What constitutes normal business practice for both insurers and their clients has evolved dramatically in recent years. Due to post-COVID financial scenarios, rising inflation, the cost-of-living crisis, and other current economic factors, insurers are under increased pressure to have a leaner cost base. However, insurers need to be more strategic in their approach to cost reduction because the market environment has fundamentally changed.
It is essential to prioritize increased adaptability and decreased absolute costs to remain competitive. Cost optimization needs to be seen as a strategic initiative by insurers if they are to implement the large-scale operational changes and new financial models that technology makes possible. Sustainable expansion and the preservation of competitive advantage should be top priorities.
Do outdated systems prevent us from cutting costs?
Through digital transformation, businesses can enhance their operations’ efficiency and agility while decreasing the costs associated with the ongoing maintenance of obsolete, legacy systems or technologies. Adopting cutting-edge cloud-based systems and SAAS-based solutions can free up employees’ time and energy to focus on value-added tasks, whether they’re in the office or working from home.
For a long time, it has been a worry that the costs of running technology on-premises would be too high. Most insurers cannot afford to “rip and replace” their core legacy systems due to the high upfront costs of building in-house core platforms and the long payback periods involved. This presents a significant challenge for businesses that rely on on-premises IT infrastructure to conduct mission-critical operations.
The introduction of novel scenarios made possible by data
For insurers, MGAs, TPAs, or InsureTechs seeking in-depth visibility into spending, new avenues to engage customers, and/or the development of entirely new product lines, data harnessing has never been more critical (for example, subscriptions to insights or services). Better data transparency to enhance and demonstrate compliance is also required by regulatory pressures such as IFRS. Using data analytics, businesses can see value opportunities because they have a thorough understanding of how various business activities generate new revenue opportunities or translate to higher costs.
By storing data in the cloud, companies can easily compile it into a single location (a “data warehouse”) from which to draw insights using sophisticated analytics and business intelligence tools. Gaining these insights can help them make better decisions, such as comparing their spending to their budget.
Reinvent with AI, ML, and automation
Automated bots, computerized learning, and AI are currently the most game-changing innovations in the insurance industry. Indeed, automation can cut the price of a claims process by as much as 30%. Administrative time can be saved by automating the migration of documents from one system to another, a process that would have been manual without IA and AI, saving them time and money. Similarly, bots can be leveraged for processing catastrophic events and large volumes of claims, FNOL/FROI data entry, audit and compliance checks, etc.
System enhancements can be made possible by machine learning (ML), including the ability to issue alerts (like any risks during the underwriting process or fraud checks in claim processing, etc.), make suggestions in real-time (enabling straight-through processing), and act on the basis of statistical patterns (during the actuarial process or predicting claims reserves). Machine learning (ML) frees up time previously spent manually inputting data and performing analytics by using algorithms and computational models to detect speech, text, images, and patterns (behavioral or otherwise), like car or property damage estimation. This not only reduces the possibility of human error but also helps keep operational costs down.
By implementing intelligent automation, insurance companies can speed up the development of new products and services while reducing operational costs. They can also improve digital interactions with customers and get a more complete picture of their demographic.
The pandemic highlighted the importance of foresight. It revealed unanticipated needs on the part of customers and demonstrated how insurers who can respond quickly and confidently, when necessary, can gain an edge in the market. With the help of modern analytics tools, businesses can better allocate their funds. Financial and expenditure models are available for leaders to access and analyze in order to develop more efficient pricing policies.
When businesses use the tools available to them, they achieve true cost optimization rather than just cost reduction. Insurers can improve their productivity and stay ahead of the competition by adopting cutting-edge technologies such as cloud computing, data analytics, artificial intelligence, and intelligent automation. Leveraging labor (like right-shoring, cost arbitrage, and manual effort reduction) and non-labor (like license optimization, discounts using economies of scale, subscription-based spending, data center cost control, etc.) cost optimization levers can provide significant benefits for the insurers.
Insurance firms are actively seeking out best-in-class IT firms to assist in modernizing their aging infrastructure.
World-class solutions from Persistent give businesses a leg up in today’s cutthroat markets by allowing them to better serve their customers and streamline their internal operations.
With the help of our digital insurance capabilities, businesses can better meet the needs of their customers in today’s increasingly demanding market.
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