The insurance industry is highly competitive. Insurers face multiple challenges consistently and dealing with them not only requires effort and time but innovation too. There is no denying that meeting these challenges efficiently will help insurers in moving smoothly on their path to success. However, if insurers need to stay one step ahead of their competitors on this path, they need to discover opportunities arising out of these insurance industry challenges and devise strategies that help them lead the race. So, let’s get started and throw some light on the same!
Top Insurance Industry Challenges Driving Opportunities
1. Natural Calamities
One of the biggest insurance industry challenges is dealing with natural calamities. Although, these are rare occurrences but when they do occur, bring in huge losses for the insurers owing to the vast impact they create on life and property. In 2020, Coronavirus, an epidemic, disrupted life and health of individuals worldwide, making insurers bear the expense of health and life coverage in huge numbers.
Although, these natural calamities are a big challenge for insurers but they also provide an opportunity for them to transform into a brand from a business! They should understand that insurance is all about taking care of human beings. If during such calamities, they show extra concern to their customers by providing them with additional coverage amount or associated benefits, they will not only be able to win the hearts of their customers for a lifetime, but also benefit from word-of-mouth publicity, helping them turn into a brand eventually.
2. Cyber Attacks
According to Axe Group, of the APRA-regulated insurers, 46% started experiencing a cyber attack in the last year, with 62% testing their capability to be positive about tackling the same. Cyber attacks are a great challenge for the insurance industry since it targets personal and sensitive information of the clients.
By incorporating the use of the latest technology to refine and redefine the security measures, insurers can surely deal with this challenge. This comes with a great opportunity for insurers to make the clients prove that they are the best choice for them. How? By making clients realize that their sensitive information is in their safe hands since they are able to deal with cyber attacks successfully unlike other insurers who are facing regular data breach issues.
3. Rising Tech Competition
With the rise of InsurTech and business giants like Google and Amazon looking to enter the insurance market, insurers cannot take any chance when it comes to matching the quality of service and products which these tech players can provide.
This is an excellent opportunity for insurers to leave behind their legacy systems and adopt the latest technology like artificial intelligence, machine learning, cloud-based software, etc., to not only streamline their internal processes but win the rising tech competition by collaborating their expertise and experience with technology.
Apart from this, they can take their digital capabilities to the next level by building partnerships. InsurTech investments are increasing with the passing of every year, which is proved by the numbers; US$1.65 billion in 2017 but increased to US$3.18 billion in 2018 (Axe Group), paving the way for growth and scalability opportunities as well.
4. Keeping Compliance with Regulation
In order to adapt to the changing time, insurers need to be revolutionary, innovative, and agile in their approach. Unlike other industries, the insurance sector has a lot of limitations owing to the highly regulated environment. This is the reason insurers find it difficult to keep compliance with the same even after spending a lot.
This is where insurers need to think. They should hire experts who help them stay updated with the latest rules and regulations so that they do not face any kind of penalty and in turn, face a negative brand image. On the contrary, this is an opportunity for them to meet the compliance needs timely and instantly build a positive image not only in the eyes of the authorities but their existing customers and potential prospects as well.
5. Rising Customer Expectations
Customers today have gone completely digital, and they seek digital solutions against all their concerns. This means they need insurers to provide them with instant solutions and support regarding their policies.
The best way to deal with ever-increasing customer expectations is by incorporating the use of technology like big data and analytics. In order to achieve 100% customer satisfaction, insurers need to understand their behavior patterns, pain points, expectations, etc., and this is only possible when they have sufficient data for the same. So, this challenge gives an opportunity to the insurers to not only devise personalized strategies based on big data and analytics to meet the rising customer expectations but go a step further to address their every issue, retaining them in the long run.
6. Overhead Cost
It is not just insurers who have to deal with the overhead cost but every industry of the world. Expenses in the form of employees’ salaries, infrastructure, technology, equipment, etc., affect the overall profitability of the company. As per a McKinsey report, expenses can be cut down by almost 30 to 40% through the elimination of manual approach and bringing automation in the picture.
Apart from this, opting for insurance back-office services not only help in bringing down the overhead cost but let insurers benefit from an expert outsourcing team. With this, the insurers get the opportunity to focus on their core business activities like business growth and profitability, leaving behind the headache of managing back-office tasks to the outsourcing experts.
7. Performance Evaluation and ROI
Most of the insurance owners find it hard to evaluate the performance of their business and know their ROI (return on investment). The reason being they do not have the proper tools in place.
The best solution to meet this insurance industry challenge lies in the adoption of KPIs (key performance indicators). Automated reports and dashboards let you monitor marketing and sales KPIs such as new enquiries, the number of policies sold, and convergence for quote-to- policy. Insurers get an opportunity to not only know what is working for them but also work on the strategies and campaigns that are not bringing in a sufficient return on investment.
This brings us to the conclusion that insurers face numerous challenges in the present times which are not only limited to streamlining their internal processes but dealing with customer demands and the competition. With every challenge, comes an opportunity and the above explanation proves the same. So, insurers should always look at a challenge as another opportunity to refine themselves and get prepared better for meeting the future industry demands.
There is no denying that insurers are capable enough to meet the challenges, but there are times when due to excessive workload, they are unable to focus completely on devising great solution-based strategies. What is the best option in that case? Well, the answer lies in outsourcing the non-core processes to the outsourcing firms, leading to reduced workload and increased time and focus on dealing with such insurance industry challenges.
Meet Insurance Support World, an 11-year old insurance outsourcing company providing proficient back-office support to insurers worldwide. Contact us to get started with your 14-day free trial.