Tag Archives: property and casualty

How to Take a Bold Approach to Growth

In today’s insurance environment, victory belongs to the bold. Margins are under pressure, and competition is heating up; insurers can no longer afford to sit on businesses that are under-performing or sub-scale.

By taking a portfolio approach to their businesses, insurers can start to assess the value and performance of their assets to make bold decisions on whether to grow or go (build or leave the business).

Time for bold decisions

Facing continued low interest rates, growing rate pressures in the property and casualty (P&C) sector and high levels of competition in both the P&C and life sectors, insurers will see margins under pressure for the near future.

Not surprisingly, most have already undertaken massive cost-reduction initiatives. Now, with little room left to cut, some are starting to take a more critical and strategic view of their business as a whole.

Our experience suggests that insurers need to take bold action and make difficult decisions now if they hope to create shareholder value and grow their business. The reality is that too many insurers are carrying businesses that are sub-scale, underperforming or simply distracting for management.

See Also: What is Your 2016 Playbook for Growth?

To help organizations assess their businesses and local operations, we have developed a diagnostic tool that segments businesses in the following way:

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Taking a portfolio view

We firmly believe that there are significant opportunities to help insurers enhance shareholder value by taking a portfolio view of their assets. And, in doing so, insurance organizations should be able to make clear decisions about whether to go (i.e., leave those markets and businesses that do not meet the strategic objectives of the organization) or grow (i.e., committing to targeted investment to drive transformational change and improvement initiatives
that will allow the business to compete effectively).

Indeed, by looking at non-core businesses as a portfolio of assets, insurance executives should be able to properly assess each businesses’ strategic fit, performance and synergies, which, in turn, will enable them to identify opportunities to improve the business through portfolio realignment.

Taking a portfolio view will also provide insurance executives with the insight needed to prepare a fix, close or sell strategy that drives a clear approach for non-core assets and then move through to a robust execution plan with appropriate governance.

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GO: A bespoke approach to divestment

In those cases where the assessment process leads to the decision to go, insurance executives will need to develop a smart divestment strategy for the business. Interestingly, our experience suggests that the divestment process has evolved considerably over the past decade.

Whereas in the past, the normal approach to selling a business involved rigid auction processes based on standard checklists and documents such as information memoranda and vendor due diligence reports, most now recognize that this approach may not maximize value.

Instead, insurers are now taking a more bespoke and focused approach to divestment that is largely influenced by four key factors:

— economic conditions
— sellers taking control
— wider buyer populations
— business model changes

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GROW: More than just scale

Insurers need to have sufficient optionality and diversification
to respond to a rapidly changing business environment. And while not all divisions and local operations need to be market-leading, they do need to demonstrate how they can make a contribution to the overall strategic ambitions of the organization.

For some, the answer will come in the form of inorganic growth within their sub-scale businesses. For others, targeted investments to support product growth initiatives or new distribution arrangements offer a lower-risk solution.

However, while many deals have been driven recently by organizations with a (fully understandable) strong focus on costs and efficiency, we often find that scale, in itself, is not a good enough reason to support a deal. Indeed, we believe that acquisitions must also bring complementary capabilities (such as new expertise in specific product lines, increased geographical reach or new distribution models) to create a sustainable platform for future growth.

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GROW: Responding to a changing environment

New technologies, changing customer demands, new ways of doing business and the threat of innovators disrupting the traditional business model are all changing the way that insurers view their portfolio of assets and businesses.

See Also: The Formula for Getting Growth Results

Clearly, understanding and capturing the benefits of innovation is a critical imperative, and there are major opportunities available for companies willing to invest in new technologies. Recognizing this, many insurers are now starting to develop new models and ways of working with the financial technology (FinTech) community.

Key takeaway: Be bold

Regardless of whether the decision is to grow or go, insurers need to start facing up to the difficult decisions that must be made about their underperforming assets.

Interestingly, our experience suggests that — in this rapidly evolving space — outright acquisition may not always be the right answer. As our recent report, The Power of Alliances, demonstrates, many insurers are now exploring the value that could be generated by investing in partnerships, alliances and innovation hubs to broaden their exposure to innovations and technology solutions.

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Simply put, insurers can no longer afford to sit on businesses that are not delivering value; they must make bold decisions and then execute on them to win in this environment.

Reprinted from (Regulatory Challenges Facing the Insurance Industry in 2016,) Copyright: 2016 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the facts of a particular situation.

For additional news and information, please access KPMG’s global website.

A Word With Shefi: Applebaum at ISG

This is part of a series of interviews by Shefi Ben Hutta with insurance practitioners who bring an interesting perspective to their work and to the industry as a whole. Here, she speaks with Stephen Applebaum, managing partner, Insurance Solutions Group, and senior adviser at StoneRidge Advisors, who describes the implications of the “torrents of data that will flow from connected cars, homes, buildings and people.”

To see more of the “A Word With Shefi” series, visit her thought leader profile. To subscribe to her free newsletter, Insurance Entertainment, click here.

Describe what you do in 50 words or less:

I provide consulting and advisory services to participants across the North American auto and property insurance ecosystem, which leverage my experience, industry contacts and understanding of innovation and emerging technologies to drive meaningful, measurable improvement in revenue, market share, process, profitability and user and customer experience.

What led you to your career in insurance?

Serendipity, actually. An early management consulting engagement with a technology-based startup providing insurance claims solutions to P&C carriers led to a full-time operational and management role and ultimately a very exciting and rewarding 30-year career spanning several different companies that continues today.

What emerging technology will change how insurance is sold?

Prescriptive analytics applied to the torrents of data that will flow from connected cars, homes, buildings and people – enabled by mobile devices and embedded sensors – will transform virtually every aspect of how insurance products are developed, priced, packaged and sold, and how risk is managed in general.

A carrier you highly value for its innovative culture?

Among the many top-tier carriers that have invested in and developed innovative cultures, USAA stands out because of its highly focused and fierce dedication to pursuing constant improvement and technological innovation in the pursuit of providing superior service excellence to its “members” in insurance as well as the full range of its financial services.

You recently published an article on “Disruption in the Automotive Ecosystem.” What tip do you have for companies looking beyond their core value to offer innovative solutions in the auto ecosystem?

I suggest that auto insurance carriers focus on leapfrogging current incremental innovation around connected vehicle and data technologies and begin designing and developing the auto insurance products and services of the future. These will likely be very different than anything offered today and will be enabled by enormous amounts of data flowing from not just connected cars but the broader Internet of Things. They may include personalized, utilization-based micro auto insurance coverages, ride-and-car sharing insurance solutions for owners, drivers and passengers, risk management services from behavioral driving modification assistance to location-based and contextual alerts for commercial favorites as well as navigational, traffic, roadside assistance and weather conditions.

You’ve had more than 25 years of consulting experience in the P&C space. What piece of advice have you found to always be relevant regardless of the subject matter?

I regularly ask myself, “What am I doing, and why am I doing it, and is this the best possible use of my time and talents?” It sounds so simplistic, but if you do it honestly you will find it very valuable.

You are a frequent chairman in industry conferences. In fact, you are the chairman of a coming event on IoT in Miami in December. Who should be attending and why?

Anyone who plans to work, invest and succeed anywhere in the insurance ecosystem over the next decade and beyond should attend. This includes insurance C-level executives, heads of innovation, strategy, claims and innovation, underwriting, business development, product development, strategy, design and innovation, heads of IT, technology and digital, IoT technology companies and startups and regulators.

When you are not consulting on insurance or hosting insurance events, you are most likely…?

Reading, watching and listening to anything and everything that relates to my work – which is, in fact, also my hobby.

Insurance at a Tipping Point (Part 1)

Since the start of the decade, we’ve encouraged insurers and industry stakeholders to think about “Insurance 2020” as they formulate their strategies and try to turn change into opportunity. Insurance 2020’s central message is that whatever organizations are doing in the short term, they need to be looking at how to keep pace with the sweeping social, technological, environmental, economic and political (STEEP) developments ahead.

Now we’re at the mid-point between 2010 and 2020, and we thought it would be useful to review the developments we’ve seen to date and look ahead to the major trends coming up over the next five years and beyond.

Where are we now?

Insurance is an industry at the tipping point as it grapples with the impact of new technology, new distribution models, changing customer behavior and more exacting local, regional and global regulations. For some businesses, these developments are a potential source of disruption. Those taking part in our latest global CEO survey see more disruption ahead than CEOs in any other commercial sector (see Figure 1), underlining the need for strategic re-evaluation and possible re-orientation. Yet for others, change offers competitive advantage. A telling indication of the mixed mood within the industry is that although nearly 60% of insurance CEOs see more opportunities than three years ago, almost the same proportion (61%) see more threats.

The long-term opportunities for insurers in a world where people are living longer and have more wealth to protect are evident. But the opportunities are also bringing fresh competition, both from within the insurance industry and from a raft of new entrants coming in from outside. The entrants include companies from other financial services sectors, technology giants, healthcare companies, venture capital firms and nimble start-ups.

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How are insurers feeling the impact of these developments?

Customer revolution

The insurance marketplace is becoming increasingly fragmented, with an aging population at one end of the spectrum and a less loyal and often hard to engage millennial generation at the other. The family structures and ethnic make-up within many markets are also becoming more varied and complex, which has implications for product design, marketing and sales. This splintering customer base and the need to develop relevant and engaging products and solutions present both a challenge and an opportunity for insurers. On the life, annuities and pensions side, insurers could design targeted plans for single parents or shift from living benefits to well-being or quality of life support for younger people. On the property and casualty (P&C) side, insurers could create partnerships with manufacturers and service companies. Insurers could also offer coverage for different lifestyles, offering flexible, pay-as-you-use insurance or providing top-up coverage for people in peer-to-peer insurance plans.

As the nature of the marketplace changes, so do customer expectations. Customers want insurers to offer them the same kind of easy access, show the same understanding of needs and provide the sorts of targeted products that they’ve become accustomed to from online retailers and other highly customer-centric sectors. Digital developments offer part of the answer by enabling insurers to deliver anytime, anywhere convenience, streamline operations and reach untapped segments. Insurers are also using digital developments to enhance customer profiling, develop sales leads, tailor financial solutions to individual needs and, for P&C businesses in particular, improve claims assessment and settlement. Further priorities include the development of a seamless multi-channel experience, which allows customers to engage when and how they want without having to relay the same information with each interaction. Because the margins between customer retention and loss are finer than ever, the challenge for insurers is how to develop the genuinely customer-centric culture, organizational capabilities and decision-making processes needed to keep pace with ever-more-exacting customer expectations.

Digitization

Most insurers have invested in digital distribution, with some now moving beyond direct digital sales to models that embed products and services in people’s lives (e.g., pay-as-you drive insurance).

A parallel development is the proliferation of new sources of information and analytical techniques, which are beginning to reshape customer targeting, risk underwriting and financial advice. Ever greater access to data doesn’t just increase the speed of servicing and lower costs but also opens the way for ever greater precision, customization and adaptation. As sensors and other digital intelligence become a more pervasive element of the “Internet of Things,” savvy insurers can – and in some instances have – become trusted partners in areas ranging from health and well-being to home and commercial equipment care. Digital technology could extend the reach of life, annuities and pension coverage into largely untapped areas such as younger and lower-income segments.

Information advantage

Availability of both traditional and big data is exploding, with the resulting insights providing a valuable aid to customer-centricity and associated revenue growth. Yet many insurers are still finding it difficult to turn data into actionable insights. The keys to resolving this are as much about culture and organization as the application of technology. Making the most of the information and insight is also likely to require a move away from lengthy business planning to a faster and more flexible, data-led, iterative approach. Insurers would need to launch, test, obtain feedback and respond in a model similar to that used by many of today’s telecom and technology companies.

A combination of big data analytics, sensor technology and the communicating networks that make up the Internet of Things would allow insurers to anticipate risks and customer demands with far greater precision than ever before. The benefits would include not only keener pricing and sharper customer targeting but a decisive shift in insurers’ value model from reactive claims payer to preventative risk advisers.

The emerging game changer is the advance in analytics, from descriptive (what happened) and diagnostic (why it happened) analysis to predictive (what is likely to happen) and prescriptive (determining and ensuring the right outcome). This shift not only would enable insurers to anticipate what will happen and when, but also to respond actively. This offers great possibilities in areas ranging from more resilient supply chains and the elimination of design faults to stronger conversion rates for life insurers and more effective protection against fire and flood within property coverage.

Two-speed growth

These developments are coming to the fore against the backdrop of enduringly slow economic growth, continued low interest rates and soft P&C premiums within many developed markets. Interest rates will eventually begin to rise, which will cause some level of short-term disruption across the insurance sector, but over time higher interest rates will lead to higher levels of investment income.

On the P&C side, reserve releases have helped to bolster returns in a softening market. But redundant reserves are being depleted, making it harder to sustain reported returns.

The faster growing markets of South America, Asia, Africa and the Middle East (SAAAME) offer considerable long-term potential, though insurance penetration in 2013 was still only 2.7% of GDP in emerging markets and the share of global premiums only 17%. Penetration in their advanced counterparts was 8.3%. Rapid urbanization is set to be a key driver of growth within SAAAME markets, increasing the value of assets in need of protection. Urbanization also makes it harder for those from rural areas to call on the support of their extended families and hence increases take-up of life, annuities and pensions coverage. The corollary is the growing concentration of risk within these mega-metropolises.

Disruption and innovation

Many forward-looking insurers are developing new business models in areas ranging from tie-ups between reinsurance and investment management companies to a new generation of health, wealth and retirement solutions. The pace of change can only accelerate in the coming years as innovations become mainstream in areas ranging from wearables, the Internet of Things and automated driver assistance systems (ADAS) to partnerships with technology providers and crowd-sourced models of risk evaluation and transfer.

At the same time, a combination of digitization and new business models is disrupting the insurance marketplace by opening up new routes to market and new ways of engaging with customers. An increasing amount of standardized insurance will move over to mobile and Internet channels. But agents will still have a crucial role in helping businesses and retail customers to make sense of an ever-more-complex set of risks and to understand the trade-offs in managing them. On the life, annuities and pension side, this might include balancing the financial trade-offs between how much they want to live off now and their desired standard of living when they retire. On the P&C side, it would include designing effective aggregate protection for an increasingly broad and valuable array of assets and possessions.

Companies can bring innovations to market much faster and more easily than in the past. These companies include new entrants that are using advanced profiling techniques to target customers and cost-efficient digital distribution to undercut incumbent competitors. It’s too soon to say how successful these new entrants and start-ups will be, but they will undoubtedly provide further impetus to the changes in customer expectations and how insurers compete.

In the next two articles in this series, we look at how all these coalescing developments are likely to play out as we head toward 2020 and beyond and outline the strategic and operational implications for insurers. While we’ve set a nominal date of 2020, fast-moving businesses are already assessing and addressing these developments now as they look to keep pace with customer expectations and sharpen their competitive advantage.

What comes through strongly is the need for reinvention rather just adjustment if insurers want to sustain revenue and competitive relevance. As a result, many insurers will look very different by 2020 and certainly by 2025. As new entrants and new business models begin to change the industry landscape, it’s also important to not only scan for developments within insurance but also maintain a clear view of the challenges and opportunities coming from outside the industry.

For the full report from which this article is excerpted, click here.

7 Imperatives for Moving Into the Cloud

For property and casualty insurance carriers, growth is hard-fought in an environment of compressed margins, regulatory scrutiny, increased competition and customer expectations for anywhere/anytime service. Add unsteady economic conditions, low interest rates that decrease investment income and catastrophic losses from significant events such as Hurricane Sandy into the mix, and insurers are finding that their tried-and-true business methodologies that worked well pre-2008 are in desperate need of a facelift. Growth is especially challenging for insurance carriers with inflexible legacy technology systems, as well as small and mid-size carriers that lack the resources to make the product and operational changes they need to remain relevant and profitable.

Insurance carriers must navigate an environment that rewards nimbleness and flexibility, but to do so requires that insurers modernize their current systems and processes. Consider the example of bringing a new product to market. At most insurers, the process may take six months or more, with a price tag reaching seven figures. By the time the product is ready to launch, the dynamics in the market have shifted, or perhaps a new regulation has been legislated. The insurer has two equally unappealing choices: Launch the product as is and never realize a return on investment, or delay launch and retool the product, increasing the R&D price tag and losing potential revenue and market share.

There is a better way: Updating legacy systems with flexible and scalable Software as a Service (SaaS) computing capabilities allows P&C insurers to rapidly capitalize on opportunities and support growth. This article presents seven imperatives for the P&C insurance industry based on industry research and analysis, and outlines how a SaaS implementation can address each imperative.

IMPERATIVE 1: INCREASE SPEED-TO-MARKET 

In an Accenture survey of insurance industry professionals, more than seven of 10 (72%) respondents indicated that it takes their organization six months or more to launch a major product. In today’s constantly changing environment, six months is a long time indeed, and it’s likely that the market looks different than when product development began. However, insurers that are able to rapidly offer innovative products and services through multiple channels can take advantage of shifts in the market and exploit the slowness of competitors. Today, “slow and steady” doesn’t win the race.

Compared with legacy system-based product development, which requires coding, scripting and testing, a SaaS infrastructure by design incorporates more nimble and configurable software, significantly reducing development time and eliminating the cost of hiring a vendor or consultant to make coding changes. In addition, SaaS provides rapid provisioning of live and test environments to further increase speed-to-market. Lastly, SaaS requires minimal investment in hardware, software and personnel. Insurers can use a pre-configured infrastructure to reduce development costs by more than 80% over comparable legacy systems, according to Donald Harrell, senior vice president of marine, exploration and production for Liberty International Underwriters. This, in turn, reduces the risk for product launches.

IMPERATIVE 2: QUICKLY RESPOND TO MARKET AND COMPETITIVE CHANGES

Those insurers not able to turn on a dime may be in trouble because so many of their competitors are preparing to invest in technologies and processes that will help them design, underwrite and distribute products and services more quickly. More than 80% of insurance CEOs are planning to increase investment in technology, and more than 60% plan to develop their capacity for innovation. Innovation must continue after product launch, and SaaS allows insurers to retool products as market drivers dictate.

The ability to revamp an existing product is particularly attractive to small or mid-size insurers launching products to a relatively small target market. With SaaS, insurers are able to bring niche products to market that would otherwise not deliver enough ROI to justify the investment. Likewise, if a product is not profitable, an insurer can make changes and quickly reconfigure the product rather than being forced to offer an unprofitable or marginally profitable product because it’s too costly to make changes.

Insurers can also more effectively price products. SaaS is charged on a subscription or consumption basis, so costs are more closely aligned with the revenue being generated by the new product.

IMPERATIVE 3: REDUCE COSTS TO MAINTAIN PROFITABILITY

As the U.S. economy slowly improves, P&C profitability is starting to improve as well. However, there is little cause for celebration. Fitch Ratings warns insurers that the current pricing cycle may be running out of steam, forcing insurers to cut expense levels to maintain profitability. Now is the time for insurers to put in place cost-saving strategies. With a SaaS infrastructure, insurers can innovate and offer new products and services without incurring capital expenses.

Rather than implement an expensive technology infrastructure, SaaS allows insurers to leverage preconfigured infrastructure and reduce IT resource requirements, staffing and professional services fees. In fact, SaaS up-front costs are typically less than 20% of the development costs of legacy systems. SaaS pricing models have also matured, giving insurers access to a variety of bundled and unbundled pricing options.

IMPERATIVE 4: AUTOMATE AND STREAMLINE UNDERWRITING

A survey of insurance professionals by FirstBest Systems found that 82% of respondents believe that their insurer’s underwriters spend less than half of their time actually underwriting, with the majority of underwriter time spent on data collection and administrative tasks. Insurers understand that giving underwriters the automation tools they need to do their jobs effectively is key to improved underwriting, but many believe that the technology is problematic, with 81% citing lack of data integration as limiting underwriting productivity. In contrast to legacy underwriting systems, SaaS allows insurers to easily incorporate rules to automate the underwriting process and increase underwriting ratios and revenues.

SaaS also allows for streamlined data integration as opposed to off-the-shelf packages that often need extensive modification, thus eliminating a major stumbling block to optimal productivity for underwriters.

IMPERATIVE 5: SUPPORT NEW DELIVERY CHANNELS

Mobile technology continues to be top-of-mind for many carriers, with more than 60% planning to add new mobile capabilities for policyholders and agents. Notes Novarica partner Matthew Josefowicz, “As the use of smartphones and especially tablets displaces the use of desktops and laptops in more areas of personal and professional life, support for these platforms is becoming critical to insurers’ abilities to communicate electronically across the value chain.” The problem for carriers is that legacy systems were not designed to run on mobile devices. However, SaaS, with its more modern coding, is able to provide both a better user interface and operational efficiency for smartphones and tablets. SaaS allows insurers to distribute products through a variety of new channels (e.g., banks, car dealerships) that would not be possible with legacy systems.

Creating and recreating websites and portals quickly and inexpensively means that insurers can more readily compete with “disrupters” that use a direct-to-consumer model. Insurers can design multiple portals for different geographies, languages and associations in near-real time. Deloitte reiterates the importance of mobile and other delivery channels for insurers: “No one can afford to take their distribution systems for granted. More insurers are likely to grow bolder in exploring alternative channels to capture greater market share, catering to the needs and preferences of different segments while cutting frictional costs.”

IMPERATIVE 6: COLLABORATE WITH THIRD PARTIES

Insurers are increasingly relying on third parties for a variety of integration services, including regulatory compliance, sophisticated data analysis, geo-location capabilities for risk assessments and risk ratings for more accurate underwriting and risk pricing. Integration between carrier legacy systems and third-party providers is typically problematic because of proprietary file formats and other issues that make it difficult to share data. In contrast, SaaS provides links to existing interfaces for access to third-party databases. Integration reduces costly, error-prone and time-consuming manual intervention.

IMPERATIVE 7: IMPROVE THE CUSTOMER EXPERIENCE

The majority of insurers (91%) believe that future growth depends on providing a special customer experience, according to Accenture’s survey. However, getting the relevant and up-to-date data they need to give customers a personalized experience is a critical challenge for 95% of respondents.

In the same survey, only 50% of insurers say that their carrier leverages data about customer lifestyles to determine the products and services most likely to meet customer expectations; 70% rate themselves as “average” or “weak” in their ability to tailor products and services to customers’ needs. A similar number (64%) give themselves low ratings for their ability to provide innovative products and services. Poor service — or even average service — is no longer acceptable. Consumers are accustomed to personalized experiences such as shopping on Amazon or booking airline tickets on a travel site, and expect a similar type of experience from their insurer.

Thomas Meyer, managing director of Accenture’s insurance practice, says, “To pursue profitable growth, insurers need to achieve the kind of differentiation that allows organizations like Apple to charge a premium while building customer loyalty. As Apple has shown, the answer is consumer-driven innovation that creates an exceptional user experience.” SasS enables insurers to access the data points they require to differentiate their products throughout the customer experience. In a market commoditized by regulations and related factors, insurers that can leverage SaaS to deliver a straightforward, simple process to customers will give themselves a competitive advantage.

 CONCLUSION

In an accelerated market where change is the new constant, P&C insurance carriers cannot afford to continue to do business as usual. Imperatives such as speed-to market, responsiveness to customer demands, new delivery channels, cost reduction and improved underwriting make it necessary for insurers to explore new methods of providing products and services to customers. SaaS, with its flexibility, scalability and low cost, is a technology imperative if carriers hope to grow and remain competitive.

For the full white paper Oceanwide, click here.

Modernizing Your Claims Operation

The claims operation poses a vital opportunity for insurance organizations to drive efficiency, cost savings and customer satisfaction. A modern claims platform—native to the Internet—is key. However, many insurance organizations still use outdated systems that are sluggish, lack contemporary claims-handling capabilities and cannot easily adapt to the industry’s evolving business needs.

In this article, we’ll discuss: the drivers that are leading more organizations to modernize; key criteria for a modern platform; strategies for successful implementation; key considerations for configuration; and the importance of user training. Finally, we’ll review the benefits that organizations can achieve by leveraging modern infrastructure.

Drivers to Modernize

An organization’s claims strategy is the cornerstone to its competitive advantage. The claims process represents a major touch point with customers, and the quality of the service provided during these transactions has the potential to make or break long-term customer relationships. An investment in modernizing claims will go a long way toward not only improving customer service but also boosting the bottom line.

Claims currently cost the property and casualty industry $40 billion just to administer, and it’s a process that would significantly benefit from an investment in IT infrastructure improvements. A typical claims department has more work and increasingly more data to manage. The sheer volume of transactions and a lack of automation tools have prevented staff from being able to focus on key tasks that would truly improve costs and outcomes. In addition, these departments are hampered by traditional bottlenecks in efficiency, including manual, paper-based operations and disjointed workflow.

Many organizations still have legacy system, which are slow and frequently crash. Maintaining these outdated platforms is not only expensive—consuming as much as 80% of IT budgets—but they also force organizations to resort to labor-intensive workarounds to process claims and to get the data they need. These systems are resistant to change and integration with other solutions.

Outdated systems also make the analysis of claims data cumbersome. Organizations spend significant time and IT resources to develop data queries, but oftentimes the resulting reports don’t contain the information required, so organizations have to start over. A modern platform leverages sophisticated data mining tools, so organizations don’t miss vital opportunities to reduce costs and improve their operations.

Within insurance, organizations must continually respond to new regulatory requirements as well as launch products and service capabilities. Organizations must be able to implement changes on the fly, preferably at the direction of business users rather than at the mercy of busy IT staff. This type of flexibility empowers organizations to continually rethink and reengineer workflow to meet compliance and business needs.

Many organizations dissatisfied with legacy systems rushed out to obtain browser-based applications, not realizing that first-generation solutions grew out of their legacy counterparts. Many first-generation systems still possessed an ineffectual design and faced significant performance issues.

Today’s next-generation, browser-based solutions are truly modern and native to the Internet, offering more flexibility and capability.

Building a Strategic Plan

With continual expansion and increased transactions, more organizations are outgrowing their current IT infrastructure. As a result, many are beginning to outline a plan to modernize. Such plans must project claims management needs, along with strategic business objectives, so organizations can support not only near-term goals but also a long-term vision. These plans must consider the selection and implementation of new systems, as well as configuration, integration and optimization of new and existing systems to optimize the overall enterprise.

Criteria for a Modern Platform

A modern platform must support an organization’s ability to grow and expand, and accommodate changing system and business needs over a period of five to 10 years. In addition, a modern platform must meet two critical requirements—in-depth claims-handling and extreme flexibility—both of which can help organizations align the system to their evolving claims and business strategy. From an architectural standpoint, a modern platform must scale well, handling both a large volume of transactions and a large number of users.

Modern platforms are capable of tightly integrating data, systems and people to facilitate streamlined workflow and enhanced decision-making. The platform must offer a wide range of integration options, including pre-built connectors, batch processing, Web services and other custom interfaces. Integration is essential to connect claims with other internal and external systems and stakeholders. Modern solutions have a track record of innovation, continually investing in new features, tools and capabilities.

Newer solutions also incorporate business intelligence (BI) and data mining tools. BI has the power to revolutionize the way organizations analyze data and predict trends. These tools deliver the information needed to improve results and minimize risk. They often use data cubes to pre-aggregate information and generate reports at amazingly fast speeds and with dynamic viewing capabilities, helping organizations make critical business decisions.

Strategies for Implementation Success

Implementing a new system can be expensive, resource-intensive and disruptive to day-to-day operations. Not surprisingly, many projects fail—while others fall behind schedule, go over budget or don’t provide the anticipated benefits.

An experienced solutions provider will outline an in-depth implementation plan and walk organizations through the process to avoid common missteps. Many vendors use an agile implementation process, which is iterative and incremental, thereby enabling the vendor to expedite the delivery of requirements, incorporate client-requested changes and reduce the risk of project delays or going over budget.

A typical implementation can take six to 18 months, depending on the scope of the project, the lines of business affected and the number of systems being replaced. Many organizations have chosen to utilize a phased implementation approach, so they can deploy the solution sooner—perhaps with one or two lines of business. This allows them to reap an immediate return, while also gaining hands-on experience with the system to better configure it for the next phase of implementation.

Key Considerations for Configuration

Time and consideration should be given to configure a new system to meet unique claims workflow and process needs. An organization must consider what screens are important, as well as whether it may need to collect unique information through customized screens and data fields. Business rules should be set up to manage and automate workflow, as well as to trigger alerts for events that require supervisory review. In addition, reports should be configured, so, once the system goes live, they’ll be ready and automatically delivered to the relevant stakeholders.

Establishing user rights and restrictions also helps facilitate quality control in the claims process. Management may want to restrict user rights and access within the system, according to the type of user. For example, management could assign full, partial or read-only access. One organization granted nurse case managers access to only the case management portion of claim files. Another restricted inexperienced adjusters from setting high reserves or significantly increasing reserves. Instead, such actions required a supervisor’s review and approval.

A Commitment to Training

Another key factor for success is extensive and thorough system training for users. Organizations should consider scheduling training two months before the go-live date to begin to familiarize users with the look and feel of the system, and a second training immediately before “go live” to ensure users are comfortable with the claims workflow within the new system environment.

Certainly, technology cannot replace the intuition, analysis or personal service that claims professionals provide. Claims staff should understand how the technology will help them to better apply their expertise. For example, by automating administrative functions, they can focus on knowledge-based and service-oriented tasks.

Business users who will be responsible for updating the system to accommodate new requirements must be trained on a continuing basis. These users will define system changes—whether it’s for a new report, workflow or supervisor alert—so they must understand the system logic. Organizations must commit to keeping these users up to date, especially as new versions and tools become available.

Key Benefits and Cost Savings

As more organizations modernize, they’re beginning to realize the extensive business benefits that can be achieved, including the following:

  • Reduce claims costs. Modernization enables an organization to better manage claims costs and outcomes. Organizations will have the reporting tools they need to identify high-cost areas and take advantage of opportunities for savings.
  • Leverage data. With dashboards, business intelligence tools and reporting platforms, modern systems help facilitate both a big-picture and granular view of claims. With this understanding, organizations can make business decisions that improve the bottom line.
  • Introduce products. When organizations introduce insurance policy products, they must configure operations to handle incoming claims. A modern system can help make updates to the claims side quickly and easily.
  • Enhance customer service. A modern platform helps organizations facilitate the delivery of timely, responsive and personalized service.
  • Improve operational efficiency. Organizations have increased the efficiency and productivity of claim departments, particularly with the use of business rules for task automation and document management for paperless claims processing. With these improvements, organizations have seen a significant return on investment.
  • Leverage IT benefits. Because of the superior design of modern systems, IT departments benefit from the ease of maintenance, security and upgrades. Staff member are freed to spend more time on projects such as process enhancements.
  • Ease the burden of compliance. Continuing to comply with new and emerging regulations can be an administrative and financial burden. Compliance is complex, but modern systems automate, streamline and facilitate the compliance process.

Keeping Pace for the Future

Insurance leaders are striving to continually improve their claims operation. Today, leveraging modern technology is a primary means to that end. The IT strategies discussed in this article are making it easier to administer and automate complex claims transactions, which involve multiple parties, multiple systems and various regulatory concerns.

As adopters have found, the more complex and cumbersome the claims transaction, the greater the opportunity for modern systems to improve efficiency, savings and service. Modern platforms also incorporate data mining and reporting to enable organizations to obtain insights to further drive performance.

In the end, there is no blanket solution, but, above all else, organizations need infrastructure capable of accommodating the ever-changing insurance market.