P&C Insurers: Come Out of the Dark Ages

Why can't insurers meet the speed and performance of a customer experience leader like Amazon? In a nutshell, siloed legacy systems.

P&C insurers spend as much as 30% of the cost of the product on distribution. That’s a hefty price to pay to get your offerings to consumers, only to have them be dissatisfied with the experience. As consumers demand more convenient options for purchasing insurance, leading P&C insurers have found a way to reduce costs and improve the ease of the buying experience by digitizing manual processes. What’s Holding Insurers Back? What’s holding most insurers back from meeting the speed and performance of a customer experience leader like Amazon? In a nutshell, siloed legacy systems. See also: P&C Core Systems: Beyond the First Wave   We know that insurers that have overcome legacy system challenges to achieve top digital capabilities grow revenue at 1.5 times the rate of less enabled competitors. We’ve said this before, so let’s break it down to discover what’s holding the rest of the industry—those still married to their aging systems and processes—from achieving the same results:
  • Sub-prime processes: Consider what it’s like to purchase items from an online retailer. You search for an item; peruse the list of available products; find the one that fits your parameters, and in a few seconds make a purchase. This shopping experience pervades our modern culture, so why should it be any different in insurance? The answer again is legacy systems, as customers must provide reams of data on everything from the type of engine that runs their car to the framing in their house just to receive a price on available coverage. Entering this level of information takes time, adding on costs and generating consumer frustration.
  • Product silos: In P&C insurance, everything lives in its own universe. Auto policies operate from one back-office system, homeowners from another, motorcycle from yet another and so on. When a customer wants to purchase multiple lines of coverage, information needs to be entered into all of those systems, requiring separate applications and sometimes separate agents to do the job. Because this data gets entered manually, the work costs the insurer in efficiency and errors.
  • Non-standardized data: Given that P&C insurers operate from silos, what happens when P. John Smith, (he likes to be called John) living on Main Street in Scituate, RI, approaches carrier agents for auto and home coverage or even starts the process online himself. For the majority of insurers, information would have to be entered twice, once for auto and once for home, into two different systems. Suppose the agent, or John himself, enters the required identifying data for auto. Then, when it’s time to re-enter the data for the homeowners policy, John or a different agent decides to speed up the process by omitting his first initial, shortening his name to John Smith and his street address to Main St. We now have non-standardized data, where one individual is represented in two different ways across the insurer’s data warehouse. These simple discrepancies make it difficult to locate John when he calls with questions or about his renewal, reducing agent and online efficiency.
In case you didn’t realize it, all of the scenarios above relate to manual or inefficient data handling, something insurers can improve to reduce costs and acquire more customers. Why Digital Reigns Supreme (Hint, It’s Automation) Digital leaders grow faster in part because they eliminate much of the inefficiency and costs that plague their less-enabled counterparts. They also create a more satisfying customer experience, resulting in stronger acquisition and retention. McKinsey estimates that as much as 45% of work activities could be automated today, but let’s focus on the quote-to-issue lifecycle for a moment. This is where most of the manual data entry occurs. Automating the quote-to-issue lifecycle takes much of the chore of data entry off the plate of agents and consumers. With a leading digital distribution platform, the small amount of information that is subject to manual entry is entered only once, while the nitty-gritty details are drawn from verified third-party sources. Applications are completed in a fraction of the time, streamlining the quoting, binding and issuance process, while eliminating many of the manual tasks associated with generating a policy. Insurers can see double-digit error rate reductions, as much as a 70% decrease in data entry costs and a 50% increase in agent efficiency. But that’s only the tip of the iceberg. The real story is in customer satisfaction. When insurers use a digital distribution platform that unites product silos, consumers and agents are able to quote, bind and issue multiple products from a single application. Imagine agents and consumers quoting multiple products in less time than it used to take to quote one. By uniting product siloes and adding application prefill capabilities, a leading insurer has reduced data entry and streamlined the quoting, binding and issuance of products. The result is quote conversion rates of 35% through agency channels and 53% direct-to-consumer. See also: Data and Analytics in P&C Insurance   As consumers unite to turn the insurance industry on its ear, it’s time for insurers to leave the dark ages behind and emerge into the light of 21st-century distribution. To learn how to evolve quickly and simply, without major upgrades or overhauls to existing systems, download our infographic, Direct-To-Consumer: The Future Of P&C Insurance.

Tom Hammond

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Tom Hammond

Tom Hammond is the chief strategy officer at Confie. He was previously the president of U.S. operations at Bolt Solutions. 


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