The digitization of insurance has been the main topic across industry conferences and thought leadership for years and has accelerated dramatically in 2020. Pre-COVID, many carrier investment plans around major digital initiatives moved from the five-year-horizon to the 12-24-month timeline. Suddenly, there was a dramatic pulling forward of these plans in response to the pandemic, and the notion that we would go back to old ways of working has been left behind.
This means that almost every facet of how we work is a prime candidate for digitization. We would be more efficient, resilient and flexible if we could magically digitize everything, but even the largest budgets and most resource-rich carriers still have to prioritize and say, “No,” to some things.
What we should work on first? How do you decide this in a context where everything seems to be a priority?
What comes first, underwriting or claims (or something else)?
When everything could be a top priority, knowing where to begin can be difficult. Most businesses learned what needed to happen first in the early days of COVID-19, when remotely working had to be enabled across organizations with little-to-no warning.
While that was an obvious first step, there are ways to identify what must come next. Insurers need to build out a priority list that follows a similar urgency- or necessity-based approach while respecting the need for bigger, strategic investments.
First, look at each functional area of your business to identify where a stop or slow-down is impacting your customers, employees, partners, and/or your bottom-line. For example, a life insurer I was working with suddenly had a freeze in new business because they could not get medical exams done. An auto insurer had trouble getting cars inspected after an accident. A multi-line carrier required a counter-signature of any check over a certain amount, slowing claim and vendor payments. Clearly, these bottlenecks cannot be sustained, so digital solutions must be identified and implemented quickly.
Doing this exercise in each functional area will likely lead to a list of competing needs, some of which may be possible to work on concurrently or solved by the same solution. Others will be in conflict directly or due to constrained resources, so a cross-functional priority decision needs to be made with an eye to the impact on the overall business. Not meeting a need in claims could result in regulatory action, so that need may rise above one in Underwriting impacting sales. This may be markedly different from how these decisions have been made historically, where functional areas have their own budget and execute against it independently.
Annual Budget Cycles May Need to Break
While insurers generally budget annually, needs and ideas come up fluidly through the year. Because of the necessity of many of these investments, the ability to hold off on digitization until the next budget cycle may not be feasible or could threaten the viability of the business.
Instead, look at the cash position of the company and the ROI of the investment so that off-cycle investment decisions can be made. If you know you need to do it, it is a net positive for the business, and you have the money, be flexible on historic approaches to approving extra-budgetary spending. This alone can alleviate some of the prioritization pressure.
Don’t Get Trapped in Short-Term Reactions
While solving pressing issues your business faces is mandatory, it is important to still engage in longer-term transformation. Instituting several new, digital tools to keep business flowing may be fine today, but ultimately, the need for many stop-gap-type solutions may be a sign that a bigger change is needed. Insurers need to examine their suite of tools and set of processes and procedures in part of your business. That priority list you built by looking at each functional business area can also be a way to spot parts that need a more strategic, unified rethinking – like a core system modernization.
It is also important to remember, while much of this is about solving problems, this is also a time when new opportunities are emerging. Competitors may not be transforming as quickly as you can, opening the door for you to grow. The makeup of your insured base may be changing as people change the type of work they do, move to new cities and more. This can open the door to offering new or different products, new segments of the market you can address and new partnerships to build. Be sure to keep space in your priority list for these proactive opportunities in addition to reactive problem-solving.