How can insurance companies leverage technology to solve business challenges?
Technological investments are common in every industry because they can improve specific processes or be utilized for the advancement of the entire firm and its operations. Even though insurance is a highly regulated industry it doesn’t mean that companies can’t invest in technology to improve their services and efficiency.
In fact, these investments are beneficial for both the company and for its customers. Companies will be able to optimize and automate their processes and pricing system, while customers can receive offers that fit their needs without paying additional service fees or coverage that they do not necessarily need.
The insurance market is highly saturated, therefore it is hard for companies to differentiate themselves from competition. However, if a company starts to integrate the latest technology to ensure that their offerings suit the needs of their customers, while also making their own operation more efficient, they can attain significant competitive advantage.
Read on to find out how technological investment can enhance your company!
Most common challenges in the insurance industry as of 2023
People’s expectations about services changed drastically over the last few years. Nowadays it is expected to have an easy-to-use platform that customers can access whenever they want. Here, they want to be able to manage their account, access information about their current service, or to request a new offer.
Basically, customers expect the same level of quality from insurance companies as in any other industry. The issue is that even though other industries caught up with technology and are constantly improving their platforms, insurance companies tend to lag behind as they keep using older technology that has been in place for many years.
Use of outdated technology
In a world where technological advancements constantly shape consumer expectations, insurance companies tend to stick to older systems that they know and trust. We would like to shine a light on how this practice can be harmful not just for customers but for the efficiency and everyday operations of a firm. Modernizing systems are not only beneficial for creating better offerings, pricing, or lowering risk, but also helps different processes to flow better and to meet deadlines.
Insurers often rely on legacy systems. Legacy systems are platforms that are usually outdated, therefore often unsupported, for example applications or servers. Even though these systems offer familiarity and predictability they can quickly lead to issues. Every day more and more parts of legacy systems stop being supported and the longer insurers wait to transition to a modern system, the harder (and more expensive) the conversion process will be. The maintenance cost of legacy systems is high and takes away resources from updating the technology. For instance, in 2019, the US federal government spent the majority of its IT budget (80%) maintaining legacy systems. This money could have been used for modernization and innovation. It is the same for insurers. The maintenance of such systems takes away lots of monetary and human resources that could be used for bettering consumer experience and attaining competitive advantage.
The use of legacy systems can result in issues that no insurer would want to face. Most notably in security concerns and workflow difficulties.
Insurance companies have to handle a vast amount of personal information, many of which are highly sensitive. The processing of such data is strictly regulated by authorities. Leakage of personal data can lead to numerous lawsuits and fines against insurers. It is cheaper to invest in a safe and modern system than to bear the consequences of a potential data leak. It’s not only sensitive information of your customers that is in danger of data leak, but also your own confidential business documents.
An outdated and unsupported system can also cause issues when it comes to the efficiency of certain processes. Legacy systems may not create a unified system that lets information flow between departments, thus creating excess work for employees on all levels of the organization. Some departments might not be able to access data that has been created by another department. This will slow down processes and create excess/duplicate data in a system that might already have struggles in that department.
Rising operational costs
There are several reasons why operational costs keep rising in the insurance industry. Some, like inflation, can not be dealt with, however many additional costs are integral to the management and the business model. General and administrative expenses can reach up to 20-30% of the total operational cost even though with IT investments they could be reduced by 10-20%. It takes a lot of time, care, and high quality customer service and background work to supply customers with services that fit their needs and they are happy to use. Moreover, the above mentioned use of inadequate technology can contribute to rising operational costs, by requiring many IT professionals to operate a less than adequate system. They generate excess workload in otherwise automatizable processes.
Gaining competitive advantage
Since the market is flooded with larger and smaller firms who offer very similar services, it is very difficult to establish a competitive advantage. A well-resourced market that is strictly regulated by authorities, and which struggles to keep up with technological advancements, is certainly difficult terrain when it comes to competing.
Unique offerings and service bundles can only serve as differentiation to a certain extent. It is easy for your competitors to copy and adapt similar offerings. Insurers are in need of hard-to-copy ideas and advancements that will grant them a desirable position.
Ultiro is here to help
On first glance, solving these challenges can be difficult, but they aren’t impossible to deal with. Especially when you have an experienced and dedicated partner who understands your needs.
Improve consumer experience
The opinion of your clients are important not only during the onboarding but during claim processes as well.
Automation is a great way to heighten customer satisfaction. Some people, especially from younger generations, prefer automated services that are easy-to-use and allow processes to run smoothly with minimal human interaction. Others might opt for face-to-face interactions, therefore even if you decide to automate some processes it is always a good idea to maintain traditional channels too.
Even if a lot of customers still prefer to have an agent who can handle their claim processes, many experience “pandemic fatigue”, meaning that they shy away from face-to-face interactions. In fact, according to Lightico, 73% of people are hesitant to meet their agent face-to-face. This data represents well that insurers need to invest in technology to cater to the needs of their clients. KPMG’s Operational excellence in insurance report clearly states that more than 70% of insurers are willing to invest in automation.
By building an easy and clear platform where users can follow processes or get information about their current offer and account, insurers can implement practices that are customers already expect in many other industries. This creates a sense of familiarity and professionalism among your clients.
However, automation is not the only thing that can help you to increase consumer satisfaction. Insurers need lots of data in order to properly evaluate clients’ needs and to be able to make the most appropriate offerings. With appropriate methods, data can be used to uncover certain trends. 7 out of 10 people would be willing to share personal data in order to receive well tailored and adequately priced coverage for instance.
Utilizing predictive analytics can shift your offer’s focus from protection to prevention. As its name suggests, predictive analytics can be used for predicting the likelihood of future events based on historical data – and then developing ways to prevent those incidents occurring (and the claims that would arise from them). In order to be able to do such a thing, insurers have to utilize statistical algorithms and machine learning.
Adequate data collection paired with artificial intelligence can optimize your offerings and prices. Thus, your clients will only have to pay for the coverage they really need and premiums for covering insurance fraud can be lowered or eliminated entirely.
Replace legacy systems
Replacing legacy systems is a big decision, but it is a necessary step for improving your business. Creating a unified ecosystem guarantees that the various technologies you utilize work together flawlessly. This will help your employees’ day-to-day work by making information and data easily accessible for all. There will be no more need for contacting several people across departments to access a particular detail or insight.
Replacing legacy systems will also reduce operational costs, since it allows IT professionals to invest in other advancements, rather than continuously trying to hold together an outdated system that creates unnecessary loopholes in many processes. New systems will also lower the risk of security breaches and possible data leaks. Your company will become more desirable for new and existing clients and investors.
Put a hold on rising operational costs
As we mentioned before, the increase in operational costs are caused by several things, and some can’t be influenced by decisions made within the company. However, there are causes that are directly connected to outdated technology and inadequate data management. These can be improved by senior decision makers.
Start utilizing the power of automation! By automating processes that occur regularly and are highly standardized,employees will have more time for other, more important tasks. For example the processes of risk evaluation, contracting, and contract renewal can be partly or entirely automated. Since 49% of consumers still prefer to have a human advisor when dealing with claims at some point during the process, with the help of automation your employees will have more time to spend with clients.
Create specialized management systems for smooth flowing processes! Cut down on paperwork and digitization of information collected in the field by utilizing customized field management systems. Insurance requires lots of fieldwork during which crucial information is collected. With an adequate system your employees will be able to easily record and organize this information. Collected data will enter the system immediately and with the help of a unified ecosystem it will be instantly accessible to other departments too.
Stand out among your competitors
Once you decide to invest in technology you will be met with a plethora of opportunities for differentiating yourself from other insurers. Through business intelligence, appropriate data collection and analysis you will be able to offer unique services and solutions to your clients.
You will be able to cut down many additional costs that obscure possible fraud or abnormalities. By utilizing big data and predictive analytics your systems will be able to detect anomalies and warn your agents in time. This will optimize risk evaluation and claim management, reduce operational overheads and minimize loss through fraud.
Companies don’t have to solely rely on first hand data, but can also integrate external data from various sources and fields to optimize personal offerings. For example, by incorporating data about weather or natural disasters in an area you can precisely predict the needs and future claims of a client who dwells in said area, properly balancing coverage requirements and risk to create policies that suit insurer and insured.
Last but not least, use business intelligence to monitor market trends. Real time reports can deliver valuable insights about what people are in need of, or what fields of business you should focus more on (and which ones to leave in its current state).
The bottom line
Insurance is a saturated and highly regulated market but this doesn’t mean that companies can’t keep up with the needs of their customers with technological advances. By leveraging technology insurance companies can improve every part of their operation, realizing new competitive advantages and creating efficient, optimized processes.
Need help with integrating technology in your day-to-day operations? Ultiro is here to help you with all of your softer development needs!