Insurance is an information business that relies on three broad categories of IT capabilities: communication, storage and management, and analysis. Recent advances in IT have changed the game in all three areas, requiring insurers to change their conceptions of what's possible in managing their businesses.
Perhaps the most visible of these changes has been in communications technology. In the last 20 years, we've gone from a world dominated by paper (including fax) and voice communications that were tied to physical locations (i.e., the phone on the wall or on the desk) to one where billions of electronic text messages and images are sent and received every day and many of these (not to mention voice communications) originate on mobile devices.
Communication of information between the many internal and external stakeholders in the distribution, underwriting, claims and service processes for insurers is being affected profoundly by these changes.
However, channel proliferation is not a sequential process. While some older channels are waning in certain subprocesses as newer channels emerge that may be more convenient or efficient, other subprocesses are likely to remain dependent on older channels.
In Novarica's recent research on this topic, we identified 13 major communication subprocesses between insurers and their policyholders and intermediaries:
1. Learn about products
2. Submit new application for coverage
3. Gather additional underwriting requirements to underwrite risk
4. Collaborate/communicate with underwriters during the underwriting process
5. Receive issued policy
6. Receive commission information (agents/brokers only)
7. Access policyholder/coverage information
8. Request policy change
9. Receive bill
10. Check policyholder billing status
11. Pay policyholder bill
12. Submit new claim
13. Access claim folder information during claims process.
When it comes to communications channels, our research found that more is more. The proliferation of new channels such as e-mail, Web and mobile has not eliminated the need to support traditional channels such as phone or physical mail.
Nonetheless, paper volumes are starting to wane. While paper volumes are still high for policy issuance, billing and commission statements, only two-thirds of the insurers in our study reported heavy use of physical mail in these communications with policyholders, and only about half still report heavily paper-based communications with intermediaries.
We also found that intermediaries still want to reach out and touch someone during underwriting. And then send e-mail. More than half of insurers report heavy usage of both the phone channel and e-mail channel during underwriting.
However, agent portals are heavily used for information look-up on commissions, product information, and claims and billing status. Also, new application submission is widely offered by insurers. Within 24 months, between 60% and 80% of insurers are planning to enable most informational and transactional capabilities for intermediaries through their agent portals.
Call it in
The phone continues to be the most heavily used channel for policyholders to interact directly with their insurers, but portal capabilities are catching up. Within 24 months, more than half of respondents plan to offer nearly all service, claims and billing functions to their policyholders online.
Mobile is still nascent, with fewer than 5% of insurers providing any functionality today to intermediaries or policyholders, but poised to grow to 25% or more within 24 months. Most insurers are still de-prioritizing mobile investments in favor of improving the online channel, but a sizeable minority of them are planning to roll out new capabilities soon.
The increase in communications capabilities is starting to drive changes in insurers' operating models. Close to one-third of insurers anticipate more direct contact with policyholders in service, billing and claims, and about one in five anticipate more direct contact in underwriting. As sharing rich information through multiple channels becomes easier and individuals are used to accessing information directly in other areas of their lives, even insurers that are committed to an intermediary sales channel are bracing for additional direct contact with their customers.
Unfortunately for insurers, the proliferation of communication channels means more complexity and cost, not less, at least in the short term. Existing channels are not replaced immediately, nor will intermediaries or policyholders shift en masse to new channels for all interactions. While new channels may mean increased efficiency or decreased unit costs for certain communications, older channels cannot be turned off, and the overall complexity of operations and technology increases with each new channel.
That being said, we are seeing a gradual decline in paper-based communication as more and more information is gathered through other channels and distributed primarily online. Some new insurers have been successful in making physical document delivery a special request item rather than an expectation.
While insurers may not be able to get out of the printed paper business entirely in the next 24 months, taking steps to reduce volumes and shift billing and commissions statements to the Web can help reduce expenses. While the proliferation of channels can be frustrating for insurer operations and technology executives, limiting the ways intermediaries and policyholders can interact with the company increases the relationship friction and is opposed to most insurers' stated goal of being "easy to do business with." We urge insurers to carefully track the changes in the communication volumes by different channels among their own intermediaries and policyholders, and prepare for shifts by strengthening their online capabilities, keeping mobile on the radar, and investing in CRM capabilities that enable them to manage relationships across all channels.
INNSight is exclusvie commentary from Novarice. Matthew Josefowicz is a partner and managing director of Novarica. This column is based on his recent report, "Paper, Phone, Email, Web, Mobile: Communications Channels in US Insurance."
