For many insurers, moving to a digitalized environment means at a minimum, evaluating for possible automation the many tasks that are now manually driven. Today’s mature insurance companies have literally hundreds of existing IT systems and applications to manage, and with those systems, thousands of processes, so simplifying processes across those systems represents a major management challenge.
Most insurance executives realize they have to step up their digital investments, yet many remain unclear about exactly where to start and how to proceed in organizing for digital innovation and redesigning their processes, notes Bain & Company in its Global Digital Insurance Benchmarking Report 2015. Further, of 70 property and casualty (P&C) and life insurers surveyed worldwide, many lack confidence in their ability to execute the digital transition, note the report’s authors.
Yet of those surveyed that did digitalize processes, almost half have been able to reduce their headcount over the past three years, mainly in policy servicing, application processing, sales and claims, notes Bain. In P&C, about 15% of carriers even plan to reduce headcount by 20% to 40%.
A carrier usually determines its digital path based on business drivers, such as improvements in self-service related to distribution and customer engagement, retention. There is also pressure from investors and competitors, but the goal is the same: boost efficiency and effectiveness in processes, productivity, quality and delivery.
If the focus is on the customer, are processes being reimagined based on the customer’s requirements, or the vendor’s latest feature/functionality? Or are they focused internally, based on the carrier’s desire to avoid the pain of a radical redesign and re-engineering of core business processes?
Eric Huls, SVP, quantitative research and analytics for Allstate, argues that, in general, insurers tend to make it more difficult for the customer to be able to transact business. In his remarks last month at the Insurance Analytics USA conference, Huls told the audience, “If Apple was an insurance company, instead of offering Siri and fingerprint technology to help the customer, it would put the burden on the customer, asking him/her to input a 14-digit policy number each time it wanted to communicate.”
If Huls is right, insurers might rethink their digital strategy based on desired outcome, because like it or not, notes Bain, a growing number of customers are leading the charge for digital alternatives.
Bain’s report summarizes its global survey of more than 158,000 consumers in 18 countries, stating that the share of digitally active insurance customers currently ranges from 35% to 70%.
“Over the next few years, 79% said they will use a digital channel for insurance interactions. In some countries, digital usage will grow to become the dominant channel for before-purchase research and [actual] purchase, while in other countries, such as Germany, customers show less urgency for digital purchasing. Therefore, insurers will have to stage their preparation for different levels of demand in different regions.”
Bain recommends that insurers on a digital journey establish a clear roadmap to determine how to sequence certain initiatives and how to organize for them.
“Digital technology does not just support and automate internal processes; rather, it’s deployed to accommodate customers’ priorities in ways that can actually delight people,” note the report’s authors. “Incentives and processes also must align with the goal of providing customers with a superior experience.”
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