As with the broader economy, inflation and other disruptive forces have hit the insurance industry. Costly claims and business turbulence over the past few years have made profitability elusive for many insurance companies.
Technology is part of this equation. A Forrester survey of 104 global insurance decision makers, sponsored by EdgeVerve, found that more than half (53%) said their transformation efforts have not been very successful in achieving desired business outcomes. In another study, Deloitte found that most of the 100 IT executives in the U.S. life and annuity market it surveyed had begun their core system modernization journey, but fewer than one-third had completed some or all of their initiatives.
Transformation is, indeed, a journey. Not just a project, but a way of operating. The question is – where are you on this path? If you’re falling behind, look around and try to reboot through automation. If you’re further along, it may be time to start layering AI into your workflows or, better yet, platforms. If you’re advanced, look for opportunities to grow, especially on the customer-facing side.
See also: Why Hasn't Insurance Automated More?
Laggards Should Automate
Insurance companies lacking optimized technology stacks face several persistent challenges that hinder operational efficiency. These include manual processes and paperwork, siloed data and systems that prevent comprehensive views, inefficient underwriting and claims processes and inadequate customer focus.
Sometimes you can address several challenges at once. Take the case of a U.S.-based healthcare insurance company serving 39 million people across multiple plans and services. Their pain points? Heavy manual intervention across claims processing, ticketing and business operations. The complexity drove up errors, despite extensive quality checks. Overall inefficiencies had led to about 70,000 records in backlog.
Following our advice, this insurer automated more than 80 processes across several portfolios, and to great effect. Cross-functional bots worked on multiple tasks, delivering savings that approximated about 170 full-time employees. The software powered a break-even within a year, enabled a 7% increase in productivity, reduced errors to below the human rate, eliminated the massive backlog and boosted overall customer experience.
Intermediate Steps: AI and Platforms
Successful automation means companies have connected the dots – and data – between plans, services and customers. Intermediate or advanced connectivity also correlates with a greater willingness to adopt AI and platform-based approaches to transformation.
It makes sense that insurers with intermediate or advanced connectivity are gravitating toward the adoption of AI, as the Forrester survey indicates. The use of software bots is a beginning, not an endpoint. Technology providers, both legacy and insurtech, are supporting generative AI agents, augmenting the more rigid preset rules of automation with AI’s human-like flexibility.
More digitally mature insurers are also looking at platforms. Not only as a way to connect systems, but also to orchestrate business and technology and tap into enhanced capabilities. Automation combined with advanced analytics, for instance, allows insurers to swiftly analyze large volumes of data, improve the accuracy of risk assessment and make better decisions during the underwriting process. Insurers also see platforms as a way to access prebuilt AI capabilities.
See also: How Life Insurers Can Leverage Generative AI
Advanced Targets: Customer Engagement
The Deloitte report notes that advanced technologies can help insurers achieve more strategic goals, such as personalized coverage, better customer relations and more effective outreach to underserved segments. Many such initiatives involve closer ties with customers, who have grown to expect service and experiences comparable to those provided by e-commerce giants.
The long-term digital transformation journey of insurance companies, therefore, involves better customer engagement. Launching an ambitious customer initiative too soon could be a mistake – without optimized internal operations, you risk overpromising and under-delivering. But timed correctly and with the right mix of capabilities, an advanced user interface can offer personalized policy recommendations, tailored communication and exceptional customer interactions that foster stronger relationships, higher customer retention rates and risk mitigation.
Crawl, Walk, Run – and Win
Hard business cycles and disruptive innovations are difficult to manage. But technology is a key part of the solution to today’s multi-faceted challenges. “The evolving operating environment should put even more pressure on insurers across sectors to increase the use of automation, AI, advanced analytics and core transformation in the year ahead,” Deloitte’s global insurance analysts said in their 2024 outlook.
If you’ve been at digital transformation for a while, now is a good time to take stock. If you’re stalled, try to automate some of your core processes. If you’re at an intermediate stage, check out well-tested platforms and begin layering on AI. If you’re advanced, focus on your customers and strategic growth, which is ultimately the only lasting way to work your way out of a tight spot.
