Four Lessons for Insurers Seeking Greater Efficiency
There is no room for wasted movement within the insurance industry. Unnecessary processes, expenses and errors eat away both at insurers’ already narrow profit margins and their customer and producer satisfaction levels.
Efficiency issues are more pronounced in today’s market environment, which is becoming more digital by the day. New technologies around big data, cloud computing and mobility have converged to enable a new digital economy in which most business is transacted virtually, lowering the barrier of entry for new competitors and raising the bar for customer service.
Many insurers struggle to keep up with this pace of change, and the culprit is inefficiency. While most new business is transacted digitally, legacy business remains trapped in non-digital systems and processes, thereby creating duplicate but disparate workstreams.
Meanwhile, Celent is reporting that 58% of insurance IT spend goes toward supporting existing technology and infrastructure. With so much of insurers’ time, resources and budget devoted to simply maintaining the status quo, very little is left over to innovate.
In this time of upheaval, insurers need to become more efficient so they can stay relevant in a digital world. That means reducing what it takes to maintain your current state, so you can get to work on your future state — one that better addresses the new needs and wants of digital-age consumers.
There is no definitive blueprint to attaining better efficiency, but there is an emerging set of best practices that can serve as a guide. Captured below are a few lessons CSC has learned from clients, from partners and from its own hard-earned experience as an insurance business process services provider. Consider each as a possible foundation upon which your organization can build its own unique efficiency plan.
1. View Efficiency Through the Lens of Customer Experience
The biggest risk to any efficiency improvement effort is deprecation. No insurer wants to spend time and money streamlining a process only to discover that the process itself is no longer necessary. It’s the very definition of a waste of time. Given today’s pace of change, this scenario plays itself out more often than most insurers care to admit.
To avoid this fate, consider the impact any given process has on the customer experience. Oftentimes, customer experience trends can serve as a litmus test to determine how vital a function truly is to an insurance company’s strategic goals. If a process no longer maps, at least indirectly, to a customer service priority, odds are its useful life is coming to a close.
2. Deconstruct Workflows to Identify Issues at the Source
By documenting the individual steps that comprise common processes, insurers can often uncover elements that detract value — bottlenecks, queues, repetitive action, unnecessary approvals — each of which can contribute to delays and errors. Smoothing these processes can be effective in many ways. Workflows that have been optimized produce fewer errors and, by extension, reduce call volumes from customers who report problems.
You don’t have to do this yourself, either. If you’re already working with a business process services (BPS) provider, you may be able to adopt the tools they’ve employed for their own use. BPS tools for managing workflows are continually revised based on new client input, industry standards and new technology.
3. Ruthlessly Question the Status Quo
Stagnation is the enemy of efficiency. To accelerate your efficiency initiatives, don’t ask if a process should be automated; ask why it shouldn’t. Most insurance companies look at their processes but don’t necessarily look for areas that can be automated or outsourced. To really become more efficient, insurers should place the onus on all internal processes to justify their continued existence. Why can’t this be automated? Why can’t this be outsourced?
In many ways, these questions are tied to what an insurer considers core, and what it considers commodity. And given the changes in how an insurer will compete in a digital economy, those considerations might be different now compared to even a few years ago. For example, does any insurer derive any competitive advantage from its billing system, from its call center, from its policy administration system? All these systems might be critical to success, but rarely do they provide unique value to the customer.
A steady diet of rationalization, consolidation and reduction can help address this complex situation. An insurer should identify systems that can be retired, those that need to be maintained in-house, and those that can be treated as utilities. In many cases, it can be more cost effective to offload utilities to a service provider and/or to the cloud. This reduces the legacy IT estate and allows the company to refocus its assets and energies on new strategic initiatives.
4. Incentivize an External Workforce
It may seem counterintuitive, but sometimes it’s easier to hold an external partner more accountable than it is an internal team. Service-level agreements and monetary ramifications for missed deadlines or poor quality are strong motivators, after all, and they’re only available to you when working with a third party.
So, when the issue of efficiency comes up, consider BPS options not just for their predictable costs and consistency, but also for the degree of control they offer. Pursue a clear and precise service-level agreement with specific language around what will be delivered and when. Think of it as a way to minimize risk and, essentially, formalize your efficiency goals.
IDENTIFYING THE RIGHT PATH
Jumping on the latest new tool or the hottest new trend in the name of efficiency simply isn’t a good use of time or capital. In fact, it’s downright inefficient. The key is to make sure that any effort to become more efficient is also tied to an effort to become more effective. So, it’s crucial that an insurance company perform its own due diligence before embarking upon an efficiency initiative. Understand what an end process should look like — ideally from a customer point of view — and work back from that premise.
Consider this an outside-in approach to process design. Some efficiency initiatives will save time, and others will save money. All should help sharpen focus so you can concentrate on building a more customer-centric business. After all, when more processes become customer-facing, the inefficient pieces of those processes are exposed along with them — making any efficiency issue a risk to your brand and your reputation as well.