Despite a challenging environment marked by low interest rates and diminished discretionary spending among consumers, life insurers can still find performance improvement opportunities in several key areas.
1. DIRECT DISTRIBUTION
Some insurers continue to be stalled by a perceived channel conflict between direct distribution and agents. Consumer behaviors have changed dramatically, and it is now commonplace for them to research and compare products, and seek reviews from social media when making purchasing decisions. Another attractive opportunity for insurers is to establish direct distribution through affinity groups which offers a great way to increase distribution capacity to reach very large target markets. Direct distribution of life insurance is growing at a significant rate in the U.S., and insurers who do not compete in this channel will miss a big opportunity.
P&C insurers already have achieved success in the direct channel, while life insurers have only recently started to focus on this route. The technology required for authentication and signature is no longer a barrier to selling life insurance policies online. Leading insurers are able to benefit further by applying many of the underwriting and servicing automations to their non-direct business.
2. SCALE, OPTIMIZE AND OUTSOURCE
Many insurers continue to successfully launch enterprise-wide cost-cutting programs, but others struggle to hit their cost-reduction targets without sacrificing customer experience or the quality of products and services. The basic success factors are outsourcing what you are not good at while optimizing the organization's strongest capabilities.
To achieve a significant competitive cost differential, many leading insurers have aggregated their buying power across businesses with a single provider for a particular service (e.g., call center, transfer agent, printing) and created internal centers of excellence to serve the entire company (e.g., contract issuance, claims payments).
3. SOCIAL MEDIA
Few insurers have an effective and optimized social media strategy to promote their brand, entice customers and empower their employees and producers. It is important to have a well-developed strategy before "jumping in." When social initiatives are executed well, there are more customers to win and keep. Insurers who successfully leverage social platforms can improve the level of customer engagement -- which correlates to better retention and the ability to sell multiple products.
4. BIG DATA
Insurers have access to volumes of marketplace information, but gaining insight remains challenging. Often data is decentralized in multiple legacy systems and is not linked to a client, producer or product. By leveraging data, insurers can become truly customer centric, attract and retain top producers, and strategically manage product portfolios.
Insurers should examine the value of data by asking the following:
• What are the key questions you would like answered by leveraging data?
• What kind of data do you need to answer these questions?
• Do you have or can you obtain the data?
• How reliable is the data?
• What is the potential business benefit?
• Would a pilot program be an appropriate starting point?
5. DIGITALIZATION: ELECTRONIC BILLING, REMITTANCE AND STATEMENTS
Transitioning from paper to digital can save millions and offer clients better service. On average, insurers can save 70% of mailing and processing costs by sending statements or bills electronically, or by utilizing ACH for remittances and premium payments. Some insurers view technology implementation as the hurdle to moving to electronic remittance and payment processing; however, there are attractive options such as third-party providers that will provide these services at a fraction of in-house costs.
Compliance initiatives are typically mandatory and often utilize a significant budget. An effective compliance program protects the company from violations and penalties. Moreover, a robust and defensible compliance strategy is a marketable asset in today's strict regulatory environment and fortifies an insurer's brand. A strong compliance strategy aligns business and IT to satisfy regulatory requirements. For midsize and large insurers, having an enterprise risk management team and approach will help ensure consistency in compliance controls across the organization.
Insurers who identify favorable acquisition targets, conduct effective due diligence, and extract value from the acquisition will gain a competitive advantage. Opportunities in product acquisition, distribution, customers, talent, and capacity await insurers. Superior execution is essential, and communications, change management and program management activities should be core to the overall plan.
With the insight to identify growth opportunities and the resourcefulness to launch practical, meaningful initiatives, insurers cannot only weather today's challenging marketplace but increase returns and safeguard their future success.
About the author: Jordan Kuperschmid is a managing director in Navigant's Financial Services practice, where he leads the U.S. insurance team. He assists Life Insurance, Annuities and Retirement Services companies in the areas of operational and IT transformation. He can be reached at firstname.lastname@example.org