How modernisation is transforming the London insurance market
The market understands that in order to survive, it needs to adapt to technological change, meet new regulatory requirements and compete with more efficient international rivals.
As in most industries, the need for technology-led transformation has in recent years forced itself near to the top of the insurance agenda. Lloyd’s, for example, has appointed a senior body – the London Market Group (LMG) – to lead its modernisation programme, which it sees as necessary to retain customers amid heightened international competition. Elsewhere, insurers are acutely aware that their legacy systems are the product of a different time and that the end of their lifecycles is rapidly approaching.
This degree of pressure isn’t entirely unwarranted. The current climate is, after all, a challenging one: firms have mostly recovered from the financial crisis of 2008, but buying behaviours have fundamentally changed in the interim. Business and consumer customers alike have become more price-sensitive, as well as more prone to reducing coverage or cancelling policies. Additionally, the market is becoming more regulated, forcing firms to reduce their exposure to certain risks and bringing new cost pressures to the table.
It’s important to remember that this in itself isn’t a business case for technology transformation, however. While rising costs and increased competition have created imperatives for change, insurers mustn’t lose sight of the metrics that determine whether or not a new policy or claims system delivers a return on investment. Where exactly will technology drive cost reductions, and by how much? Can it also help the firm to grow? And how will it affect the insurer’s relationship with the insured?
In order to build this business case, there are perhaps three key areas that insurers should examine.
One of the main reasons insurers today lose money is through inefficiencies and inaccuracies in the claims lifecycle. This phenomenon is called claims leakage and often arises as a result of limited information sharing between various systems, requiring data to be imported or rekeyed manually.
By automating these low-level processes, insurers can achieve a measurable decrease in the time it takes to carry a claim from submission through to closure, as well as reduce the scope for inaccuracies arising from human error.
In order to compete with new, more agile market entrants, traditional insurers are under pressure not only to cut costs, but also to raise their game when it comes to innovation. This requires a high degree of flexibility on the technology front, which most legacy systems in use today were not designed for. It can take a long time to roll out new products, for example – something that makes it hard for firms to respond to changing market conditions.
Modern policy management systems can offer a substantial speed increase in this regard, making it possible to design, develop and launch services in a matter of days rather than weeks or months.
According to LMG’s manifesto, modernisation’s principle aim is to “deliver better service to the insured”. And indeed, the benefit of improving the customer experience shouldn’t be understated. In today’s climate, buyers are more inclined than ever to shop around; it’s important not to pass up on the chance to offer a service that surpasses their expectations.
Technology transformation provides insurers with a wealth of opportunities to improve the customer experience. A simple reduction in response times can result in an uptick in buyer satisfaction, for example, while dynamic pricing can help to attract new customers. These may seem like incremental improvements, but in time, they’ll drive a shift in customer expectations – any insurer that remains stuck in its ways will end up at a major competitive disadvantage.