The top quintile of insurers take all the industry profit whilst the three middle quintiles barely make their costs of capital. The bottom quintile lost an average $976m a year.
Source McKinsey August 2019
The gap between the top and bottom quartiles has substantially increased from 2012 to 2017. For P&C Carriers the gap has almost doubled in five years.
That is why productivity is such a vital imperative to square the circle of both delighting customers and cutting costs. There are a number of hurdles to clear if carriers are to tackle this issue.
At the forefront are the core systems of record. Some 15 to 35 years old and often compounded when M&A results in multiple such incompatible systems. Attempts to replace these with newer platforms often lead to the same complication- a customised core platform that is so complex and hard to upgrade that insurers can not avail themselves of new vendor upgrades. Gradually they fall two or even three versions behind the current functionality of latest releases.
Is there salvation from insurtechs and new digital platforms? It's a case of the "parson's egg" i.e. good in parts. just being parts of a solution is the problem.
It is of no use if the new technology only offers home, renters, auto, bikes, pets, travel solutions. You can see the result on an insurer's website. A slick and effective self-serve home contents FNOL via a "make a claim" button. But try that on an auto claim and you have to ring the claims team.
A delightful UX and journey for one product and a battle through numerous phone calls for the rest.
The digital claims solution has to be the same platform for all products and perils and integrate with the current sore systems of record. Only that way can an insurer avoid ruinous migration costs. Additionally, the platform, after being happily adopted by the auto claims handlers/adjusters, must be easily deployed by the Home & Contents team with same training and they must enjoy the same functionality and benefits. The customer must experience the same delight with auto, home, pets, travel, workers comp, life.
And then the insurer must be able to enjoy productivity improvements and collapse costs whilst also delivering this better customer satisfaction. Wishful thinking? NO.
360Globalnet has delivered major productivity benefits across all products. Take these for example.
- 70% reduction in call centre FTE resourcing
- 45% reduction in claims operating expenses
- 40% cut in average length of a claim
- Zero capital expenditure
- No need to replace current core systems of record
These metrics are not from a small sample of simple claims. Over 3.6 million claims from high-volume/low value A&D through moe complex auto repairs to serious Disaster Repair & Recovery (DR&R) claims.
Overspend in this area is commonplace in this sector and combining a digital claims platform with digitally transformed supply chain partnersyields significant productivity and customer satisfaction gains. Take one major UK insurer's results: -
- Escape of water, flood and fire register an indemnity saving of £2,500 per claim ($3,025)
- Major UK Insurer gross savings of £25m/$30m a year
- Claim cycle times reduced by 50%
- Enables all key decisions to be made on day one 5. An average of 17 additional decisions are now made on day one that would’ve taken weeks of back and forth call
- Complaints reduced by 95% when a video stream is present
Look at first Exhibit in "How to win in insurance: Climbing the power curve".
The answer lies in the metrics shown above . I have extended these in a separate article incorporating KPIs from a number of leading consultancies.
Time is short, action is required and solutions are there for the asking.
the majority of carriers are not making their cost of capital. In fact, the industry as a whole is in the red by average economic profit, with huge disparities in performance among the profitable carriers and the rest of the pack. As insurers struggle to sustain growth, the pressure to boost performance has become an urgent priority. Unlike other industries, which have been able to capitalize on their investments in digital technologies, insurance hasn’t increased its overall productivity in the past ten years.