By Kari Moeller
In the insurance industry, operational resilience has been tested to the limit in 2020.
With many businesses struggling to adapt to changing customer and employee needs, it’s become more important than ever that insurers accelerate the changes you’ve spent lots of time talking about, but never quite got around to making.
A problem paradox
There have been many significant events in the recent past that should have prepared us for the disruption we’re facing today but somehow haven’t.
These disruptions – economic, political and environmental – that have occurred over the past decade, should have dictated a “new normal” of agility we needed to put in place. But our previous efforts somehow didn’t take us far enough to manage what we are experiencing.
What happened after those past events was that we looked at the changes and improvements that we needed to make in silos and on a project-by-project basis. Those projects were not part of a more holistic strategy and were often competing for focus, priority, and funding.
It’s of course with the benefit of hindsight that we say it, but it’s clear this lack of cohesive strategy for transformation has led to the significant pain we’re now experiencing.
Mixed impact on insurers
Studies have shown that the disruptions this year, in particular the effects of the global pandemic, have had a complex impact on the insurance market. Mirroring the economic landscape as a whole, certain insurance lines have actively grown while others are in significant decline.
The health insurance market has experienced both boom and bust, with an increase in sales but also an increase in claims, and huge variances between countries depending on the nature of their healthcare system. Property & Casualty insurers, in particular motor and travel, have experienced the most significant decline as consumer behavior has been impacted by travel bans and national lockdowns. Many insurance lines now also see providers with huge exposure, including event cancellation insurance, trade credit insurers, and the reinsurance sector.
Major challenges we’ve seen insurance organizations encounter include:
Most governments either mandated or encouraged office-workers to work from home, accelerating both the evolution of consumer preference for digital channels and also the adoption of remote working. Many processes in insurance businesses remain manual and have been put under strain during remote working and lockdowns. Process deficiencies have led to slower turnaround times and increased costs, and these conditions could adversely affect customer experience as well as long-term business prospects and success.
As the economic downturn takes hold, spending must be reduced by businesses and individuals, and this means reducing cover, delaying renewals or looking at the market to be more competitive.
There is an increased focus on GDPR and cybersecurity as the highly confidential nature of insurance records and remote working, on potentially insecure connections, poses serious risks and challenges.
Increased customer contact
A larger volume of claims in certain areas, (for example business interruption, hospitality, travel, health, and life insurance) is unavoidable. Event insurance claims have skyrocketed, but the major issue for many insurers has been the sheer volume of customer contact points as people wish to check policies or increase coverage.
Increased opportunity for fraud
Higher claim volumes and restricted claims investigations procedures means the likelihood of fraudulent claims, or exaggerated claims, is higher.
Decreased confidence in insurance products, and increased demand for premium or specialist insurance policies
With the same root cause, consumers either have lost a sense of the value of insurance because they recognize its limitations in the event of wide-scale disasters or are demanding more cover from the market, and are willing to move insurance providers to get it.
Digital transformation can protect insurers
What has been most interesting to note is that the impact of 2020 on insurers has varied not only by the insurance line but also very much by how digitally mature the business is. Insurance providers who were already undergoing a digital transformation were best placed to deal with disruption to their operating model as they responded to overnight-changes to behavioral, economic, and legislative conditions.
Now more than ever, insurance businesses must put the pedal to the metal with digitization to keep up with a world where the pendulum has taken a heavy swing towards everything digital, or face being left behind.
Take action now
Many insurance organizations have already created crisis task forces, centers of excellence and command centers to manage their response to the ever-evolving global landscape. These approaches provide a centralized focus team that could provide a pivotal point for problem-solving strategy.
These groups should represent a cross-section of the entire business, IT and Risk so that all points of view are incorporated and understood. They can assert responsibility for understanding the new way of working and serving your customers, the impact of market conditions on customer experience, and should build new solutions that create new ways of delivering processes.
Many teams are working to quickly develop heat maps that expose areas of risk and vulnerability and develop contingency plans and workarounds. Clear lines of communication to make sure that certain controls and operational processes are consistently applied and practicable are essential to success.
Though all of this is a tall order, it’s certainly achievable, but this level of transformation and uncertainty requires support to manage. To achieve transformation of this scale, you need access to both top-level oversight and deep insight into how your business is behaving and responding to challenges.
A piece of your jigsaw
Transformation begins with understanding where you are before you work out where you want to be, and how you’re going to get there.
The BusinessOptix platform can enable you to discover your business’ DNA and gain an accurate picture of how you operate, through rapid process discovery. This data can then be used to adapt or create operating models that can address all major challenges in terms of practicalities, workforce, profitability, and risk & compliance whilst ensuring the customer journey is one that keeps your business in business.
What better way to remain agile than to have the power to virtually try out solutions to problems using simulation and scenario modeling capabilities, to test alternative ways of working before changes have been delivered in live environments? How useful would it be to have these changes integrated with the ability to generate documentation and work instructions instantly, so that you can efficiently inform your workforce of their changing obligations?
A full-service business process optimization platform like the BusinessOptix solution could be just the support your business needs to navigate current and future challenges.
Your business’ ability to remain dynamic, move quickly on delivering change, and optimize processes on a continuous basis is what will see you through 2020 and beyond. We want to help. Contact us today to start a free trial.