commercial lines of business are affected by a digitally empowered consumer, many insurers are rethinking their IT infrastructures, distribution networks and communication strategies. Yet recent coverage in the media paints a different picture for smaller insurers trying to achieve transformative change.

I was struck by a comment made by Tom Benton, VP of research and consulting at Novarica, in an article called “Smaller insurers lean on partners to navigate disruption.” Benton argues that, while all insurers continue to struggle with limited IT resources, capabilities and access to specialized skills while facing increased demand for operating efficiency, smaller insurers are at a disadvantage.

“Most insurers are focused on three things,” he said, “running IT for the organization, projects that help the organization grow and transformational projects. Most small carriers don’t have the budget or resources (including talent) to apply to transformative projects.”

See also: How Small Insurers Can Grow  

While it’s true that small property and casualty and commercial workers’ comp carriers, municipal risk pools, captives and self-insured groups may be vulnerable to more rigid budgetary concerns than their larger Tier 1 and Tier 2 counterparts, I’m not convinced that transformation is unattainable to them.

Although smaller carriers may not have the desired resources, they can move faster than larger organizations on certain initiatives. Smaller carriers don’t have to jump through all the organizational hoops usually present in a larger company. Plus, smaller carriers usually have a culture that embodies taking risks, getting faster approvals and moving into a pilot much quicker than larger insurers.

Let’s look at the agility of a smaller carrier and add the notion that these employees tend to “wear many hats” (often running IT operations while functioning in another capacity within the organization). Here, choosing the right technology partner is critical, and long-term issues must be considered when making decisions on platform, systems and applications.

For example, Maine School Management Association (MSMA), a state-wide non-profit federation that administers various insurance programs to the state’s school systems, replaced a decades-old process that involved spreadsheets and manual entry, with cloud-based insurance management software. The decision, made to provide secure and efficient online renewals of property and casualty (P&C) coverage for its 98 member school districts, is transforming the entire renewal process, reducing renewal process time and streamlining members’ ability to respond.

With just 23 employees, MSMA is an example of an insurance organization that has achieved transformational change due to its commitment to successful risk-taking, a calculated plan to work exclusively with “best in class” vendors that specialize in serving public entities and a culture that is committed to innovation-fueled growth.

Even less successful experiences serve to inform future operations. We aren’t perfect, and firms that proclaim, “not us,” or “we won’t have those issues,” are either disingenuous or naïve.

See also: Have Insurers Lost Track of Purpose?  

The call for transformational improvements is upon us, with pressure to innovate using technologies such as cognitive computing tools, machine learning, predictive analytics, robotics processing automation, chatbots and natural language processing.

Rather than be at a disadvantage, smaller insurers are embracing a new level of confidence that maintains that transformation is not only possible, it’s realistically attainable.

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About the Author

Jim Leftwich has more than 30 years of leadership experience in risk management and insurance. In 2010, he founded CHSI Technologies, which offers SaaS enterprise management software for small insurance operations and government risk pools.

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