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How Digital Platform Smooths Operations

In a 2009 interview with Insurance Journal, Juan Andrade of The Hartford ranked “improving operational efficiency” third on a list of essential priorities for P&C insurers, below both customer retention and a systematic sales approach.

This ranking made sense 10 years ago. At that time, Andrade’s top two priorities were customer connections and insurance sales, but digital means of providing either one had not fully developed.

Today, however, all three of these top priorities can be addressed through a digital platform — and placing operational efficiency first on the list has the power to boost the other two.

Digital operations management “is not only about technology,” says Eddy Lek at Schneider Electric. “It requires a holistic approach to transform operations; implementing changes to the existing business and operations models and training employees to effectively operate with new tools – [e]mpowering the workforce to leverage technology for greater efficiency.”

Here, we look at how a digital platform improves operational efficiencies for P&C insurers. We also discuss how insurers can identify the top challenges they face and ask the right questions to ensure they implement digital tools that address those challenges effectively.

The Digital Future and Its Challenges for Insurers

Property and casualty insurers have seen stormy weather in the past few years, literally and figuratively. The need to respond to claims from the 2017 hurricane season, decreasing auto coverage purchases combined with rising claim costs and other factors have resulted in losses across the board, according to a Deloitte report.

Customer needs and demands are changing, as well, as Insurance Journal’s Michael Kasdin notes. For instance, younger adults drive less, reducing demand for auto insurance policies and increasing interest in newer, more adaptable tools like pay-per-mile auto insurance. Gig economy work like driving for Uber or Lyft or listing rentals with AirBnB has changed needs in auto and home insurance, as well.

See also: Digital Playbooks for Insurers (Part 4)

According to Kasdin, insurtech is poised to address many of these problems. Yet concerns about cybersecurity and anticipating the “right” place to invest in digital platforms and similar tools continue to stall many insurers, as Nate Anderson, Pascal Roth and Pierre-Henri Boutot described in a Bain & Co. brief.

To address sinking premiums, rising claims and the retention of a customer base shifting rapidly away from old standards of expectation in insurance, insurtech stands out. Improving operational efficiency via digital platforms can improve P&C insurers’ ability to address all three threats simultaneously.

Digital Tools for Operational Efficiency

A recent Audit and Risk Committee Forum survey by PwC found that 44% of insurance leaders surveyed believe that “most existing insurers will not survive, at least in their current form.” And one of the biggest causes of their demise will be operational inefficiency.

Currently, operational inefficiencies in P&C insurance are commonly found in “repetitive, business rule-driven work,” according to February 2018 PwC white paper. While other inefficiencies exist, the sheer volume of repetitive, rule-driven work sets insurers apart from many other industries.

For decades, such work has demanded human intervention because no machinery existed to ensure that the rules were followed and that the task was done correctly each time. Today, however, machine learning, AI and similar tools make it possible for insurance companies to automate much of this work for increased efficiency.

“It’s always important to realize that 55% to 60% of all the cost within any given agency is going to be personnel cost,” Andrade told Insurance Journal in 2009. “The key here is making sure that your people, your employees are being as productive as they can.”

Digital platforms offer new ways to ensure employee productivity. In an automated world, insurance companies can reevaluate the contributions each agent and employee makes based on the value added to the process, providing a powerful new way to determine and eliminate inefficiencies.

How Efficiency and Customer Retention Meet on a Digital Platform

The February 2018 PwC report noted that when it comes to insurtech, most P&C insurers are still thinking in an “outward”-facing mode. They’re embracing digital platforms primarily for the platforms’ ability to connect them with customers who increasingly demand easy digital communication, online purchasing and consistent points of contact.

Meanwhile, Ben Kerschberg at Forbes identifies three “pillars of change” for digital platforms: customer service, operational processes and business processes. In other words, digital platforms do have the power to improve operational efficiencies in customer service — but customer service is only one of three pillars of opportunity. Insurers who focus here miss the two opportunities to greatly improve operational and business efficiency, as well.

Five years ago, big data was big news. Today, it’s a given in most businesses. The ability to analyze vast amounts of data to spot meaningful trends and changes can revolutionize risk analysis and operational efficiency in insurance, but insurers must first have the digital platform necessary to capture and analyze data.

Customers are willing to provide more data to get seamless digital service. They’re also willing to pay more for service on a strong, integrated digital platform — up to 21% more to get, it, according to Ameyo’s Shaista Haque.

A digital platform also makes it easier for insurers to streamline service, not only to customers but also within the organization itself. For instance, when products are developed in a streamlined digital environment, much of the inefficiency caused by in-person meetings, incompatible or un-editable digital documents, checking details or numbers by hand and other prolongations of the product development cycle can be minimized or defeated. This increased internal efficiency improves the ability to provide customers with products that meet their changing needs on a timetable that encourages customers to adopt them.

See also: Digital Insurance 2.0: Benefits  

Questions to Ask When Seeking the Right Digital Tools

Insurtech developments appear almost daily, which can leave insurance leadership feeling overwhelmed. What are the best tools for the particular challenges you face? How can you identify top inefficiencies, and how will you know you’re choosing the right digital platform capabilities to optimize them?

Deb Miller, director of market development for business process solutions at OpenText, identifies four operational efficiency optimization strategies that are being employed by an increasing number of insurance companies:

  • Improving operational efficiency by driving for leverage across silos
  • Scaling to address demand for specific products and across a broader geographical range
  • Expanding distribution channels while improving or maintaining excellent customer service
  • Automating case management tasks to reduce time to resolve in claims, as well as reducing paper and other resource waste

Knowing which strategies to prioritize, however, means knowing where your particular organization’s inefficiency pain points lie. A McKinsey & Co. white paper recommends that managers seeking to improve operational efficiency ask questions like:

  • How are we delivering value to the customer? How do we do so efficiently?
  • How do we work? What are some better ways to perform that work?
  • How do we connect goals, strategy and meaningful purpose? How do we communicate these to our teams and to our customers?
  • How are we enabling people to lead at their fullest potential?

Questions like these can help insurers find inefficiencies. The answers can also help digital platform providers identify which tools will be most effective for a particular insurer.

How to Be Agile in Today’s D2C Era

Direct-to-consumer (D2C) sales have shaken up multiple sectors, from retail consumables to insurance sales. While D2C sales of property and casualty insurance have the potential to improve customer satisfaction, increase upselling and boost retention, moving into the D2C space also poses challenges for insurers that have invested heavily in more traditional models.

Here, we look at some of the biggest challenges D2C poses, the opportunities available and how P&C insurers can improve their direct appeal to consumers without losing their traditional strengths.

The Challenge of D2C

D2C models are threatening traditional participants in a number of industries with their ability to adapt, innovate and streamline — skills that are tough for established players to exercise quickly,Groceryshop cofounder Zia Daniell Wigder notes.

“Ultimately, monopolistic players are stuck in a paradigm that is very profitable, but that leaves them with reduced ability to innovate and form direct, meaningful relationships with their customers,” Widger writes.

While Wigder’s analysis focuses largely on retailers, many of the same challenges of D2C competition apply to P&C insurers. In particular, P&C insurers need strong connections with customers. These relationships boost customer retention and provide key insights into behavior and risk that play an essential role in the development, pricing and deployment of insurance products.

And the D2C model makes customers want to build relationships with companies. As Ben Sun, general partner at Primary Venture Partners, tells Wigder, “New D2C brands emerging today understand these challenges and have built platforms that directly attack those vulnerabilities and provide consumers something of real value — either a far superior shopping experience, higher-quality goods, cheaper products or greater convenience.”

An outstanding shopping experience, better coverage, lower prices and increased convenience are high on the wish lists of those seeking P&C insurance — and, when D2C models can provide them, they become more attractive than their predecessors.

See also: Why More Don’t Go Direct-to-Consumer  

Even newcomers to the insurance market, however, face hurdles that sectors such as retail do not. Jay D’Aprile, executive vice president at Slayton Search Partners, says the complex web of legal regulations surrounding insurance creates additional hurdles for companies planning to either start on a D2C model or include a D2C option among their approaches.

Fortunately, these challenges also present opportunities.

D2C Opportunities for Insurers

A 2016 Timetric report on D2C innovation in insurance found that the prevalence of internet technology in consumers’ lives — and the transparency that brings to every industry — has shifted the balance of power from insurers to consumers in our industry. Most insurance companies’ customers now demand fast, efficient, digital-centric access to insurance information and products.

Often, a shift in the balance of power can feel like a cloud with no silver lining. Yet the power shift actually creates a number of opportunities.

Expanded (and Tailored) Product Offerings

Concerns over “choice paralysis” have long led P&C insurers to maintain a relatively small catalog of offerings. Insurance is complex, and a longstanding belief that too many options would cause customers to walk away has resulted in a reduced number of product offerings.

While too many choices can be overwhelming, the existence of many choices, alone, isn’t typically the problem. “There is no upper limit to the number of options you can provide customers. With our private exchange, companies are offering 30 or even 300 choices to customers with a great experience,” Liazon cofounder Alan Cohen says.

The trick, he adds, is to present options in a way that customers find intuitive to navigate. Personalization, packaging that clearly indicates differences in value and information access to support customer decisions allow D2C companies to lead customers easily through any number of choices.

What does this mean for insurers? As technology helps insurance companies develop new products more quickly, P&C insurers are no longer limited from the customer side when it comes to tailored offerings. It becomes easier for insurers to provide precise, personalized coverage — and doing so simultaneously feeds customers’ desires for personalization and specificity, boosting their likelihood of returning to the insurer.

Increase Employee and Customer Satisfaction at the Same Time

In a 2016 report, Liazon found that companies using a D2C approach to both customer-facing products and employee-facing information tripled their employee satisfaction and doubled their customer satisfaction.

How? In both cases, the D2C approach made the product in question — whether it was auto insurance for customers or health insurance for employees — easier to access. Questions could be answered more quickly, often with a quick browse on a website or mobile app. Selecting benefits or coverage was easier and more transparent and felt more personal.

Companies that use these tools to collect customer or employee data have seen big boosts from their D2C approach, as well. “By leveraging analytics, we can deliver promotions and offers more efficiently to our consumers,” former High Ridge Brands CEO James Daniels explains, “and build our brands using owned media assets including our millions of Facebook Fans, email subscribers and website visitors vs. solely relying on paid media channels and at-shelf promotions.”

How to Innovate

D2C provides opportunities to increase agility, not only in the sale of P&C insurance products but in the way an insurance company understands customers, analyzes risk and does business. Technology provides the key.

An agile insurance business in a D2C world “typically requires a multi-channel approach, including web, mobile, social, email and phone,” D’Aprile said. “Interaction on each of these plains must be tracked coherently to cater to the increasingly non-linear customer journey.”

And, as Daniels noted, tracking customer interactions matters. Currently, insurers are limited by the systems they’ve build to track only certain types of customer data — and by legacy computer systems that can’t crunch available data efficiently. To get ahead of this problem, insursers will need to explore more expansive ways to capture and understand customer data.

A strong D2C platform is only part of the equation. “If DTC is not a strategy that is deeply ingrained across the entire enterprise, customers will quickly see it for what it is: a smoke screen,” D’Aprile said. “Fancy technology cannot overcome operational siloes and uncoordinated business functions.”

See also: Why Are Direct-Sales Carriers Winning?

While D’Aprile mentions a multichannel approach as one solution to this problem, increasingly savvy customers who interact with insurers through multiple channels may come to read “multichannel” as a smokescreen, as well, because the experience in each channel is still different, BOLT’s CEO Eric Gewirtzman says.

An omni-channel approach puts the customer experience, insurers’ access, agents’ information and data analytics under a single umbrella, maximizing the agility of the entire system while offering customers the personalization and speed of a D2C approach, according to CRM software provider Ameyo. Omni-channel allows for more agility in a D2C world — whether or not an insurer wishes to prioritize D2C insurance sales.