The challenges facing property-and-casualty insurers -- anemic investment returns, increased regulation, increased operational complexity, adapting to increasing customer focus -- are greater than ever. In order to be competitive, insurers must continue to produce uniquely designed and competitively priced new products, streamline underwriting and claims processes, and establish effective cross-sell strategies. The most successful insurers will start with the end in mind when designing solutions for optimal operations.
P&C insurers should first start by evaluating operational efficiencies for duplications, bottlenecks, disconnections, and more. Some insurers may even have to recreate processes to include optimization of sub-processes between functional business units.
By evaluating the linkages between processes, such as application review and underwriting, organizations can begin to spot gaps in performance and plan for better process flows to improve outcomes. By reaching beyond individual business units to address end-to-end processes, organizations can create a roadmap toward greater effectiveness and stronger performance.
Other important elements when embarking on a strategy to optimize operations is the implementation of benchmarks and high-quality metrics. First, P&C insurers must understand the metrics associated with their own processes. Examples of such evaluation might include key measures such as cost per application, cycle time from signature to index, and more. Once P&C insurers have a complete view of their own processes, they then can compare results from their own process steps to best-in-class performance, which should offer a holistic view of the inefficiencies that erode operational functions from application through claims processing.
The next step toward optimizing business operations is evaluating how technology can support efforts to improve efficiencies. For example, insurers must weigh the value of modernization as compared to return on maintenance. For many insurers, the hidden cost of not upgrading aging legacy systems can include missed inputs that, ultimately, may help organizations make more informed decisions to reduce risk and support new product development.
Additionally, it's important for insurers to understand how their various technologies interact, and to take a systemic -- not a piecemeal -- approach to upgrading systems. Upgrading components one at a time may further fragment the process chain. Technology improvements in areas such as application issuance can reduce the effectiveness of other functions up the value chain. In terms of technology, IT and business managers must work collaboratively to understand where the operational gaps and logjams are, map core processes within the organization, and create solutions that include plans for both process and technology to reduce unnecessary costs and improve productivity.
The roadmap and the strategy that's been created in the first few steps is just the beginning of the effort of the overhaul process. Each element must be considered in relation to the whole and to the operating environment. The team implementing these changes must constantly review and realign the processes to best meet the external challenges in the insurer's market and customer requirements.
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As an organization's strategic plan is put to the test, the use of dashboards, performance metrics against benchmarks, and a formal governance program will help track results to ensure continuous improvement of ongoing process functions.
For most P&C carriers, the benefits of process optimization are felt almost immediately, as teams experience increased productivity and capacity while improving their cost control and risk management efforts. Business process transformation will not result in a radical restructuring of the entire insurance organization, but its long-term results will positively impact customer satisfaction and revenue for years to come.
P&C insurers hoping to achieve true growth in this uncertain economy will need to be proactive and open to adopting the type of holistic approach that includes the right business processes, management strategies and technologies to enable them to reduce unnecessary costs.
The alignment of processes to meet business objectives, the communication of newly devised solution steps that come out of that alignment, and the application of the right technology solutions that result in flexible and agile processes capable of providing the maximum scalability often will grow not only productivity but profitability.
Scott McConnell is Senior Vice President, Americas Business Leader and Global Insurance Business Development Leader, Genpact. His responsibilities include formulating and executing the right onshore and nearshore strategy that will meet the business needs of Genpact clients in this market.