Today’s US property & casualty (P&C) insurers are not immune to the challenges associated with the increase in merger & acquisition activities, rising interest rates and combined ratios, increasing customer demands, and disruptors in the form of both insurtech startups and technology innovation.
The hard facts around these trends appear in the industry’s financials. Consider that during the first half of 2017, P&C insurers’ underwriting losses more than doubled to $5.1 billion compared with the year before. Further, AM Best reports that increasing loss costs, as a result of higher catastrophe and auto claims, drove net income down 29 percent in the first half. Keep in mind these figures comprise the industry’s reality before insurers dealt with the onslaught of third-quarter Hurricanes Harvey, Irma and Maria.
The bottom line is that to compete in this volatile market, insurers must be able to pivot quickly to respond to market changes while meeting ever-expanding customer demands. This means rethinking their strategic objectives, identifying weak spots in functional processes, and prioritizing cost-effective ways to successfully stay in the game.
Perhaps the watchword here is pivot, because historically, the majority of insurers have not been known for their ability to adapt quickly to market changes. As a result, as the old saying goes, “the rising tide brings up all the boats,” i.e., competition has been relatively normalized. That is all changing, thanks to new disruptive competitive entrants and leading insurers that now understand where to find cost efficiencies that play forward to improving customer engagement and service.
This is especially true in claims processing, which presents the most important opportunity to establish lifetime loyalty with a customer at a critical and difficult time. Yet for most insurers, a myriad of claims-related tasks take staff members from their core competencies. For example, the labor around intaking first notice of loss (FNOL) by phone, email or fax includes successful preparation of customized scripts, monitoring of service levels, and application of quality assurance metrics. During a catastrophe, employees often feel as if they are “wearing many hats,” including trying to staff the call center while conducting a host of other claims-related responsibilities. The reality is the bulk of call center tasks end up being about more than just the claim, as calls also come in regarding policy services, payments and billing inquiries. By employing customized outsourced services, these issues become non-issues because the services ensure rapid ramp-up labor during intense, high-volume requirements. Furthermore, internal audits ensure client service levels are met and exceeded. This decision alone can be a competitive differentiator.
The ability to respond quickly and accurately to a customer’s FNOL also positively impacts the distribution network, as producers and agents leverage the benefits of these outsourced services to keep the claimant informed, engaged and up-to-date.
As carriers compete with upstart companies such as P&C insurer Lemonade, which uses artificial intelligence and chatbots to deliver policies in real time, the ability to pivot to business process services that drive efficiencies in policy issuance becomes almost a mandate. Here, business process services can enable traditional insurers of all sizes to compete as if they were a large, Tier 1 carrier, providing fast, efficient services up and down the value chain.
The arrival of upstart competitors, along with other changes and challenges in the current insurance marketplace, should be a wake-up call for traditional insurers looking to compete successfully. Why?
Because as new entrants conducting business in a more agile fashion are able to respond faster to customer demands, incumbents that are able to pivot to the efficiencies afforded by external business process services will be able to focus on superior customer experiences that impact top-line sales and bottom line profitability.