Much has been written about the many uncertainties facing the insurance industry and the difficulties of making decisions in that kind of environment. These range from the timing and strength of any broad economic recovery—which in turn drives consumer confidence, insurance pricing cycles, and investment returns—to the degree and precise demands of the regulatory changes that will no doubt emerge as a result of the ongoing federal government and related domestic and global evaluations.
While it is true that some of these questions still are not fully answered, and the exact timing of the resulting changes is unknown, the industry already has more than enough information and should avoid using these uncertainties as a reason for procrastination and inaction. In fact, it will be those carriers and vendors that seize upon this transitional period and begin implementing real change that will become tomorrow’s market leaders.
Profitable and Attractive
While the life insurance industry continues to search for product and distribution strategies that might find some traction with today’s consumers, personal and commercial insurance lines have been providing relatively attractive returns to shareholders. The Hartford may be the first, but it won’t be the only large insurance company looking for a bigger share of the property/casualty space. Global, multi-line carriers like Spanish insurer MAPFRE—whose business is 88 percent non-life—are also increasing their focus and investments in North America and elsewhere. And the JOBS Act of 2012 will only further fuel demand for business insurance of all kinds. Insurance carriers need to ensure that their tactical and strategic plans—both offensive and defensive—are properly aligned with their business and shareholder objectives.
Forced Change
Competition and the “new consumer” are forcing change across the enterprise in product development, marketing, distribution, and customer service. Leading carriers and their vendor partners have begun to realize that several quick and fundamental shifts have taken place simultaneously, rendering yesterday’s strategies almost useless.
Consumers are now armed with powerful, low-cost computing and communication devices, which have become almost ubiquitous. Aggregators of both useful and trivial content and information have proliferated to feed the seemingly insatiable demand of these users, as well as the marketers that have realized how important they are as a new, large, and different marketing and distribution channel.
The new consumer (Millennials and others like them), with access to instant and unlimited amounts of information and armed with the opinions of their cohorts, are better informed than any other group in history, are almost always connected to “the grid,” and expect and demand very different service from their insurance providers. To respond, carriers should place these actionable tactics as high-priority initiatives:
-
Centralize client information and integration of redundant databases to enable instant access and policyholder self-service.
-
Leverage internal and external expertise and technology to enable excellent customer-centric service in order to drive retention and differentiate their brands.
-
Institutionalize the use of social media now to build their brands and relationships in consumer communities, gather insight into existing and new products and competitive intelligence, and identify the most important innovation opportunities.
Greater Compliance and Transparency
While the exact requirements of new regulations are as yet undefined, it is clear that compliance, transparency, and reporting demands will increase. In preparation, carriers should begin to investigate the vendors and technologies they will need to deploy, and consider a master data management plan that can deliver additional benefits in terms of supporting new organizational and operational objectives.
The demand for conducting commerce electronically continues to rise, and carriers need to focus on legal and regulatory requirements, the receipt and delivery of documents electronically, and the many legal and compliance issues that are already apparent.
Business Intelligence Coming of Age
While most carriers have deployed business intelligence across the enterprise, more sophisticated analytics and location intelligence tools—which hold great promise, especially for property lines—are emerging for such diverse uses as product modeling; agency operations; real-time fraud deterrence, including claims pattern recognition and link analysis; customer intelligence; and internal performance measurement. Carriers that can leverage these tools will not only enjoy the economic benefits but also will have a meaningful competitive advantage.
High-Tech Expectations
Policyholder technological expectations are changing, and claims provide the ideal place to meet them.
Claims continue to grow in importance as a core strategic area for property and casualty insurers, particularly as policyholder habits and expectations evolve. While not every technical advance will work for every carrier, many are delivering quick and attractive paybacks for the more innovative companies. In addition to upgrading claims management systems, carriers are investing in analytics, mobile applications, telematics, vendor collaboration, and Web technologies.
New Technologies Demand Attention
Social media, once simply a conversation medium, is now an essential business tool that provides a valuable repository of customer insight. Insurers that pay attention can profit by improving their products, gaining new customers, and strengthening their existing relationships.
Telematics has gained broader adoption, and pay-as-you-drive options will likely be commonplace among low-risk customers within a few years. But beyond its marketing advantages, telematics can be used to reduce carrier risk and, in turn, claims losses. It is in these areas that telematics can literally reshape the industry. Those insurers that are paying attention and taking advantage will become the new market leaders.
Underwriting workstations, product configurators and predictive modeling, and mobile devices and technologies round out the list of the most promising technologies in which insurers should be investing.
Stephen Applebaum is a senior P&C insurance industry analyst with Aite Group, an independent research and advisory firm. He has been a Fellow with CLM since 2011 and can be reached at sapplebaum@aitegroup.com.