Insurance is predicated on the ability to plan effectively, to model accurately, and to predict the likelihood and impact of certain events. Whilst already facing significant regulatory, competitive, and customer disruption, the industry, like all others, has now been deeply disrupted by the pandemic.
From an operational perspective, insurers have seen their workforces dispersed, their technologies stretched to the limit, and customers put under immense pressure – and in turn, that strain has been put on the insurers themselves.
Then there’s the increase in customers focusing on wanting to better protect themselves. Separate reports have found that the number of people making wills has risen at the same time as life insurance has seen a spike in interest. And for commercial lines, corporate customers are carefully scrutinising their current and future business disruption insurance, again with an eye on increasing their cover.
When is a growth in customers a problem? When you can’t handle each one properly. No business wants to fail due to too much success, but if insurers do not adapt rapidly, that is the risk they entertain. Whilst there may be an uptick in demand in some areas, the market is still awash with competition and tight margins.
Added to this are the demands of IFRS17, due to come into force in January 2023. That may seem a long way off, but the reporting requirements it places on insurers will require significant organisational, data and technological change, all of which needs to be started now.
Two fundamental shifts: adapt and reinvent
This all points to the need for a fundamental shift in the way insurers operate in not one, but two areas.
Firstly, there is the need to adapt their operational model so that the effects of disruption, whether driven by the pandemic or regulation, do not impact the experience their customers receive.
Secondly, they need to reinvent their business so that the services and products they provide are both appropriate for customers and capable of withstanding future upheaval.
In both instances, technology, or rather the ability to consolidate, analyse and action data-driven insights through the use of technology, may offer the solution.
Why? Because as with so many things, the issues that insurers face are built on data. Being able to harness it gives them a much better chance of tackling those issues head-on. For instance, when it comes to operational models, better visibility (powered by data), combined with accurate scenario-based modelling and planning, will aid the development of a more agile organisation. Whether it’s adapting to a reduction in staff headcount as infections spike in different parts of the country or anticipating when customer service functions may be impacted by local lockdowns and increased restrictions. Being able to identify problems and react accordingly will be critical to delivering operational continuity and, therefore, unimpeded customer experience, and data lies at the heart of this.
Then there’s how it can be applied to evolving products and services for customers. Customers, whether consumers or businesses, are going to want to feel covered by their insurance – insurers will want to balance this with the need to not overexpose themselves to events that could appear out of nowhere. Here’s where the combination of accurate data use and the right digital tools, such as artificial intelligence-driven solutions, can help insurers take a major leap forward. Premiums can be adjusted, and more dynamic products tailored to the needs of customers can be developed.
Being able to use data more effectively is going to play a major role in complying with IRFS17, both in getting ready for its implementation and meeting its requirements in the years to come. Complying with a reporting standard will drive an investment in data and technology, but harnessed correctly, that investment can unlock wider benefits – the same commitment can be used to cover off all the challenges already covered.
In short, those that use technology effectively, and plan for scenarios appropriately, are more likely to build the types of products and services that fulfil both those objectives, and ultimately keep customers coming back.
Preparing for the unknown isn’t impossible
Much like other sectors, insurers need to revamp their business models. Technology, and the better use of data, offers a solution to both operational and customer experience challenges.
Planning for the unpredictable may seem impossible, but by using a variety of data sources, and more importantly, by being able to connect them all and read them effectively, insurers can ensure they continue to meet customer expectations while preparing their businesses for whatever comes next.
By Adam Bimson, chief customer officer at Vuealta