McKinsey’s 2022 Global Insurance Report shows that 52% of the industry’s global equity in the past five years had a return on equity (ROE) below cost of equity. While most insurers predict that premiums will continue to rise in 2022, following the pandemic-driven growth in 2020 to 1.2%many non-pandemic hurdles remain, including changing consumer preferences and the emergence of advanced technologies challenging relevance.
Intelligent automation (IA) can overturn this outdated model and replace it with an effective and profitable alternative. By integrating IA into claims, underwriting, pricing and distribution processes, insurance companies can improve margins, productivity, and customer and employee satisfaction.
Why is the insurance industry failing?
The insurance industry is in a state of stagnation and struggles to maintain profitable operations. Fee transparency has made it easy for customers to seek out cheaper options, while increasing technology adoption has increased pressure on price and speed, fueling an increasingly competitive landscape.
Non-life and non-life insurers have struggled to reduce costs in recent years. The overall industry has seen an ROE slightly below the cost of equity, except for insurance brokers, the only segment with positive economic growth. These oppositional forces are exacerbated by the lack of growing demand in mature markets. The industry is increasingly reliant on price increases rather than expanding its customer base and new coverage offerings.
One of the biggest threats to the industry is this shifting growth model that relies on price increases. The industry needs to unlock latent customer demand, enhance value creation and cultivate growth and innovation. Advanced technologies can achieve this, resulting in lower costs, an optimized customer and employee experience, and improved decision-making and productivity.
Why has digital transformation become necessary for the industry?
Due to the changing demands of the market, insurance companies have to operate faster and faster. As McKinsey reports“What?that used to take years, now has to be done in months or weeks.” Such speeds can be achieved by harnessing the power of intelligent automation. By integrating IA, insurers can reduce turnaround times, take on larger volumes of applications, and dramatically lower the error rate, which is more common when human employees have to perform repetitive tasks. This gives employees time back and allows them to develop innovative strategies, focus on complex cases and deliver customized customer experiences.
This is especially important as the industry’s competitive landscape has become a “fighting for the customer.” To consumePeople expect the convenience and convenience of digital channels, but still need the personalized service that only human employees can provide. This is where insurers can differentiate themselves – by turning right balance between automation and customized human services.
The rapid growth of insurtechs – entities that use technological innovations to maximize savings and productivity in the insurance industry – further illustrates the importance of IA to the industry moving forward. Their threat to traditional insurers is evidenced by increasing global investment in them from $1 billion in 2004 to $14.6 billion in 2021. Insurtechs provide digitally enhanced customer experiences and tend to focus on the marketing and distribution segment of the value chain, along with property and casualty products. These behaviors point to areas that add value to the rest of the industry.
How is the insurance industry harnessing the power of intelligent automation?
For many insurance companies, moving away from legacy systems and silo functions in the face of budgetary pressures can seem daunting. However, insurers can work with an automation partner to facilitate the process. Such partners enable them to get the most out of their existing systems, using digital workers to work between systems previously stored in silos and to synchronize data between applications. This method allows insurance companies to gradually dismantle their legacy systems instead of being forced into an all-in-one approach.
Using this temporary automation strategy, tasks related to onboarding, data analysis, claims handling, and billing can still be automated, relieving human workers and in turn fostering innovation and new revenue streams. This automation management helps insurers streamline the customer journey, process claims faster and ensure compliance with the latest regulations. And as the proceeds from IA initiatives free up more resources, insurance companies can further automate processes and deconstruct legacy systems, increasing value and return.
Thomas Millera leading international insurance service provider covering 80 percent of the world’s containers partnered with SS&C blue prism to integrate intelligent automation into its business operations. The service provider was looking for solutions that worked with its ‘low-volume, high-value’ model and did not require the implementation of expensive new IT infrastructures. As a result, the company was able to achieve significant ROI, increase agility and resiliency, process renewal requests 24 hours a day/seven days a week, improve accuracy and reduce turnaround times, and give insurers more time to focus on value – enhancing work . This ultimately led to an improvement in the customer experience, a key differentiator in today’s industry.
Although the demand for insurance eexpected continue to rise this one year, especially in emerging markets, the sector’s long-term outlook will depend on its ability to adapt quickly. Advanced digital technologies can increase the competitive advantage of insurers or make them obsolete. The future relevance of the insurance industry will depend on its willingness and commitment to adapt to this changing environment.
