The Property & Casualty (P&C) insurance industry is facing a variety of pressures in the current environment of relatively lower interest rates, regulatory and technology advances, and customer-related demands. In addition, slower premium growth rates and a rising combined ratio has been putting a greater pressure on industry profitability. Therefore, insurers are exploring optimal cost lowering initiatives that can offer the fastest and highest ROI with minimal investments.
What we are noticing is that most P&C insurers are now focused on identifying and implementing strategies to drive cost reduction. Some of these include:
- Modernizing the legacy systems / IT platform replacement
- Standardizing existing processes within the insurance value chain to increase straight-through processing
- Business Transformation – Streamlining and optimizing existing functions across the value chain with an integrated play of automation, technology products, and process optimization solutions
However, modernizing legacy platforms adds an additional burden of increased costs that most insurance carriers cannot take on in this current environment of low profitability. Hence it makes sense to use Business Transformation to achieve ROI faster without any major investments – and we have seen that many use this option with great success.
In today’s digital era, when every industry is talking about transformation, what type of Business Transformation have we seen being really effective in the Insurance industry?
Smart Business Transformation does not require large automation projects. It does not necessarily require an overhaul and replacement of legacy technology platforms. We have seen an effective transformation of business operations by optimizing and redesigning existing processes by simply leveraging low cost, easy to implement, and add-on (rather than replacement) technology solutions and automation to gain greater efficiencies, reduce turn time and improve quality of processes.
Several Insurance carriers have partnered with third party service providers to help them in their transformation journey. These experienced third party providers will not only help identify the right transformation approach based on business needs but also recommend and implement the right mix of process optimization, automation tools (including RPA), Data Analytics and technology solutions. But the smartest of these providers do not need the Insurer’s technology department to take on any projects, or enhance internal systems – but still, manage to bring about efficiency and speed in operations. They use optimized services with ‘add-on’ technology to achieve the desired outcome.
How have P&C Insurers benefitted from Business Transformation?
- Cost reduction leading to improved expense ratios
- Faster turn times enhancing customer satisfaction
- Enhanced accuracy and quality
Business Transformation – Progression
Step 1: Business Process Optimization – Standardizing and optimizing existing processes to gain immediate benefits
Step 2: Business Process Reengineering – Reengineering existing processes with incremental process automation tools and value stream mapping to eliminate non value adds. Longer-term benefits start accruing.
Step 3: Business Analytics – Driving greater business value through data analysis, intelligent decision-making
Step 4: Business Innovation – Leveraging Predictive & Cognitive Business Solutions to drive business innovation and business changes.
From our 17+ years of experience in delivering business transformation to 150+ customers in the financial services industry, we would recommend that P&C insurers follow a planned and phased approach to achieve the maximum benefits from their transformation initiatives. And experienced providers, like SLK Global Solutions, can certainly make this journey easier, by reducing the need for technology intervention, and achieving the same benefits via process optimization and smart use of ‘add-on’ technologies.