As P&C insurers continue to make significant investments in customer-facing transformation and back-office optimization, it’s worth evaluating their progress to date and the overall outlook for 2019 and beyond.
For Property and Casualty outside of life insurance, the industry has grown at a very low rate. Falling profitability caused by higher underwriting losses and a weak pricing environment in commercial lines are creating an uncertain environment.
What are the issues insurers must conquer in this tough business environment?
No. 3: Drive cost efficiencies to fund digital transformation.
Cost efficiency is still the goal. Operational Tuning and Digital Initiatives have produced gradual benefits at best. Legacy systems, disappointing revenue and rigid operating models have left expense ratios largely unchanged for years.
Thus, insurers should look to technologies to deliver cost and performance improvements. Claims and policy interoperability (Connecting systems across the value chain) will be critical to eliminating redundancies and tuning operating models.
The top technologies for transformation programs include:
- Internet of Things (IoT) Underwriting using real-time data and reducing claims (e.g., sensors providing early detection of loss in homes or business facilities)
- Customer Experience bolstered by Artificial Intelligence (AI) and streamlining management of simple claims
- Leveraging Blockchain to fortify Authentication, Underwriting and Claims Attribution and to connect in a trusted manner with external collaborators
These technologies, creating an information flow, will generate real-time insights and help control operational costs.
No. 4: Empower more direct channels to reduce dependency on agents and brokers.
As the first touch point with customers, distribution is critically important. It’s also the value chain link most likely to be disrupted. Direct channels have already increased transparency and produced differentiated customer experiences. But, despite the buzz about disruption, agents and brokers still dominate.
A gradual shift toward direct sales can be seen in personal and small commercial lines. In large commercial lines, agents and brokers will be forced to adjust to cater to large clients with increasingly digitized operations. Similar adjustments will be necessary to satisfy different customer segments. For example, millennials prefer using insurance comparison and quoting websites, while baby boomers have a relatively lower inclination to use the Internet for insurance purposes. In spite of all trend lines pointing to direct channels, insurers must master the balance between human and digital because their diverse customer base wants access to both.
Coming Next? Part #3: Digital Giants and a Roadmap