Core Insurance, Risk Management
Article | September 22, 2022
Underwriting has historically been one of the most data-intensive areas of insurance. But when it comes to looking at investments and results, data and information handling for underwriting at most carriers is still disjointed and disconnected. This is underwriting’s version of the digital divide we’ve been discussing in this series, and it leads to inefficiencies and ineffective underwriting.
The divide exists because today’s underwriting platforms have not evolved to meet the needs of a modern digital carrier. To see why, let’s take a quick look at the history of these platforms. The first generation of underwriting platforms was built to provide rating systems and core policy management needed to price and administer the underwriting of policies. The technology they run on has changed from mainframe to servers to the cloud, but the platforms themselves remain focused on managing the least information necessary to price and maintain the policy.
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Insurance Technology
Article | July 14, 2022
Automated claims processing, price comparison platforms, mobile bill paying—these are just some of the digital services that insurance customers expect and insurers want to provide. As the demand for digital skyrockets, so does the need for insurers to invest in IT. In the past seven years, the share of IT in total operating costs of property-and-casualty (P&C) insurers increased 22 percent. The rise of digital means technology is no longer a cost center. Rather, it is an asset that, if managed well, can increase growth and profitability.
But do these IT investments pay off? As the COVID-19 pandemic exacerbates already increasing cost pressures, insurers’ IT budgets are under scrutiny; they want to see the business impact of their IT investments.
Insurers with targeted IT investments achieve better growth and performance
Data from McKinsey’s Insurance 360° benchmarking survey provide strong evidence of the positive business impact of targeted IT investments. In fact, insurers that invest more in technology outpace competitors that don’t pursue targeted investments in business measures such as gross written premium (GWP) growth, return to shareholders, and expense and loss ratio (exhibit).
As an example, in life insurance, companies that invested more in IT saw a greater reduction in expense ratios (by 2.0 percentage points) and higher returns on technical reserves2 (1.7 percentage points) when compared with insurers with lower IT investments. Insurers achieved these outcomes within three to five years of making their investments.
For P&C insurers, those with high IT investments achieved approximately twice the top-line GWP growth of low IT investors. High IT investments also produced a greater reduction in combined ratios when compared with those with low IT investment.
Four areas for targeted IT investment
So what kinds of technology investments can help insurers achieve growth and improve productivity and performance? Investments in four areas are critical:
Marketing and sales: Marketing technology solutions can increase sales and processing efficiency, improve the quality of core customer-facing processes such as policy inquiries and policy applications, and improve customers’ overall experiences. McKinsey’s Insurance 360° benchmarking data show that tech investments in this category can facilitate top-line growth for P&C insurers by up to 20–40 percent; for life insurers, that growth could be 10–25 percent over a three- to five-year period.
Underwriting and pricing: Automated underwriting fraud detection can improve the likelihood that insurers correctly identify fraud and set accurate prices. A pricing tool kit that analyzes pricing across competitors and enables a flexible, more segmented market versus technical pricing further improves profit margins. Insurers that deploy these and other product, pricing, and underwriting technologies have seen improvements in their profit margins by 10–15 percent in P&C insurance and 3–5 percent in life insurance.
Policy servicing: Workflow automation, artificial intelligence–based decision support, and user experience technologies in policy servicing and within IT can improve the customer self-service experience and automate back-office processes, thus reducing IT and operations expenses. And state-of-the-art self-servicing options will reduce processing times and even improve customer experience. An analysis of programs for large-scale insurance IT modernization finds that insurers that deploy these and other product, pricing, and underwriting technologies have seen improvements in their profit margins by 5–10 percent in P&C insurance and 10–15 percent in life insurance.
Claims: P&C insurers can use automated case processing—machine-learning technology trained to process basic claims cases—to segment more complex cases and significantly improve claims accuracy. Combined with better partner integration and steering technologies embedded in a transformation of the claims operating model, such technologies can help P&C insurers improve profit margins by 25–40 percent, according to McKinsey analysis of large-scale IT modernization programs.
To realize the full value of IT investments, insurers must strategically allocate their resources and view tech as an asset, not a tool.
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Claims
Article | July 15, 2022
The world is changing at a rapid pace, and no industry is immune to the need to evolve, upgrade, and innovate. The effects of mass digitization, artificial intelligence, machine learning, climate change, and the rise of financial-based cybercrime are all being felt in the business world. At the same time, consumer expectations have shifted dramatically, thanks in large part to companies like Netflix and Amazon, which have the technology and business models to provide the instant access to products and services that today's consumers have come to expect. When these changes are considered, it becomes clear that no industry, not even one as traditional, robust, and stable as the insurance industry, can afford to stand still.
Trend 1: CARE-Based Distribution Channels
Insurance companies are engaged in a "digital arms race," rushing to equip their distribution channels with digital tools to improve customer experiences. While CARE is the core experience that most insurance companies strive to provide in both distribution and sales, few achieve it consistently.
Trend 2: Quicker Payouts
Pay cycle time is fast becoming one of the most important differentiators between insurance companies. The winners of the future will use insurance technology to help them resolve claims quickly, at the touch of a button.
To this end, companies are adopting AI-enabled tools to automate both estimation and inspection. Telematics insurance solutions are expected to provide greater levels of contextual information that will support the smoother, faster, and more comprehensive settlement of claims.
Trend 3: The Rise of Usage-Based Models
As the pandemic made consumers aware of the waste involved in paying for insurance on cars that sit unused in driveways, interest in usage-based insurance products skyrocketed in 2021. As the nature of work changes and many people's daily commutes become obsolete, winning insurance companies will offer products that are more in line with how their customers live today. Telematics devices will allow insurers to offer products based on how and how far users drive.
Trend 4: Intelligent Automation
For a long time, the insurance industry has been experimenting with automation. The first phase was robotic process automation (RPA), which was viewed as a way to speed up processes and reduce costs without requiring significant changes to the underlying applications. While this was effective at capturing low-hanging fruit—those ubiquitous repetitive steps that were an unnecessary feature of so many insurance processes—it never really attacked productivity and core functions that required automation.
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Core Insurance
Article | February 12, 2021
In the 21st century, we have witnessed high technological advancement. Just like any other industry, the insurance sector is transforming at a rapid speed. With the changes in demands and expectations of customers, insurers are seeking digital innovation and transformation that not only meet the requirements but also reduces their costs.
So, here are a few that are set to engulf the entire industry for the better. These tech trends will help both insurers and customers to achieve what matters the most efficiently.
Artificial intelligence For Process Improvement
AI tends to disrupt the insurance industry more than any other technology. The main advantages that insurers can claim with AI include reduced claim costs, identifying insurance fraud, and mining voice data for improved customer service. The more an insurer will understand and use this technology, the better they will survive the competition.
Customers usually look for a personalized experience when it comes to buying something especially as crucial as insurance. Artificial Intelligence provides the ability to create a personalized experience for a vast amount of users based on the data collected. It also enables fast data access and rapid reporting by removing the human element from the process.
Blockchain for Secured Records
With the amount of security required in the insurance records and claims, blockchain seems to be the most powerful technology for the upcoming revolution. The thriving technology behind the cryptocurrency has become the center of attention for insurance enterprises. Blockchain having the capability to encrypt all the data can decrease the number of fraudulent transactions, loss of data, and scams.
IoT For Protecting Investment
IoT (Internet of Things) is a technology trend that can be used to connect different objects to the internet. Be it a car, smartwatch, or a refrigerator. For insurance companies, it can be the most awaited blessing as IoT can help in detecting any problem before the actual damage take place. With the help of this technology, insurers can alert the customers in advance about the problems they might face through vehicle tracking, biometrics, and weather sensing. All of this makes it a win-win situation for both consumers and insurers.
Automation For Ease of Verification
Automation along with machine learning will drive better efficiency in the insurance sector. Having the intelligent system as support, insurers are exploring the more complex processes that can be automated. Some of which entails verification and approval of claims, customized interactions with customers, acquiring insights of the customers, property assessments, and detection of fraud.
Adopt New Tech To Succeed
As the competitors of insurance companies are moving ahead, more organizations need to adopt these emerging technologies. Moreover, techs like blockchain and automation are ready to provide more efficient processes. On the other hand, AI and IoT will help in offering personalized experiences while lowering the cost.
Besides, a company or insurer can also hire developers to develop their system or application that can provide all the customization and security needed in the processing.
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