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The insurance industry in 2021: driving operational excellence during a crisis

Crisis whether natural, man-made or complex emergencies such as the pandemic and/or Brexit in UK/Europe have severe economic and social impact. A hangover from 2020?  Or a roadmap towards a reset for the insurance industry?

Demanding customers, new competitors and the unpredictable set of challenges are transforming the insurance industry. Insurance companies need to adapt their processes due to dramatic disruption and shift in industry imperatives: customer behavior of immediacy, demand for flexibility, an abundance of choices and personalization.

Insurers must now develop new products and coverage for COVID-19–related personal and business damages, in order to help support their clients over the short term (while the pandemic lasts) and also over the medium and long term (post-pandemic).

Towards a wider objective of operational excellence comes with several trade-offs between cost savings and crisis-led innovation.

Leveraging smart processes and new technologies, that have a staggering impact on the total customer experience, will radically improve productivity.

What customers want?

Short-, medium- and long-term changes

Customer demands have changed in response to COVID-19 for both the short and longer-term. Over the short term, what customers will want to see will help with the financial resilience of their businesses for the subsequent waves of the pandemic, including cover for employees as they continue to work remotely or return to work.

Retail businesses will want their insurance companies to help them provide a safe environment as customers return to their stores. Businesses are further demanding insurance companies show more clarity regarding their COVID-19 cover, with 44% of SMEs expecting their insurance companies to cover them in case of another wave. When the vaccine becomes readily available, insurance companies can also expect to be asked for help in supply chain management of the vaccine as well as in the cover of individual recipients.

Over the medium and long term, with the business environment in the pandemic becoming more volatile, customers will be requesting flexible cover that will protect them against unexpected pandemic-related issues across a range of business operations. They will also want their insurance companies to help them prepare for future systemic risks, and support them with risk prevention and mitigation. More particularly, businesses will want protection from supply chain, cyber and digital transformation risks, as outlined below.

Supply chain, cybersecurity and digital transformation

Transport restrictions, political tensions, and border closures are all impacting supply chains, and this has caught businesses off guard. For the UK, it’s a double whammy where pandemic and Brexit pile on the pressure.  As a result, they’ve had to diversify and strengthen their supply chains, and are expecting their insurers to develop appropriate coverage in response to this diversification.

The new trend of employees working remotely has introduced unprecedented risks to cybersecurity and data protection, which businesses are naturally expecting their insurers to cover. As the insurance industry already provides strong cybersecurity protection, what customers need will be wider and more comprehensive coverage for the greater threat caused by new remote work processes.

The process of digital transformation has been swift and at times rushed, with many companies taking weeks instead of months (or even years) to digitize. Customers are demanding solutions that will provide protection against issues caused by these transformations.

What the insurance industry can do

Internal processes.

The first step taken by insurance companies was damage control in their own businesses: that is, protecting their employees as they move to remote work/reenter the workplace. The first point of order for many insurers was therefore the updating of crisis management plans and ensuring minimum disruption to clients while taking steps to safely continue operations.

These steps have included strengthened cybersecurity due to increased remote access to systems as well as protection of employees and management from external cybersecurity risks, ensuring that third-party service providers are not affected by operational and supply-chain disruptions, preparation for the rapid rise in operational volume, reassessment of valuation processes and dealing with the loss of profits.

Optimization of claims processes

Optimization of claims processes has been the first step, companies have undertaken in navigating the challenges posed by the pandemic. Inefficiencies in data collection processes (e.g. manual instead of digital) generally lead to claims process expenses that could otherwise be avoided, and with the sudden rise in operational volume during the pandemic, this has really hit home for many insurers.

Cybersecurity management and improvements

As employees continue to work remotely, managed detection and response (commonly known as MDR) has grown exponentially in the cybersecurity industry. According to Gartner, 40% of mid-size companies will use MDR by 2024.

In-home insurance, as the adoption of IoT solutions, has boomed in part because of the pandemic, insurers are planning to introduce new solutions combining home insurance, IoT, and cybersecurity.

Pre-emptive and preventive services

Insurers are currently shifting their services from covering pandemic risk post-damage to covering it preventatively. Solutions that cover preventive health measures using connected devices are becoming increasingly common in the health insurance sector, as the telehealth boom is driven by the pandemic. Governments around the world have passed legislation enabling the permanent adoption of telemedicine after the pandemic trial period. A case in point is the NHS’s encouragement of medical services providers to switch to telemedicine during the pandemic.

Usage-based car insurance

As people use their car less during the pandemic, new products could be worked out in the car insurance industry, whereby people could pay for insurance based on usage. Many companies had already introduced this service before the pandemic, but the trend has really kicked off in 2020.

Digital Agility

Insurers need to embrace the digital disruption and adapt quickly to “go digital”.

Intetics enables a new digital, resilient, and innovative future for insurance, and addresses the new dynamics of consumer demands.

As part of our Digital Agility series, we offer insights on how to apply technology to a traditional industry.   The journey to bridge legacy systems to a hybrid or fully digital environment, depending on the current and wider level objectives within the organization and address the needs on how to serve a customer.

Intetics has the expertise to integrate insurance back-office automation with modern technologies including business intelligence & analytics, Artificial Intelligence/ Machine Learning (AI/ML), IoT and Blockchain.

Predictive Analytics

The widespread use of predictive analytics in insurance has resulted in more accurate and more expedient processes across operations providing better rate accuracy, loss ratios, and profitability.

Predictive analytics can take big data by insurers and to accurately and precisely calculate:

  • Pricing and risk selection
  • Claims triage
  • Emerging trends

Artificial Intelligence

Data is the most valuable commodity in insurance.  AI has provided disruptive innovation and improvements on how insurers handle claims processing, underwriting, and customer service.

Applying AI to big data and applying machine learning and predictive analytics provide invaluable tools for insurance operations, changing the way carriers process and handle claims.

AI improve big data analytics in insurance by:

  • Increasing speed
  • Optimizing processes
  • Generating new insights

Blockchain

To enable secure exchange of data between insurers – brokers – customers.

  • Building apps around risk assessment providing savings
  • Faster claims processing and payment to customers
  • Reductions in claims leakage and fraud, saving 15-25% for insurers
  • Improved accuracy and legitimacy of data, meeting legal standards

Conclusion

Operational excellence is a wider objective for insurers and has been mostly driven through aggressive cost-saving targets that mostly provide operational efficiency in their journey towards excellence.

Insurers are driven by crisis-led innovation to respond to demanding customers and a new competitive landscape.

Digital Agility by leveraging technologies such as analytics, AI/ML, blockchain, and the cloud will radically improve productivity and provide staggering results to address customer experience.

Insurers need to accelerate embracing technologies and solutions to be truly digital in order to compete with the rapid pace of transformation.

Intetics understands the needs and challenges in handling insurance processes such as new business insurance, underwriting, claims management, policy administration, onboarding, no claim bonus, risk score, claim adjudication, claim processing, verification & validation, disputed claims resolution, regulatory compliance, KYC, AML.