The insurance industry has always done big investments in digital transformation programs, some of them, finding themselves constantly in the state of digital transformation. For example, AXA invested more than 1 billion in digital transformation in just over two years.
In the insurance industry this investment is likely to result in lower profit for a while, but without this investment, the long-term profit will be at risk entirely. Therefore, insurers are investing on new emerging technologies constantly. In general, these investments have a direct impact on increasing revenue and reducing the expenses in the insurance.
Let's Understand the business of Insurance
Insurance is a very complex business, and there are many verities and types of insurers from General Insurance or GI in short, to health, pet, auto insurance, and etc. But if we want to explain it simply, there are 5 broad areas of the business:
Risk assessment and pricing:
Insurance is a very risk-averse industry, based on the appetite of an organization for taking risks in a specific area the pricing guideline is developed. Then this pricing guideline will derive different pricing schemes and algorithms for each product offerings and service.
Distribution and Sales:
This area is all about go-to-market channels and strategies. It enables the insurer to establish multiple channels such as agents, partners, direct sales etc. This is one of the areas that is very much in the need of relationship management.
In this area, many processes working together to take care of business operations such as rating, quoting, binding, issuing, renewal etc. This is a very big and complex part of any insurance.
Claim management enables insurance to start processing the claims. The processing of claims depends on the insurer will have multiple processes such as investigation, identification and classification, approval, and payments.
This area technically is where all the audit, fraud detection, volume abnormalities, etc is identified, detected, and will be reported to the relevant stakeholders. Even activities such as audits of cases to ensure the quality of operation will be happening at this level.
Addressing Insurance Challenges with Digital Transformation
Because of the complexity of the business, reliance on domain experts such as underwriters, sales, etc of each area, and the risk involved in every step of all processes and activities digital transformation will help the insurer to increase the revenue by allowing them to design and develop more products, optimize marketing and sales channels and last but not the least increase customer engagement to retain customers.
And when it comes to operations such as underwriting, pricing, discount because they heavily rely on the field experts and relationship, the digital transformation will help to deliver quality and consistent decisions constantly. And it reduces the expenses in underwriting, claims, compliance, and audit.
On top of these, one of the top challenges for an insurance company is the loss of IP and inconsistency in insurance's operation.
Introduction to Unified Digital Insurance
One of the main challenges in insurance companies are that almost everything kind of live and in isolation. Underwriting, from distribution, from sales and etc. but when they need help, they will pass a baton to each other, this is called referral. Referral introduces a significant delay in every process running in any area and functions. Referral depends on the product, price range, level of seniority of underwriter, authority level and many other criteria.
The referral, answers the problem of isolation and silos by scarifying the quality, consistency and time to respond for a case, but also, in many cases it does not solve the main underlaying issue. For instance in a scenario of underwriting a case sometimes there will be a need to have the price adjusted when they offer a new product (if they are allowed by compliance and regulations) to a customer, underwriter and sales have to be able to know exactly what to offer for what price point and how much discount rate they can apply. Is might seem fine, but because this is manual, based on relationship and based on the other people and team you might refer the case, decision outcome will not be the same for similar cases, let's put aside different channels which will add more complexity to the process.
There kind of challenges only can be addressed by a Unified Digital Insurance:
If we look at the general picture of how it will all fit together to implement the unified digital insurance, we will see there are many different components involved, from integration to legacy and core insurance systems, to integrated decision, rules, analytics, and processes. Also not to forget, there will be the need for the involvement of people at different levels and timing, for their inputs, approvals and possibly handling exceptions.
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End-to-end decision management allows insurance companies to manage all types of requirements from multiple angles. Whether its a rule, process, or data transformation for decision making to automation of tasks, long-running business transactions or complex orchestration. In general, we are looking at something like below allowing to build the single source of truth across company's different functions and operations.
In future posts, we are going to explain more details about every element of this model and how each function in the insurance company with so many varieties of requirements can leverage the digital decisioning technology to reduce expenses, increase revenue and improve the quality of customer engagement.
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- Updating Business Rules in Insurance Underwriting
- Dynamic Pricing
- Streamlining Business Processes
- 3 Ways to Improve Insurance Underwriting using Decision Automation
- Machine Learning in Health Insurance Premium Calculation
- Handling Compliance Challenges in Insurance
- Minimizing Health Insurance Risks
- Why Automate Insurance Pricing Model?
Last updated September 25th, 2023 at 04:33 pm, Published November 26th, 2020 at 04:33 pm
CEO and the founder of FlexRule – He is an expert in architecture, design, and implementation of operational decisions, business rules, and process automation. Created Decision-Centric Approach, a methodology that brings People, Data, Rules, and Processes together to automate operational business decisions.
This approach is recognized by Gartner as the missing link to provide business value to organizations.