Adapting to changing customer needs and market dynamics has long defined the enduring success of insurers. In today’s marketplace, however, the pace of change has accelerated dramatically, both in terms of technology and stakeholder expectations. How can you become an agile insurer to ensure long-term profitability?
Becoming agile is crucial for the long-term success of insurers seeking to navigate market challenges effectively, meet evolving customer demands and drive sustainable profitability. But what does this mean in practical terms?
Below, we explore the concept of the agile insurer and highlight three key areas where you may need enhanced agility to future-proof your business: new business, in-force management and management information. We also consider the obstacles insurers might face in achieving agility and provide practical guidance to address these challenges.
Insurers should embrace new technologies and leverage them to drive new business growth in today’s marketplace. Two crucial aspects of this are understanding customers better and using data analysis to tailor products and services to their needs. By harnessing data from internal or external insurance quoting tools, for example, you can look at applicants who enter and persist in the pipeline to purchase insurance, identify the target audience most likely to purchase your products and tailor your marketing efforts accordingly. This targeted approach can reduce the cost of customer acquisition, improve top-line growth and enhance customer satisfaction.
Customer personas defined by data-driven insights can also shape impactful new business strategies. By understanding customer preferences, your product development team can develop innovative products and personalized experiences that resonate with a given profitable target market. This information can also help you identify or improve services to underserved markets.
Having the agility to deliver accurate and up-to-date sales statistics and information on the value of new business enables insurers to evaluate sales performance in real time. This knowledge can help management adjust strategies to prioritize or deprioritize certain lines of business or products in light of the realized value.
Historically, insurers may have primarily focused on top-line growth, but for legacy insurers, effective in-force management is essential to maximize profitability. Managing your existing business in agile ways can significantly impact your bottom line. By implementing robust and responsive in-force management strategies, you can improve the profitability of your existing block of business while continuing to drive sustainable growth through new business.
One example of intentional in-force management is regularly reviewing non-guaranteed elements (NGEs) and making periodic adjustments in accordance with contractual provisions and regulatory requirements. Not having a systematic process to perform this reasonableness check to assess whether an NGE action makes sense can be a challenge. Existing financial reporting processes may not be granular enough and don’t compare actual results with original pricing assumptions to assess the reasonableness of NGEs.
To overcome this challenge, we can expect more agile insurers to deploy automated processes to perform systematic and regular NGE reviews. One key enabler of this process will be maintaining the original pricing assumptions alongside current best-estimate assumptions in the valuation models, allowing for side-by-side runs and easy comparison. Conducting automated and periodic NGE reviews can support proactive management action and improve block performance as well as improve compliance with regulations and actuarial standards of practice.
Without accurate, timely and granular management information, insurers may struggle to make informed decisions and drive meaningful change toward their strategic aims.
While crucial for comprehensive reporting and analysis of new and in-force business, data remains one of the biggest obstacles for insurers. Many are struggling to gather, analyze and use data effectively across many legacy systems; therefore, a critical first step to enhancing your management information is centralizing data in a common data platform that all areas of the company can populate and access. When you democratize data across an enterprise with consistent definitions, you facilitate cross-functional efforts to understand and harness the power of complex information.
Having this “single source of truth” can also enable insurers to generate automated and governed reports, reducing the time and effort required for manual reporting processes. This automation allows strategic leaders to focus on interpreting data insights to reveal hidden value and new opportunities rather than spending time on data collection and creating reports.
Many companies have achieved the first step of deploying a data platform but still struggle to generate the necessary insights from the available data. When most of your available resources are devoted to business-as-usual reporting, you’ll have limited time to transform and build new tools. This is where outsourcing or co-sourcing certain functions to free up internal resources for more strategic tasks can help. So too can partnering with external experts able to provide specialized knowledge to supplement in-house data capabilities. By leveraging a strategic partner’s advanced data analytics and visualization tools, for example, insurers can gain actionable insights and make data-driven decisions.
The agile insurer is a concept that can shape how insurers can imagine their future operating models and strive for excellence. To achieve this, you may need to think in a holistic way that encompasses digitalization, agility and analytical decision making.
For example, can you leverage your data from digital sales to identify the touchpoints inspiring brand loyalty or driving lapse rates? By doing so, you can refine the experience or products offered at key points in the customer journey.
Looking to future-proof your insurance business? Our specialists can conduct a maturity assessment across in-force, new business and management information to help advise you on steps to accelerate progress toward your strategic vision and greater agility.
