How digitalisation can make insurance firms resilient in an inflation-hit economy

How digitalisation can make insurance firms resilient in an inflation-hit economy

Inflation, a pervasive economic phenomenon, is extending its grip across all sectors, including the insurance industry. A projection indicates that the surge in prices in 2021 resulted in around $30bn escalation in loss costs, which are payments insurers make to cover claims.

InsurTech company Novidea recently explored how inflation is impacting the insurance industry.

In these challenging times, MGAs and agents are grappling with narrow profit margins, averaging between 2-3% per customer. Consequently, transferring the burden of the rate hike to the customer is unviable. To achieve and sustain operational resilience, it’s essential to maximise efficiency across operations.

In light of this, it’s never been more crucial for insurance firms to digitise their business. Operational streamlining and efficiency enhancements represent a sustainable strategy to bolster resilience against external shifts and events.

Novidea started off by stating that  activating your data is crucial. Escalating costs and tightening margins leave little room for erroneous business decisions. To circumvent this, insurance companies must begin to collect their own customer data and extract useful insights from it. A sophisticated and adaptable agency management system (AMS) facilitates this process.

An effective AMS initiates comprehensive integration, enabling real-time access to all customer and policy data when required. By integrating all business elements into a single platform, it provides a 360-degree view of the front, middle, and back offices. It’s crucial that your team can access the necessary data, whenever and wherever they need it.

Efficient inter-office communication is already contributing positively to the financial health of companies. However, that’s merely the first step. Upon data consolidation, how should it be utilised?

The next step is to put your data to work. You’ll require a platform that incorporates potent analytics tools to convert raw data into practical insights, thus supporting informed decision-making.

For instance, an up-to-date AMS will monitor the resources allocated to each account, from the time invested in selling and supporting, to associated salary and commission costs. Analysing this data will allow you to identify your most profitable accounts. These insights lead to strategic account acquisition, as well as effective resource planning for account management.

Next, consider the case of Encore Insurance, a digital-first independent agency specialising in personal lines. They revamped their sales team’s management of business opportunities. Implementing their data and developing a central data source across the agency was critical. This allowed Encore to accurately assess its new business closure rate and analyse lead acquisition cost.

Gaining a comprehensive understanding of the kind of customers to acquire is crucial, but arguably, even more important is to retain and optimise profitable existing accounts. Remarkably, the cost to acquire a new insurance customer is seven to nine times more than selling to an existing one. Hence, enhancing the lifetime value of your customers is crucial.

Finally, leveraging automation can also be beneficial. Automation frees your team from mundane tasks that may become bottlenecks. Novidea’s comprehensive approval process workflow, for instance, can verify authority limits, view peer reviews, and notify relevant team members about ready-to-approve activities.

Intelligent automation aids your financial health in various ways, including error reduction in repetitive workflows, quicker processing time for new policies, and retention of talented team members who prefer to utilise their expertise over performing mundane tasks.

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