The number of core systems an insurance risk pool uses can have a major impact on the level of service that members receive, as well as the pool’s ability to make the best use of staff resources. Constantly jumping between multiple systems and trying to coax Word and Excel into accomplishing tasks they were never designed to handle is a recipe for performance issues. This can limit a pool’s growth and the types of services it can provide.
Activities most impacted
While the inefficiency of using a patchwork of applications to handle core business functions cuts across a wide variety of routine tasks, several activities performed by risk pool staff are particularly susceptible.
Calculating loss ratios
Assembling the information necessary to calculate loss ratios often involves building multiple spreadsheets and transferring data from several sources via copy/paste. This highly inefficient process is prone to errors. According to the ECRI Institute report, Copy/Paste: Prevalence, Problems, and Best Practices, the familiarity of the copy/paste technique explains why it is used so often. “However,” the report warns, “with several windows open, information can easily be copied into the wrong location. Secondly, copy/paste accelerates propagation of inaccurate information. The ubiquitous use of copy/paste means that, once created, an error can rapidly spread.”
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One of the Claims Journal’s most popular articles of 2018 covered the Altus report that investigated the possibility of Amazon entering the claims management sector. The fact that Amazon tried to poach employees from Lemonade and recruit for a new product manager position certainly provided enough circumstantial evidence to fire up the rumor mill.
The report highlights some of the advantages Amazon brings to the table. The customer-facing infrastructure — from Alexa and Echo devices to an online juggernaut offering an expansive consumer marketplace and digital media center — is unlike anything currently in the insurance space. In addition, Amazon Home Services, which offers on-demand repairs and potential assistance with installing large replacement goods; its array of supported smart home devices; and its direct access to customer purchase history make the company poised to completely transform the claims management process.
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There is a major discrepancy with the treatment of the Internet of Things (IoT) in the commercial insurance sector. IoT is a huge topic amongst carriers and the insurtech community, yet studies show that companies are simply not ready for the changes it brings.
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There is a spirited, ongoing discussion around how carriers will adapt to digital underwriting. As a recent Accenture article states, “The entire insurance industry—its customer expectations, products, competitors, distribution channels, analytics and data technology—is evolving significantly and quickly. For carriers to compete and grow in this increasingly complex environment, underwriting will have to evolve, too. Carriers will have to do more than just familiarize themselves with digital tools; they need to transform into Digital Underwriters.”
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A recent article, “Transforming into an analytics-driven carrier“, examines best practices in what is a multi-stage journey that requires equal parts business and analytics leadership. The end goal is an organization where:
- Data-driven decision making is the standard
- Analytics is central to claims adjustment, underwriting, and pricing processes
- Analytics drive the entire business, functions are better integrated, and organizational silos no longer exist
The transformation is also dependent on having the right technology in place in order to begin to get buy-in and build momentum as a strategic vision for the organization is implemented. As a McKinsey Quarterly article puts it, companies must begin to build a foundation which enables change. “People have been talking about data-driven cultures for a long time, but what it takes to create one is changing as a result of the new tools available. Companies have a wider set of options to spur analytics engagement among critical employees.” For carriers still looking to move off of core legacy systems that struggle with modern requirements, even starting down the path to becoming an analytics-based insurer may seem out of reach. … read more