The insurance industry is incredibly competitive. Insurance companies are vying for new personal and corporate customers by offering better service at more attractive rates, staying competitive requires a strong technical infrastructure to keep the company running. By having a better understanding on how IT helps drive business, insurance companies will find themselves in a better position to compete.
Analyst firm Celent estimates that IT spending for insurance firms across North America, Europe, Latin America, and the Asia Pacific countries will from $174.9 billion in 2015 to $189.2 billion by 2017. Insurance premiums are increasing and money is being funneled to CIOs who are increasing IT budgets to hone their competitive edge by upgrading their networks.
However, investing in technology only has value if you understand where the technology gaps lie in insurance operations. A McKinsey report shows that the top insurance performers actually spend 40 to 50 percent less on IT infrastructure than their competitors. That’s because they aren’t necessarily spending more money, but they are using their budgets more wisely.
Here are five IT areas that insurance companies should scrutinize to help them improve operations and provide a competitive advantage:
1. AutomationAutomated business processes improve efficiency while reducing costs. Top insurance performers often have self-service systems to support customer service, agents, brokers, financial planners, and customers, so handling simple transactions and getting the latest information is a simple and secure process.
For example, one property and casualty insurer was able to reduce claims processing time by as much as 40 percent for high-volume, low-risk claims such as automotive glass replacement. Using an integrated, automated workflow, the claims process is handled solely by machine without human intervention. Another underwriter facing rising losses from claims decided to automate loss-management by implementing a standardized, rules-based process to determine eligibility and manage compliance. The result was a reduction in payment processing errors, resulting in recovery of 4 percent of revenue lost from improper claims processing. As a result, the company could lower the premiums on some of its more popular products without affecting profit.
2. Centralized Business ProcessesTo achieve effective automation, you need truly integrated and centralized business processes. Back-office processes need to be consolidated to pool both data and expertise. Centralizing IT operations means fewer staff and resources, but more importantly it means standardized business processes and centralized data.
One insurance company that consolidated back office support integrated a dozen different data centers into a single large IT operation the result was a savings of 25 percent of operational and IT costs that gave an immediate boost to the bottom line. Advances in cloud computing are making it easier to create data centers with the extensible capacity to adapt to changing company needs.
3. Lean ProcessesInsurance is a process-laden industry where duplicate data and redundant paperwork often creates a backlog and slows response times. IT systems can help streamline operations by adopting lean business processes to implement a more logical, streamlined workflow.
For example, improving claims payout times is a key factor in promoting customer satisfaction, but one underwriter discovered that their claims process was broken with multiple back-and-forth steps to complete documentation. The process was cumbersome, time-consuming, and disruptive since the adjusters were continually being asked to shift priorities to handle delayed claims. To address the problem, the company created two workflows – one for administration for routine tasks and another for payouts that demanded a higher priority. Using a computerized workflow, deadlines could be enforced and claims processing simplified, and the time required for the payout process went from 18 days to eight days.
4. Digitized Customer ServiceCustomer satisfaction in the insurance industry is vital and companies are working to improve the customer experience with the help of better self-service systems. Today’s consumers are used to having access to around-the-clock services, including access to account information, the ability to pay bills online, and more. Digitizing customer service gives consumers self-service access to their accounts, which means less staff, fewer errors, and more automation.
Digital insurance services increases the number of marketing channels while simplifying customer interaction. It also saves staff time while improving the customer experience; customers can manage their own transactions until they decide they want customer service and an online interaction can immediately be elevated to a service representative or call center. It also creates a more detailed data trail, which can be important for compliance, and provide invaluable information to improve future customer service and sales.
5. AnalyticsBy improving your IT infrastructure with consolidated workflows and digital customer interaction you also get another huge benefit – more data. Having an end-to-end process in place to manage claims and handle customer service provides the means to monitor their systems for bottlenecks and points of failure.
Digitizing all business processes also gives you more raw data to feed into analytics. Big data has the potential to develop accurate statistical models that can make insurance more cost-effective for consumers and more profitable for companies. For example, auto insurance premiums are being set using information about individual driving habits correlated with other factors such as local weather patterns, traffic conditions, car model, and increasingly telemetry data gathered from the driver’s vehicle. With the right IT infrastructure, companies can assimilate available data to lower their risk at the same time they can lower their premiums.
The right technology partner can help you evaluate your IT infrastructure and make recommendations regarding enterprise resource planning (ERP), consolidating operations, and securing the IT network. Your IT partners also can make recommendations about private cloud computing and creating an extensible infrastructure to handle tasks like big data analytics. And you want a partner who can provide remote support services such as remote monitoring and disaster recovery to keep systems up and running. Bringing in an outside expert can help you see the limitations of your current IT infrastructure and develop a roadmap to improve the value of IT as a business asset.
What are some other ways you have seen your IT hold back your insurance company?