Insurers are adopting specific strategies to make business operations streamline and efficient. However, hurdles such as outdated technology, changes in consumer purchasing preferences, and amendments in regulatory norms & compliance laws are limiting insurance companies’ capabilities of achieving business objectives.
Due to such reasons, more and more insurers are seeking help from BPO – Business Process Outsourcing. Yes, insurance BPO has become an effective solution to address multiple back-office management issues, and it brings new opportunities to drive growth & profitability.
According to Ernst & Young’s Global Insurance Trends Analysis 2018, “the insurance industry not only showed steady growth in 2018, but also is estimated to increase by another three to four percent by the end of 2019.”
What is Back Office?
As per the definition by Investopedia, “The term “back office” originated when early companies designed their offices so that the front portion contained the associates who interact with customers, and the back portion of the office contained associates who have no interaction with customers, such as accounting clerks.”
Over the years, the role of the back office has not changed. Even today also it is called a part of a company that includes administrative & support personnel that don’t face clients or customers. While being essential and supportive, it is a part that incorporates positions that don’t participate in generating direct revenue, such as billing, accounting, IT support, claims settlement, regulatory compliance, and to name a few.
Now before we proceed further to discuss how back-office outsourcing can make insurance industry future-ready, check out these facts came in front as the result of a survey conducted by Cognizant Center for the Future of Work. During this survey, 168 insurance executives across the world were asked numerous questions, and the results are:
1. The Major Technology/Business Dynamics Impacting the Future of Insurance Through 2020:
• Firstly, artificial intelligence is shaping the landscape.
• Moreover, business analytics and big data play pivotal roles.
• Public cloud infrastructure and applications are gaining prominence.
• Cybersecurity and information privacy are critical concerns.
• Lastly, talent shortages pose significant challenges.
2. The Top Five Changes that will Materially Impact the Future of Work in Insurance Industry:
• The nature of work is undergoing a shift towards increased specialization.
• Additionally, work is poised to gain greater strategic significance as it advances on a growth trajectory.
• The work landscape is on the verge of transformation through automation.
• The prevalence of collaboration with machines, augmenting our capabilities, is expected to rise.
• Moreover, technical prowess will establish the cornerstone of the forthcoming work environment.
3. The Biggest Hindrances to Digital Transformation:
• Owing to budget constraints,
• Lingering worries about data security persist,
• Amidst a dynamically evolving market landscape,
• Coupled with a shortage of digital expertise,
• Furthermore, the uncertainty surrounding return on investment persists,
• Moreover, the challenges are exacerbated by insufficient management support.
4 Strategies to Prepare your Insurance Business for the Future
The following strategies have developed the insurance market, and emerging insurers can implement, as per their situations.
1. Become Innovative
Transform the future of insurance through innovations. Whether you are a part of developed or emerging markets, you need to focus on R&Ds, analytical techniques for decision-making, and new innovations. As there are limited growth opportunities for traditional insurance products in countries that are already developed, you will need to focus more on loss control and risk management.
2. Focus On Business Expansion
Reshape the future of your insurance business through expansion. You need to focus on growth by expanding your business and not necessarily by becoming innovative in building new products and services. Focus on utilizing your capabilities, such as product portfolio, diverse workforce, customer understanding, capital, etc. to step into similar markets across the world.
Business expansion is possible by establishing services in new geographies, targeting new customer segments for services you already provide, and leveraging new distribution mediums to reach potential customers.
3. Catch Up With Market Leaders
You might not want to be the first one to experiment new insurance practices. Thus, follow the market leaders and establish your own strong presence. You must focus on scaling up your capabilities to cover a broad market. Become efficient in sensing new market opportunities & innovations.
Your primary focus should be less on front office and more on bringing agility in information, operations, technology, and back-office so that you can adopt operational excellence and new business models.
4. Survival Is The Key To Win
Even if you stay focused on maintaining a short-term yet stable performance to survive in the market, you can still win. You may wait for the industry to adopt new business ideas and practices before you adopt the same. This way, you can grow your business by becoming operationally efficient and withstand industry challenges.
There’s no strategy having more importance than others. However, while managing risks and exploiting opportunities, making a strategy for ‘what you want from your business’ will pave the way to prepare for the future.
What Are The Challenges Insurance Industry Is Facing?
1. Shortage Of Skilled Workforce
The industry has been experiencing a lack of a skilled workforce for years. There’s an utter need for employees having varied skills, and ambitious workers are already working on their skills to become future-ready. When insurance companies couldn’t find workers with enough skills, they can head toward agencies that provide contract workers or virtual assistants.
To stay one step ahead in this competitive, digital era, insurance companies require a creative, proactive, and skilled workforce that is ready to handle multiple tasks, especially other than their standard roles & responsibilities. To solve the workforce shortage problems, you need to think beyond the traditional hiring methods. Insurance BPO services are the new era solutions and will become more sought-for in the coming years.
2. Digital Transformation
As digital channels and other relevant technologies, in this industry, are becoming prominent for connecting with and engaging customers, insurers pursuing high performance required to build a digital and customer-centric mindset while making significant changes to their operations to become a digital enterprise truly.
If you are also struggling to cope with such changing industry paradigms, especially in view of outdated technology and traditional business processes, which actually limit your growth, you might need to consider technology as a key element of business transformation and procedures in the future and adopt the same.
3. Resilience In Operations
Insurance business retains enormous amounts of data, where most of the information is of customers and highly confidential. There are certain risks involved in insurance data management, such as data breach, data theft, and data loss.
As you would not want to get involved in any kind of conspiracy related to your customers’ data, get highly safe & secure data management systems in place. You may opt for IT services that let you manage your data online (cloud data solutions) and provide you with optimum Cybersecurity.
4. The Trust Factor
Many insurance firms sell insurance but fail to provide a claim, and some don’t even take the responsibility to offer some benefits. Delay in getting the claim or not even getting the claim are big reasons why customers lose trust in the insurers.
To solve this problem, insurance agencies can consider hiring third-party claim management services to handle the entire claim process and provide sufficient claim amount to customers on time. The use of outsourced claims administrative services is now common in this industry, and the variety of tasks they can handle is growing.
With these factors, it would be fair enough to say that outsourcing will play an essential role in the insurance industry in a few years to come.
5. Competition – A Major Hurdle
With the growing number of insurance companies, the competition is getting fiercer. All companies are putting their best efforts to sell their insurance products in the best possible manner while targeting as many individuals as possible. Small and mid-size insurance firms often overlook crucial marketing campaigns as they don’t have a sufficient budget for marketing.
They even sacrifice brand building practices, spend a limited amount on web development, and have a sub-standard company logo; all of this leads to not having a professional image among customers. Here, you can go for insurance back-office services to save some money that can be invested in marketing and building your brand. You may also outsource sales and marketing operations.
6. High Operating Costs
The involvement of technology in targeting customers, managing operations, processing claims, etc. has hiked the operating costs in the insurance business. Apart from that, employee salaries & benefits, taxes, infrastructure expenses, and to name a few are even higher costs.
While all these cost factors are responsible for less profit, insurers are under consistent pressure to provide innovative services on time to maximize their potential, get more growth opportunities, and obtain a competitive advantage.
In a survey by KPMG, 26% insurers indicated business process redesign as a primary initiative for operational efficiency gains.
The solution here can be:
• Wisely, redesign your business processes while adeptly leveraging suitable technology. Moreover,
• Streamlining labor-intensive processes leads to efficiency gains. Furthermore,
• Enhancing the efficiency of manual processes becomes a priority. Additionally,
• Embrace the latest IT infrastructure and features to their fullest. Furthermore,
• Opting for outsourcing presents another effective solution.
The insurance BPO industry has grown rapidly in the past few years and is projected to take the lead in the future.
Digitization will have a profound impact on insurance operations. The insurance industry in 2025 will be very different from today’s. As an insurer, your job will significantly be changed by the end of the next year. The utilization of technology, empowered by Artificial Intelligence and Automation, will change how insurers carry out the insurance-related tasks.
As technology-driven operations are likely to be the future of insurance business, companies can consider outsourcing back-office operations. This move can help them become future-ready without spending on recruitment and training. Most insurance BPO service providers have enough resources to deal with the changing trends and industry challenges that might arise in the coming years.
After all, businesses are developing and adopting such technologies faster than ever. Though there will be some challenges in leveraging the top features of new technology. There’s no way back to the insurance industry of the pre-technology era.