The State of Insurance GBS: Igniting Innovation, Expanding Scope, and Driving Talent Strategy
June 15, 2023 |
8:30 AM EDT | 6 PM IST
Today’s insurance GBS organizations have become strategic partners for enterprises. Are you fully aware of the exceptional opportunity for insurance GBS organizations to deepen core capabilities, add new work to scope, and accelerate transformation initiatives, all while elevating their position as valuable solution partners?
Join this virtual roundtable discussion to participate in conversations with our expert analysts and your peers to develop a deeper understanding of insurance GBS organizations’ future priorities, opportunities, and strategies to drive more value for enterprises.
We’ll explore the insurance GBS outlook on:
Services scope expansion
Role elevation
Role in performance management
Talent and location strategy
Transformation
Who should attend?
GBS leaders
GBS strategy leaders
GBS site leaders
Virtual Roundtable Guidelines
The only price of admission is participation. Attendees should be prepared to share their experiences and be willing to engage in discourse.
Participation is limited to enterprise leaders (no service providers). Everest Group will approve each attendance request to ensure an appropriate group size and mix of participants. The sessions are 90 minutes in duration and include introductions, a short presentation, and a facilitated discussion.
Readily available capital and low-interest rates made the past few years ideal for the insurance brokerage industry to consolidate in response to increased competition, changing customer expectations, and other challenges. Merged insurance intermediaries can partner with business process service (BPS) providers to optimize processes, manage risks, enhance data analytics, and improve customer experience, among other benefits. Read on to learn more.
The insurance brokerage industry went through an inflection point last year. A confluence of factors happening simultaneously created a perfect recipe for consolidation. These included large quantities of readily available capital, low-interest rates, highly valued broker stocks, all-time high valuation multiples, and the challenging insurance market.
The deal frenzy of 2021 slowed towards the end of 2022, with less than $2 billion of deal value announced and no large transactions in the last six months of the year. Despite this, insurance brokerage transactions trumped the activity. More than 90% of the overall insurance deals were in the brokerage space. In terms of both the volume of transactions and the multiples being paid, the consolidation rate in the re/insurance broker industry has accelerated.
Let’s take a look at the following dominant broker groups influencing the insurance brokerage industry:
Global brokers – Large multinational insurance brokers who typically operate in multiple countries and offer a wide range of insurance products and services
Private Equity (PE)-backed brokers – PE firms provide the necessary capital for mergers and acquisitions
Family-owned brokers – Small to mid-sized insurance brokers that are family owned and operated
Drivers and challenges leading to consolidation
Competition
Increasing competition: The insurance intermediary industry is becoming increasingly crowded, with new players entering it all the time, further fragmenting the market. These new players often can offer better services, lower prices, and more innovative solutions than traditional insurance intermediaries
Market share growth: Insurance intermediaries can inorganically boost market share with additional capabilities and market penetration in new geographies by consolidating with another firm. They also can benefit from customer base growth
Capabilities
Technological advancements: The industry’s recent drive towards digital transformation by implementing new technology and platforms is forcing intermediaries to seek funds to invest in digitization or lose against better-capitalized intermediaries
Economies of scale: Insurance intermediary consolidation can spread fixed costs over a larger number of policies, resulting in lower average costs per policy. It also can provide intermediaries with increased bargaining power with insurers, provide cross-selling and up-selling opportunities, and help increase brand and mind share
Service offering diversification: Consolidation allows insurance intermediaries to expand and diversify their services and product lines. Intermediaries can attract new customers by acquiring another brokerage that provides different products or services. This keeps intermediaries relevant and competitive in a dynamic market
Complexity
Regulatory pressure: Consolidation can help smaller intermediaries remain up to date on increasingly complex risk management requirements that would be difficult for them to do by themselves
Inefficient processes and people: By joining forces, smaller firms can improve process efficiencies and combine their talent pools. Consolidation also can help large entities better manage operations
Customer
Changing customer expectations: Consumers increasingly demand customized and convenient services and anticipate an omnichannel experience. Insurance intermediaries that cannot meet shifting consumer expectations risk losing clients to rivals who can.
Impact of consolidation on stakeholders
Insurers
Customers
Routes to consolidation
Insurance intermediaries can take multiple paths to consolidate depending on their strategy, such as:
Mergers & Acquisitions: This is the preferred route for consolidation where two or more intermediaries enter into an M&A to achieve economies of scale, expand into new markets, and gain access to the latest tools and technologies. Different forms of M&A pursued are horizontal mergers between intermediaries from the same market, vertical mergers between intermediaries with different capabilities, and cross-border M&A
Strategic alliances and joint ventures: Insurance intermediaries can pursue strategic alliances or JVs under many forms, such as distribution agreements, co-marketing agreements, and shared service agreements to effectively share resources and expertise while reducing risks and increasing market power
PE investments: In recent years, PE firms have increased their involvement in this industry as they look to invest in dependable, cash-generating companies with room for expansion. PE companies can assist insurance intermediaries seeking strategic acquisitions and expansions while also providing access to finance and experience
Many intermediaries also take an independent route and pursue organic growth by investing in digital transformation initiatives to achieve unparalleled scale and efficiency.
Key players in the insurance intermediary consolidation space
The insurance intermediary market is highly competitive and dynamic, with many players pursuing different strategies to achieve their growth objectives. Here are some of the active players in the consolidation space:
Marsh & McLennan: In 2019, the company acquired Jardine Lloyd Thompson Group, a leading UK-based insurance intermediary, in a deal valued at $5.6 billion. The company also has announced the acquisition of Focus Insurance, offering tailored personal insurance programs.
Gallagher: Gallagher has pursued a growth strategy focused on M&A and has completed over 500 acquisitions since 1984. Gallagher started 2023 with an acquisition of Dublin-based commercial and personal lines broker First Ireland, making it one of Ireland’s largest brokers.
Hub International: The company also is focused on growth through M&As, and has made more than 600 acquisitions since its founding in 1998. In 2020, Hub acquired the assets of The Insurance Exchange, Inc., a leading insurance brokerage firm in California.
How intermediaries can leverage insurance service providers
Intermediaries face increasing pressure to reduce costs, increase efficiency, and deliver better customer experiences. By partnering with BPS providers, they can achieve these goals. BPS providers can deliver policy administration, claims processing, customer service, data analytics, and other services, as illustrated below:
In selecting a BPS provider, intermediaries need to evaluate the service provider’s capabilities by carefully considering their expertise, experience, cost arbitrage, flexibility, security, business continuity, delivery footprint, talent maturity, technology, infrastructure, governance approach, and client-centricity.
Everest Group can help evaluate these capabilities through its proprietary PEAK Matrix® assessment and impartially rank service providers as leaders, major contenders, and aspirants, as well as provide expert commentary to help enterprises make better-informed decisions.
From the many thought-provoking conversations that Everest Group analysts engaged in at Formation ’23, three main themes emerged about the future of insurance technology. These priorities are: integrating a humanized and people-centric approach, leveraging data to make intelligent decisions, and strongly emphasizing the Software-as-a-Service (SaaS) ecosystem. In this blog, we will take a closer look at these growing trends and explore their potential impact on the insurance industry.
Formation ’23 on May 8-10, hosted by Duck Creek Technologies (DCT), provided an excellent opportunity for Everest Group analysts to engage in exciting conversations with the community of insurance enterprise leaders, technology providers (from DCT and its solution partners), system integrators, consulting firms, and other analysts, about what will drive the next era in insurance.
Based on the dialogue we heard, the following three themes stood out to our team:
Building humanized and consistent experience will be the key to success
Delivering high-quality personalized customer experience is taking center stage in the insurance industry’s current transformation as carriers move from their traditional role as loss payors to becoming empathetic insurers and guardians for customers.
Digital experience platforms, distribution management systems, and smart communication platforms are becoming increasingly relevant to streamline operations, provide seamless and consistent digital experiences, and engage customers more effectively.
Data will play an important role here by equipping insurers with the right information that they can use to personalize and humanize the experience for individual customers. Interestingly, DCT also gave us a preview teaser of its new product – Elea, an AI-powered and empathy-driven chatbot slated for release later this year.
Infusing data and intelligence into insurance operations is the industry’s top priority
Data-driven intelligent decisions are a key priority for the industry. As the insurance industry moves toward AI-powered workflows, infusing data and having standard data models at a value chain and workflow level will be a major demand.
We found it interesting to see various point solutions offered by technology providers, such as CogniSure’s AI platform, which helps automate the underwriting process by converting structured and unstructured data to improve efficiency and effectiveness.
We also heard many discussions about early use cases of Generative AI (GAI) for operational tasks (emails, presentations, etc.), GAI-powered chatbots, and writing codes. But concerns remain about using this fast-growing technology in core operations.
SaaS sprawl requires attention
SaaS sprawl was another theme that dominated conversations. While the point solutions across the value chain come with the benefit of speed to market and bridge the capability gap on the top of core systems, integration across these remains a concern as these solutions often don’t talk with each other.
Enterprises leveraging a wide number of these point solutions now see the need for digital rationalization. Most of these software platforms have evolved and added new functionalities. But enterprises are not taking advantage of the latest features because they are either unaware of these benefits or because they are paying for other software with the same purpose. This leads to duplicate costs and less value.
These conversation themes and focus areas resonate well with what we expect from the industry in this environment, but we felt some upcoming trends did not get enough attention from the community – low code/no code technology being the most prominent one.
As always, Formation ’23 was a great experience for Everest Group to interact, learn and exchange thoughts and points of view with industry leaders about the future. The fun atmosphere in Orlando, Florida, complete with country music, delicious food, and drinks, added to the interesting conversations, resulting in lasting memories.
To discuss these insurance technology trends in more depth, please contact Ronak Doshi and Roma Juneja, who attended this insightful event.
As the insurance industry undergoes a paradigm shift post-pandemic, digital transformation can improve customer experience and engagement. Insurance intermediaries have an exciting future ahead if they can successfully adopt Artificial Intelligence (AI), mobile apps, big data, and analytics to better understand their customers and provide personalized products. Partnering with service providers will help insurers overcome barriers and improve efficiencies. Read on to learn more.
Insurance intermediaries (agents and brokers) play a crucial role in the industry by helping customers find the best insurance policies to suit their needs and connecting insurance companies to potential customers.
The overall intermediary market is vast with nearly 500,000 licensed intermediaries registered in the US, according to the National Association of Insurance Commissioners (NAIC), and 12,000 insurance brokers registered in the UK. The market is valued at more than $130B in the US and £13B-plus in the UK, as per IBISWorld and the UK Financial Conduct Authority. McKinsey estimates that 84% of sales in US property and casualty and 90 percent of US life policies go through agents or brokers.
This industry is undergoing a paradigm shift post-pandemic due to the increased adoption of digital direct-to-consumer (D2C) channels, remote work, and other trends. The intermediary business is evolving to maintain its growth momentum with rapid execution of quote to bind, hyper-aware consumers, increased competition, and declining margin profile.
Digital transformation is taking center stage on the intermediary side of business due to factors like the increased availability of customer data, demand for customized products, the rise of low-code/no-code solutions, increased use of self-serve options, increased use of D2C channels, rise of embedded and usage-based insurance, telematics, analytics, and advanced risk management solutions.
Role of service providers in helping intermediaries overcome barriers
While these changing industry dynamics push intermediaries towards adopting digital transformation, they still face the following barriers:
Legacy systems and processes: Insurance intermediaries have used outdated systems and procedures for many years, and the migration to modern systems is further delayed by a lack of funds
Resistance to change: Some insurance intermediaries are unwilling to adopt innovative technology and business models or lack the right knowledge and experience with digital technologies
Resource constraints: Putting modern technologies or business models into practice may require a substantial cash commitment or access to specialist skills that are unavailable with today’s talent crisis
Regulatory constraints: Various regulations like personal data protection, sales standards, and solvency requirements limit intermediaries’ flexibility and ability to innovate
Data security and privacy concerns: Intermediaries must safeguard sensitive client information and adhere to several data security and privacy laws
Shifting consumer expectations: Insurance customers demand more information than ever before and expect customized products through their preferred channel (digital, in-person, sales partner), better user experiences, shorter turnaround times, and digital touchpoints for the end-to-end process
Competition and customer retention also hamper the growth of intermediaries.
Service providers can help intermediaries overcome these barriers as illustrated below:
Digital technologies transforming insurance intermediaries
The following technologies can help intermediaries enhance the services they provide to customers:
Digital onboarding with interactive workflow and digital policies: The entire intake process should be digitized, reducing the intervention needed by intermediaries and showing customers the complete user journey from bind to quote. Insurance policies that allow electronic signatures also will accelerate the overall process.
Artificial Intelligence (AI) and Machine Learning (ML): Applying AI/ML for chatbots, fraud detection, personalized recommendations, and other processes can help insurance intermediaries enhance customer experience, boost efficiency, and offer more customized services.
Mobile technology and User Experience (UX)/User Interface (UI): To meet customers’ increasing desires to access services on the go, intermediaries need to provide access to policies and the ability to submit claims and pay bills available via mobile devices and applications.
Big data and analytics: Leveraging data and analytics will help intermediaries better understand their customers and provide more personalized recommendations. For example, agents may use data on a customer’s driving habits to provide personalized auto insurance recommendations.
Real-time insurance quotation and comparison tools: Using innovative technologies that automate the insurance underwriting process will allow intermediaries to deliver real-time insurance quotes and pricing comparison tools. Digital tools leveraging algorithms and data analytics will help agents/brokers instantly evaluate risk factors and determine
Claims management: Insurance intermediaries can play a key role in automating the claims management process by helping customers with online claims filling systems, automated claims triage, automated claims adjustments, and real-time communication.
By partnering with service providers or using third-party platforms and tools to accelerate their use of modern technologies, insurers have the potential to achieve large-scale cost savings and headcount reduction benefits. Depending on the adoption, insurers can achieve cost arbitrage generating a Return on Investment (ROI) of 1.5 to 3 times.
Intermediary of the future
Insurance intermediaries’ future likely will be shaped by a combination of technological advancements, changing consumer behaviors and expectations, regulatory developments, and economic conditions.
Intermediaries need to adapt to the following five changing trends to thrive:
Embrace digital innovations: The Internet of Things (IoT), AI/ML, blockchain, big data analytics, and other innovations increasingly are becoming mainstream and changing the way intermediaries operate and evolve.
Increase personalization: Data analytics can help intermediaries better understand their customers to provide more personalized recommendations and, in turn, find opportunities to cross-sell and upsell. Insurance plans must be customized to address clients’ unique needs and risk profiles.
Prioritize risk management: By gaining insight into customer risks, intermediaries can offer proactive risk management services. They should also identify emerging risks, such as cyber threats, and collaborate with clients to develop comprehensive risk management strategies and insurance solutions.
Shift to a consultative model: Insurance intermediaries must evolve from their traditional focus on selling policies into offering advice and guidance as consultants. They need to become trusted advisors, providing insights and recommendations to customers, such as risk management, insurance policy options, and financial planning since insurance is often a crucial part of an individual’s financial plan.
Integrate with the ecosystem: To stay competitive and meet evolving customer expectations, agents/brokers have to bundle services and offer financial planning and risk management in addition to traditional insurance products in a seamless customer experience.
Life and Annuities (L&A) Insurance BPS and Third-Party Administrator (TPA) PEAK Matrix® Assessment
The global Life and Annuities (L&A) insurance industry has recovered from the pandemic, but it now faces macroeconomic uncertainties. Going forward, insurers will prioritize cost reduction and may cut back on discretionary spending to save costs. However, they are likely to continue their digital transformation initiatives because of the long-term benefits they offer in terms of process improvements and efficiency gains.
Given the situation, insurers are expected to use outsourcing as a popular cost mitigation strategy, which provides ample growth opportunities for providers. In fact, providers are developing end-to-end capabilities to advance themselves for larger deals as insurers pursue more enterprise-wide transformation. Additionally, insurers face challenges such as evolving customer preferences, product innovation, and legacy systems, which increase the demand for support in areas such as actuarial transformation, underwriting streamlining, and new product launch capabilities. Providers are increasingly investing in these growth areas to differentiate themselves in the market and stay ahead of the competition.
In this report, we assess 23 L&A insurance Business Process Services (BPS) providers and position them on Everest Group’s PEAK Matrix® framework as Leaders, Major Contenders, and Aspirants. Each provider profile provides a comprehensive picture of its vision, delivery capabilities, market success, and key strengths and limitations. The report also examines the global L&A insurance BPS and Third-party Administrator (TPA) services market and its provider landscape. The study will assist key stakeholders, such as insurance enterprises, service providers, and technology providers, understand the current state of the L&A insurance BPS/TPA market.
This report features 23 L&A service provider profiles, and includes:
Providers’ relative positioning on Everest Group’s PEAK Matrix®; for L&A insurance BPS and TPA
Providers’ market impact
Evaluation of providers’ vision and capabilities across key dimensions
Scope:
Industry: L&A insurance BPS/TPA
Geography: global
In this report, we only cover vertical-specific L&A operations and have omitted horizontal business processes, such as Finance and Accounting (F&A), Human Resources (HR), procurement, and contact center
The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.
With pension risk transfer (PRT) activity hitting post-pandemic record highs of $53 billion in North America market volume last year, this growing market represents a massive untapped opportunity for technology and services providers to leverage theirretirement and pension expertise to deliver new solutions. Read on to learn about the possibilities this option opens.
Even with the general shift towards defined contribution (DC) plans, defined benefits (DB) assets still contribute to the majority of retirement Assets Under Management (AUM) in the US. However, defined benefit plan providers often struggle to guarantee the security of retirement benefits because of the following risk factors:
Unpredictable investment returns due to variable interest rates, market volatility, and the geopolitical environment
Volatile interest rates
Increasing life expectancy and longer service tenure of plan participants
Underfunded pension liabilities
To shield against this unpredictability, plan sponsors are adopting pension risk transfer strategies to guarantee retirement and pension benefits for DB plan members. Under this approach, DB plan providers transfer their entire/partial pension liabilities to other firms, usually a life insurance firm, to remove their obligation to pay plan participants guaranteed retirement income or post-retirement benefits.
In the past four years, PRT transactions have increased as DB plan providers seek to de-risk huge pension liabilities. Many large and mid-sized plan sponsors are hedging these risks through PRT transactions with the intent of transferring or terminating existing DB plans.
The pension risk transfer market peaked in 2022 as retirement plan sponsors urgently felt the need to secure pension benefits in an increasingly uncertain world following the pandemic.
The growth momentum is expected to continue due to favorable transaction terms for sponsors and insurers’ continued desire to de-risk pension assets. North America accounted for approximately two-thirds of global PRT sales (US$60 billion) in 2021 and grew by 40% in 2022. In both these years, almost half of the PRT transactions were near US$1 billion or more, according to the LIMRA Secure Retirement Institute.
Pension risk transfer types
The following two PRT transactions are most prevalent in the market:
Buy-in – The insurance firm takes the liability of benefit payments for plan participants to the plan trust. The sponsor retains fiduciary and administration obligations and holds the pension plan contract as an asset on its balance sheet
Buy-out – The insurance firm takes the liability of benefit payments for plan participants entirely and all of the administrative responsibilities. This is the most common transaction type, as the entirety of pension obligations are transferred
Implications of pension risk transfer for services and technology providers
Transferring pension liabilities to an insurer comes with many challenges. Providers have several opportunities to support insurance enterprises, recordkeepers, plan sponsors, and third parties involved in such transactions in the following key areas:
Technology systems: Insurers need support to transform their technology landscape to meet the increasingly complex market requirements, including data migration, fund transfer, benefits administration, contracts and provisions management, and pension administration for the full participant lifecycle.
Varying technology maturity levels among recordkeepers, insurers, and plan sponsors presents a big challenge. A service provider or platform provider’s solution can help with the entire process of transferring liabilities (sometimes along with plan termination) and all the relevant data, provisions, rules, funds, and critical participant details. This presents an opportunity for system integrators (SI) and platform providers to work together to efficiently manage the process lifecycle
Strategic partnerships: As this business achieves scale, insurers will strategically view this as an alternate revenue stream. Insurance firms can partner with technology and service providers to enable user-friendly onboarding, payment/annuity processing, automated query resolution, and analytics-based PRT transaction pricing, as well as building newer underwriting and actuarial capabilities for deciding PRT transactions’ premiums
Regulatory compliance: Technology and service providers need to assist insurers and sponsors in complying with the changing regulatory environment, varying state and regional taxation laws, and accounting nuances of different transaction types such as buy-ins and buy-outs
Cyber security: The significant amount of sensitive participant data being exchanged between recordkeepers, insurers, and sponsors’ systems poses substantial security risks. With the varying complexities and formats for different plan sponsors and record keepers, traditional file formats of participants’ data are difficult to maintain. Technology and service providers can securely manage the migration of pension data from on-premise systems to cloud, on-prem systems to other on-prem systems, and between different cloud environments
With the transaction volume increase in the PRT market expected to continue, technology and service providers have many opportunities to seize this underserved industry segment by leveraging their existing business expertise in the retirement and pension domain to build new solutions catering to this market.
Group Life Policy Administration Systems (PAS) Products PEAK Matrix® Assessment – North America
Group life insurers are increasingly looking to modernize their core platforms to address the limitations of their legacy core systems and drive transformation to future-proof their IT infrastructure. They are seeking cloud-ready platforms that can enable extensive API integrations and provide out-of-the-box functionalities for rapid product configurations.
In response, technology providers are developing deep expertise across various product types and demand themes. They are expanding their talent pools, building configurable solutions to address key concerns around on-budget and on-time implementations, and supporting insurers to become digitally enabled.
In this report, we assess 15 technology providers featured on the Group Life Policy Administration Systems (PAS) Products PEAK Matrix® Assessment 2023 – North America. Each provider profile provides a comprehensive picture of its service focus, key Intellectual Property (IP) / solutions, domain investments, and case studies.
This report examines:
Provide an overview of the group life PAS market, including its size, growth, and drivers
Assess 15 technology providers that focus on North America
List the characteristics of Leaders, Major Contenders, and Aspirants
Examine providers’ key strengths and limitations
Scope:
Industry: insurance Geography: North America
The assessment is based on Everest Group’s annual RFI process for year 2022-23, interactions with leading group life PAS technology providers, client reference checks, and an ongoing analysis of the North American insurance technology market
The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.
Regional banks are likely to upgrade their risk management technology as the recent problems in the industry raise concerns about all elements of their risk positions, experts say.
Most regional and super-regional banks previously sought to spend as little as possible on risk management technology to meet minimum regulatory and compliance requirements, said Ronak Doshi, Partner at Everest Group. However, over the past six weeks, banks have felt pressure from their boards, employees, and other stakeholders to prioritize risk assessment.
“Banks are suddenly saying, ‘Risk management is a key component of who we are as a bank,'” Doshi said. “It’s not just the cost of doing business. That’s business.”
Heightened momentum for technology-first and automated operations is elevating customers’ need for greater convenience, instant gratification, faster turnaround time, and more self-service options. Today’s digitally-immersed consumers have grown accustomed to doing business anywhere, at any time, and with any device, and this is shaping up the new normal of the insurance industry; transforming the insurance claims journey becomes a pivotal priority for Property and Casualty (P&C) carriers to meet demands for a customer-centric hyper-personalized experience driven by digital technologies. Read on to learn more about the zero-touch claims of the future vision and how to achieve it.
Leading InsurTechs with pure-play digital models are heating up the competitive landscape, making it imperative for traditional insurers to optimize their claims functions. An insurer can achieve future goals by accelerating the adoption of next-generation capabilities.
Amid the digital shake-up and rising demand for delivering an “Amazon-like” experience, insurance operations are plagued with workflow complexities caused by multiple intermediaries and legacy systems. Digital and emerging technology solutions can help insurers reshape the customer claims journey and improve turnaround time while reducing information leakages and fraud and delivering a superior customer experience.
Foundational pillars of a digital-claims future
To embark on a transformational claims journey, insurers need to go beyond traditional after-the-fact claims management, tap into the plethora of available data to unlock immense value, and focus on offering omnichannel experiences powered by intuitive digital technologies. P&C carriers will need to excel at the 3Es: experience, efficiency, and effectiveness.
Winning P&C digital claims offer a compelling digital experience and strengthen customer loyalty. Insurers can differentiate themselves by supporting each touchpoint in the claims journey – starting even before an incident occurs – with data, artificial intelligence (AI), analytics, and other emerging technologies—all while retaining the human touch.
By offering seamless omnichannel customer experiences across claims registration, disputes, timely process updates, final settlements, insurers can improve customer satisfaction and retention rates. This is crucial given that Everest Group’s research shows ~35% of P&C insurers’ priorities across claims management are focused on enhancing customer experience (based on an analysis of 60+ case studies involving claims modernization/transformation).
Insurers also need to drive superior efficiency by enabling data-driven and analytics-driven claims processing. This ensures focus on effective service delivery to reduce claims expenses, while improving claims handling accuracy and ensuring greater customer satisfaction.
Bridging the gap between current and future digital claims-processing
With innovation growing throughout the P&C insurance industry value chain, AI/Machine Learning (ML)-enabled tools eventually will help insurers redefine their roles from claim handlers to claims preventers. P&C carriers flourish when they embrace this mindset shift from a risk transfer to a risk mitigation model.
Insurers can unlock value in the claims industry by employing the internet of things (IoT) and telematics capabilities combined with the connected devices ecosystem and third-party data to identify red flags and alert customers of risks before any loss occurs.
Insurers need to look beyond mere cost-savings, accurately utilize the wealth of data they possess, and transform claims from a necessary back-office function into a source of competitive advantage and market differentiation. Below is a look at the key steps to reach a seamless claims settlement:
Exhibit 1:
Source: Everest Group
Rigid legacy systems for claims processing can present challenges for insurers and prohibit them from adapting to the evolving customer requirements and optimizing their operations. Legacy IT processes slow progress and innovation, eventually affecting the end-user experience that holds the potential to make or break insurers’ reputations. Taking a one-size-fits-all solution approach for different business lines, failing to adopt modular design principles, and having limited advanced systems skills add to the overall complexity and further weaken the ability of insurers to thrive in today’s competitive environment.
To attain a competitive edge, insurers require instant resolutions and digital experiences on the go. Leading insurers are harnessing the power of unified and custom low-code/no-code platforms with advanced AI and analytics tools to streamline claims processes, modernize systems, and build modern layers on top of existing legacy systems or other core platforms without involving time-intensive and expensive upgrades. This allows insurers to build reusable codes and design “plug and play” environments to deliver enterprise-grade solutions at speed and scale. Low code makes it easy for carriers to simultaneously focus on profitability, enhance customer experience, and fulfill the vision of balancing quick wins with strategic initiatives.
The need for digitalization of workflows and customer interfaces, convenient user journeys, reusability of components and faster configurations, cost optimization, and skill management are the top drivers fueling the demand for low-code/no-code technology for insurers in modernizing the claims process.
For instance, a leading global insurer used a low-code platform to create an intuitive and dynamic first notice of loss (FNOL) prototype application in just 90 minutes and transformed it into a fully functional mobile application for 2,000-plus users in four weeks, delighting customers.
Where do the opportunities lie?
A combination of agile insurance claims process/operating model transformation, adoption of advanced technologies and telematics, a skilled workforce with technical and domain expertise, and a connected partner ecosystem are the fundamental facilitators for the probable future of zero-touch claims.
In the future of claims processing, P&C insurers will be able to facilitate touchless claims decisions, accelerate payment settlements, assess indemnity obligations accurately, prevent fraud, and mitigate claims litigation losses.
Exhibit 2:
Source: Everest Group
Below are the key elements needed to move from the current state to claims of the future:
Acting quickly and flexibly: The rapidly changing environment is compelling insurers to keep up with the pace. Incumbents need to act fast, develop and launch new products, accelerate FNOL processing, and streamline claims management quickly to stay relevant. The need for agility is greater than ever. Adopting the latest technologies and processes will propel P&C carriers to move faster and separate leaders from laggards
Adopting advanced analytics and AI: Real-time sensor and IoT data coupled with AI and ML-backed algorithms will enable insurers to process claims efficiently and manage fraud without any human intervention. For instance, leading insurers are using an AI model embedded within the claims workflow to assign a complexity score to each claim based on multiple parameters and process all low-risk claims under a certain threshold. Low-complexity claims are routed for straight-through processing while high-complexity claims are sent to the right team depending on the claims adjuster’s specialization and availability, thus ensuring speed and accuracy
Transforming talent management strategy: Modernizing the claims journey requires relying on advanced technologies and a skilled workforce to manage emerging risks. Insurers need to enhance their long-term value proposition to attract skilled workers with technical and domain expertise
Partnering with digital claims solution providers: Building partnerships with solution providers can support carriers in extracting maximum value by utilizing the provider’s end-to-end digital claims solutions portfolio. Advanced capabilities across core functions include claims notification, adjudication, and settlement to fulfill P&C carriers’ needs across the claims value chain
To achieve the zero-touch claims of the future vision and keep up with leading competitors, insurers will need to invest in advanced technologies and drive value creation by taking a more proactive and customer-centric approach.
Successful insurers who can deliver a hyper-personalized experience will generate superior efficiency and leverage data and ecosystem insights to proactively detect fraud. Above all, this transformation improves the claims ratio by building predictive and preventive capabilities. Insurers who take these steps will emerge as industry frontrunners.
