Market and economic conditions, as well as responses to globalisation and automation opportunities, have seen many companies across the spectrum, including the insurance industry, assessing their operational procedures with the goal to streamlining and optimising costs.
Market trends, competitive pricing, and underwriting performance are greatly influenced by external factors, which in of themselves, present a challenge with underwriting efficiency and excellence. Companies, therefore, see operational efficiency and optimising costs as financial factors which they can easily assess and more importantly control.
Commercial and specialty insurance is largely a manual based business which relies on trusted and difficult to automate human decision making. The operational activities with managing new risks can require many teams that are involved in the pre-bind underwriting and post-bind process relying on handoffs, duplication, and repetition of low-value activities.
The Digital Insurer have looked at 5 InsurTech lessons to improve operational efficiency, from which large commercial insurers could take inspiration.
When I look at the operating guidelines, processes and activities that occur, and govern, the assessment of a new risk or renewal business, I am reminded of project management methodologies.
The business workflow in a pre-bind process of a risk typically follows a waterfall method, as opposed to an agile method, where specific processes must be performed and completed in the order that the operating guidelines have laid out. The governance of compliance and regulatory requirements are like checkpoints and acceptance criteria, and the reviews are similar to the test phases of a project. Even the project scope and requirements can be compared to the coverage requirements of the insured.
Operations Managers are then the “Project Managers” of these mini projects and the resources, ops team that work within them.
The age of globalisation and digitisation that we are in has meant that ops teams can be in different locations and by using tools such as instant messaging, video conferencing, platform-based collaboration and workflow systems tasks can be executed and completed regardless of where team members are located.
The trend towards automation, robotic processing and artificial intelligence, within the ops space, can move the low-value repetitive tasks to the machine, freeing up human talent for those higher value activities where humans perform much better than machines; primarily decision making, risk assessment and intuition.
The biggest challenge with managing operations and gaining operational efficiency is with legacy systems that can hold back insurers due to their inability to integrate and automate, and that are difficult to customise for new opportunities. The constraint that they place on efficiency gains means that processes can become outdated and rigid.
Automating and Integrating the Operational Activities
Above, I touched on the project management view of the pre-bind process, now let’s take a closer look at the end-to-end cycle and see where we can use automation, integration and assisted decision support to gain operational efficiencies.
I’d like to break the pre-bind process down into key steps that generally occur in the underwriting process - we can think of these as the phases of our mini project:
Carriers would perform tasks within these phases, based on their underwriting guidelines that work for the insurance products that they offer.
In my next blog, I’ll look at some general activities that occur within these phases and how we can use digital transformation approaches to gain efficiencies.
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