Using Technology to Add Value in Insurance

Matt Josefowticz wrote a great piece recently – Technology May be the Answer for Insurers, but What Was the Question? In this he argues that there are only three levers of value in insurance:

1. Sell More

2. Manage Risk Better (aka underwriting and adjusting)

3. Cost Less to Operate

And that while some of these will require an investment in technology, that investment should be framed in terms of those business drivers.

This resonated with me as we have been doing a lot of work recently developing digital decisioning solutions using our DecisionsFirst™ approach for insurance carriers and have seen all three drivers in play.

We have developed Next Best Offer (NBO)/Next Best Action (NBA) engines to upsell and cross-sell insurance customers (at the point of sale, when on the customer portal, in nurturing or maturity campaigns). This, and some work we have done to improve agent productivity and effectiveness, are all about selling more. NBO at the point of sale is a great way to boost the annual premium equivalent (APE) and especially new business profit (NBP), ( as there is almost no additional cost of sale. One CFO describes this as almost like picking free money off the floor! One client has a successful upsell rate of 14-24% depending on the product and has added millions of dollars in APE in less than a year of operations.

This topic also touches on the work we have done to help with persistency and retention by deciding on the right approach to help insurers retain revenue and so avoid having to sell replacements for lost customers.

On the risk management front, we have begun working with some insurers to automate underwriting and pricing. This will drive consistency and accuracy and allow them to use more advanced analytics and machine learning to manage risk. It also positions them to use new data sources to make underwriting decisions. 

This can also have an impact on selling. Some customers will be lost if underwriting takes too long or asks for too much follow-up information. Automated underwriting can close those deals now, boosting the APE by saving customers who would otherwise be lost.

Finally, all these solutions as well as our work in claims handling and customer service automation help drive down operating costs. As clients ramp up their claims handling automation, for instance, they see increased rates of straight through or hands-free processing. This drives down costs while boosting customer satisfaction. Our approach emphasizes continuous improvement not big bang wins, so customers can begin cautiously and gradually ramp up automation. One group using our claims handling solution started at under 10% straight through processing but raised it to nearly 30% over the first 12 weeks of operation without IT involvement.

All of these solutions are squarely focused on selling more, managing risk better or driving down costs (often while RAISING customer satisfaction). Do they use cool technology like predictive analytics, machine learning or AI? Sure, when that makes sense. But they remain ruthlessly focused on business value.