How P&C Insurers can earn high ROI on digital investments
Article Synopsis :
As concerned as P&C executives are about digital technologies in general, the same executives don’t seem singularly focused on how digital investments can deliver ROI and improve their own bottom lines—or so suggests this report from Oliver Wyman.
Digital initiatives can become undisciplined and unmanageable, producing negligible or even negative financial returns, if executives fail to impose clear targets for the three primary drivers of ROI:
- Focused Growth: Enabling effective customer and channel management
- Efficiency: Driving down costs in core operations
- Underwriting Results: Generating actionable insights to improve loss ratio
The three P&C industry sectors – personal lines, small and medium-sized enterprise (SME), and large corporate and specialty – each face their own challenges. Thus, high impact digital investments vary by sector; according to competitive dynamics, historical factors, and areas of greatest improvement opportunity.
Personal Lines – The Customer Experience Journey
The personal lines sector is most dramatically affected by demographic change and consumer technology adoption. Winners take a hard look at every customer touch point, including marketing, distribution, underwriting, servicing, and claims management. This includes agent/channel interfaces and linkages with business/data partners and vendors. The report suggests personal lines carriers reap the greatest benefits by concentrating on three areas:
DOUBLE DOWN ON CUSTOMER ANALYTICS
- Drive growth by identifying and targeting new market segments
- Add profitable customers based on analytic insight into factors driving high lifetime value; reduce churn by understanding predictors of lapse
- Increase customer satisfaction and retention by designing segment-specific engagement models and product/service offerings
SIMPLIFY THE CHANNEL (OR DIRECT) EXPERIENCE
- Enhance the speed and accuracy of prospecting and quoting for your channel partners of choice
- Equip your distribution force with tools to provide advice and support to determine the right coverage from among your offerings
- In direct channels, focus on the variables driving abandonment in your quoting and purchasing process
DEPLOY DIGITAL SERVICES
- Deploy tools such as robotic process automation and machine learning to drive down cost
- Reduce channel and operations center time spent on administrative tasks; free up customer facing prospecting and sales resources
- Automate routine tasks, and redeploy staff to judgment-based roles informed by real time data in underwriting and claims
SME/Middle Market – Granulize, Streamline, Modularize
Given the intense competitive dynamic in this segment, SME carriers should focus on the following three areas to generate returns from digital investments:
REFINE RISK INSIGHT AND RISK APPETITE
- Apply analytics to understand drivers of profitability in each risk class, deriving insights to systematically refresh the risk appetite
- Improve underwriting decisioning; quote risks where you are advantaged, and turn away businesses outside the risk appetite
STREAMLINE TO SUPPORT EFFICIENT AGENT INTERACTIONS
- Leverage third-party data to develop marketing campaigns, support growth and build long-term relationships with chosen channel partners
- Provide tools to clearly communicate risk appetite to assist brokers in more efficiently identifying potential clients to target
- Implement a modular product architecture to enable fast customization of coverage, features and pricing for evolving client risk profiles
- Increase product development speed and reduce IT complexity
Large Corporate and Specialty – The Paradox of Focus v. Flexibility
The paradox of large corporate and specialty is the need to build capabilities supporting laser-like focus while enabling flexibility and nimbleness. As in other lines, automating routine tasks will help reduce costs, but the greatest benefits will come from freeing up talent to focus on building channel relationships and creating new risk program solutions.
Large corporate and specialty business writers should focus digital investments in three areas:
ALIGN RISK APPETITE WITH MARKET DEMAND
- Identify proprietary insight into risk drivers and pricing dynamics to target clients that can be profitably won
- Target attractive risk profiles, and engage brokers to improve the quality of submissions matching risk appetite
- Rapidly adjust risk appetite and business processes to engage with new programs and placement platforms
MANAGE NEW BROKER INTERFACES
- Establish linkages into the flow of new programs; customize coverage and limits to succeed in an increasingly specialized market
- Position with brokers to emerge as a winner as they consolidate flow to fewer carriers and programs
- Deploy skills to the highest value-add activities. Capture and scale the knowledge of experienced underwriters and claims professionals
- Design the digital workforce of the future: redefine key roles and develop new career paths based on agility and enabled by data
Seven Digital Enablers
As a practical matter, many P&C carriers aren’t ready to fully implement the suggested ideas today because they lack the baseline digital enablers – data, systems and processes – required to move forward. A good starting point is to review priorities and capabilities across these seven ‘digital technology levers’:
- Customer and Channel Experience: What are the touchpoints across the value chain where you intend to differentiate via digital capabilities?
- Self-Service Opportunities: Where can you enable customers, agents/brokers, and business partners to streamline processes or transactions by using new interfaces?
- Enhanced Applications: How can applications and data be linked to enable seamless data exchange to improve efficiency, decisioning, and customer experience?
- Data and Analytics: While few P&C carriers can claim to have excellent current capabilities, where can you begin building decision-support tools to improve marketing, underwriting and/or claims?
- Process Excellence: Before we digitize, are we confident we’ve eliminated or reduced undue complexity, duplication or decision rules?
- Process Automation: What are the best opportunities to deploy bots, artificial intelligence, and machine learning; and how do we guard against automating the 1980s – building complex technical tools to perform tasks that should have been simplified long ago?
- Workforce Modernization: What are the new skills we need to embed in our organization; and who will serve as “digital evangelists” over the course of a long-term transformation as the lines between traditional IT and business blur? What workforce size will the organization require as work tasks evolve toward being more analytically driven and digitally enabled?
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Digital Insurer's CommentsThis report argues in favour of a comprehensive digital roadmap spanning the organization—and we agree. All too often Business, Distribution, Operations, Underwriting, Claims, and IT executives work their respective agendas in isolation.
Internal competition between business units and even functional areas is a healthy fact of life at most carriers. Digital investments, however, require collaboration, to the good of all. Silos are so yesterday.
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