These are challenging times for personal and commercial auto insurance leaders: Trends that were already in play have been accelerated by the COVID-19 pandemic, and the level of competition is forcing insurers to do more with less. How can auto insurance leaders adapt to fast-evolving trends and accelerate competitiveness amid ongoing uncertainty, yet still limit underwriting expenses?
Success demands an
Efficiency strategy #1: Disrupt the status quo with yes-no risk indicators
For decades, insurers have been spending on underwriting reports for applicants with no adverse activity on their records. Underwriting expenses and workflow challenges can confront insurers with seemingly stark choices: Incur high costs that eat into profitability, or spend sparingly upfront and sacrifice early risk insight and long-term efficiency.
Examples: At the heart of this dilemma is paying for sources of data that may provide no actionable information, such as driving history, prior losses, and coverage history. In fact, according to research from Verisk, about 75% of motorists have a clean driving record, 70% have no coverage lapses, and 40% have no past chargeable claims. Innovative yes-no risk indicators can help address the underwriting side of insurers’ data challenges more cost-efficiently in channels with low conversion rates, such as comparative raters. Placed in front of full-detail report ordering, they can become a core element of expense management and a better customer experience.
Benefits:
- Save as much as 40% on underwriting expenses, according to research from Verisk.
- Eliminate unnecessary report ordering.
- Fast-track low-risk applicants for accurate and speedy quotes.
Efficiency strategy #2: Move data forward at quote with robust platforms
Fast, on-demand experiences from e-commerce giants and digital innovators exert a growing influence on modern insurance buyers. A recent Verisk study found 89% of auto insurers accelerated digital transformation plans in response to the pandemic, and plan to adapt to meet these expectations by moving more data to the point of quote—assessing that data for accuracy and accessing it based on minimal inputs from the customer. This can help place customers in the right program at the right rate based on predetermined rules for eligibility.
Example: Intelligent underwriting platforms can harness the power of data and analytics to enable straight-through processing while using increasingly complex business and product configuration rules.
Benefits:
- Simplify insurance buying and create connected experiences.
- Increase speed to bind and conversion rates.
- Lower fraud and acquisition costs.
Efficiency strategy #3: Accelerate innovation with scalable technologies
Many insurers have worked for years to modernize core underwriting systems. But advancement can consume capital and staff time in migrating legacy platforms and tying together complex and diverse strands of data and knowledge. Scalability that supports profitable growth isn’t always doing more of the same; it can also mean applying new technologies to different distribution channels and pursuing new sources of clean data.
Example: Scalable technologies can help smooth out workflows and bring forward critical customer and policy data when it’s needed to build better products and improve processes. Leveraging tools such as the cloud, data lakes and translators, and single-point-of-contact application program interfaces can deliver speed while distributing workloads to help guard against single points of failure.
Benefits:
- Simplify contribution, ingestion, and management of first- and third-party data.
- Reduce the capital and time required for data preparation—a task that may consume 50 to 80% of insurance data scientists’ time, according to SAS.
- Improve access, resiliency, security, and the magnitude of processing capabilities—for today and tomorrow.
Efficiency strategy #4: Outsource strategic automation that requires subject matter expertise
When it comes to fulfilling requirements that keep the business running but have little bearing on growth or retention—and have variable demands that change regularly—strategic automation and outsourcing may make sense. It may pay to find one source able to consolidate data and translate it across multiple systems and formats.
Example: Compliance, reporting, and notifications involving regulators, lenders, and producers are prime candidates for strategic outsourcing and automation. These functions can add cost and complexity to internal workflows, while external expertise can help simplify connections with government entities and other businesses that intertwine with yours.
Benefits:
- Leverage subject matter expertise to stay on top of changing requirements.
- Automate workflows and drive efficiencies.
- Reduce the potential for fines, disruptions, and public relations challenges.
Efficiency strategy #5: Enhance competitiveness with a digital auto insurance ecosystem
Ernst & Young defines ecosystems as networks of companies that collaborate to produce a higher level of business value than any one company could on its own. And Accenture says the stakes around ecosystems are high: Among 18 industries Accenture analyzed, insurance is the most susceptible to future disruption, and slow-responding companies could lose market share as early as 2022.
Example: Finding the right auto digital ecosystem partners involves numerous considerations and intangibles, but here are a few must-haves: Look for value, return on investment, and a path to the following outcomes.
Benefits:
- Limit your spend through enterprise licensing and overall value.
- Plug into interconnected solutions at scale.
- Dig deeper and drive your strategic vision to the next level.
