P&C Carriers Must Disrupt, or Die
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This document discusses the need for property and casualty (P&C) insurance carriers to innovate their operations in the face of disruption. Rising customer expectations for on-demand access and a tepid economic outlook are forcing changes. The document cautions against ignoring disruption, using examples like Blockbuster's failure to partner with Netflix. It argues that P&C carriers that innovate will see improved scalability, efficiency, productivity, profits and customer satisfaction/loyalty while decreasing costs. One example of innovation highlighted is Pristine EyeSight, which allows adjusters to get remote expert help and training through live video to expedite claims processing.
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P&C Carriers Must Disrupt, or Die
- 1. Disrupt or Die: Why P&C Carriers Must Innovate Their Operations
- 2. Disruption is Happening...Like It or Not. E&Y reports that 2016 will be a year of disruptive change, as P&C insurers respond to changing customer demands and operational realities.
- 3. Rising Customer Expectations From Uber to Esurance, customers live in an on- demand world. They are accustomed to easy access to products and services when and where they want them.
- 4. Tepid Economic Conditions P&C insurers should do fine in 2016, but the forecast is lukewarm at best. ROI is predicted to dip due to competitive pricing and other factors.
- 5. Other Forces Impacting P&C Customer expectations and the economic forecast aren’t the only disruptive forces. At play, too, are technology, pricing, and increased regulations.
- 6. Disruption: What Not to Do Change is scary. But that’s beside the point. Change is happening. In an every more fiercely competitive insurance landscape, carriers that embrace change will trounce those who bury their heads in the sand.
- 7. Cautionary Case: Blockbuster Rejecting a partnership with Netflix may have seemed prudent for Blockbuster back in 2000, but only one company remains standing. The lesson? Like Netflix, be unafraid to disrupt existing business models in favor of newer, more fruitful ones.
- 8. Cautionary Case: Wang Labs Once an S&P leader, Wang Labs fell by the wayside as it stalwartly clung to existing business lines (word processors), rather than focusing on the future of customer demand (computers).
- 9. It’s Simple. Innovate or Die.
- 10. P&C insurance companies that innovate will realize: • Improved scalability • Greater efficiency and productivity • Increased opportunities and profits • Higher customer satisfaction and loyalty • Decreased operating costs Making the Case for Disruptive Innovation
- 11. Scalability Scalability is about offering solutions that operate at home and abroad, and across every device.
- 13. Productivity Mobile has transformed business productivity. Employees can work anywhere, any time, and on almost any device.
- 14. Increased Opportunities and Profits The cloud lets you say “yes” more often. Use it as a new engine for business growth.
- 15. Customer Satisfaction and Loyalty Cycle Time Customer Satisfaction
- 16. Operating Costs and Expenses Lowered operating costs due to cloud computing was once hype. It’s been proven true over and over again the past few years.
- 17. What Will You Do?
- 18. Pristine EyeSight: How it Works E Y E S I G H T Pristine EyeSight enables field adjusters to get the help they need from expert colleagues on demand. Through live video on any device (even Google Glass), back-office desk adjusters can remotely train staff, offer second opinions, or handle paperwork. The result? The claims team operates more efficiently, and settles claims faster.
- 19. How Inspectors Use EyeSight 1 2 Expedite Risk ManagementOperations Streamline Claims Adjusting Easy access to remote experts reduces the need for specialist travel, reducing travel cost, and boosting efficiency.Additionally, using desk adjusters to handle back- office writeups frees field adjusters to perform other, more productive tasks By enablingrisk managementprofessionals to follow along with claims adjusters in the field, you can cut out huge costs associated with quality control. 3 Exponentially Increase Scalability With “eyes on” a problem via video, the most senior specialists can be in more places at oncewithout wasting time in transit, increasing their functionalproductivity.
- 20. 20 See EyeSight in action. Call 855-545-3777, or schedule a demo.
Notes de l'éditeur
- Disruption is happening for every business, in every industry. That’s nothing new. The difference today is the scale and speed at which it occurs, as well as some of the causes. For property-casualty (P&C) insurers, the new reality is front and center; it truly is a case of innovate or die. Says EY: For US property-casualty insurers, 2016 will be a year of ongoing disruptive change. Digital technologies, such as social media, analytics, and telematics, will continue to transform the market landscape, recalibrating customer expectations and opening new ways to reach and acquire clients. The rise of the “Sharing Economy,” under which assets like cars and homes can be shared, is requiring carriers to rethink traditional insurance models. Combined with an outlook for slower economic growth, increase M&A, and greater regulatory uncertainty, the stage is set for innovative firms to capitalize on an industry in flux. (http://www.ey.com/Publication/vwLUAssets/ey-2016-us-property-casualty-insurance-outlook/$FILE/ey-2016-us-property-casualty-insurance-outlook.pdf) Disruption is happening. And it isn’t going to stop. Image: Roland Tanglao (https://flic.kr/p/wJBoSs)
- Customers live in an on-demand world. From Uber to Instacart, they expect to receive products and services when and where they want them. They bring that mentality to even the stalwart industry of P&C insurance. According to Market Insight Group and Applied Systems’ joint report “Adaptability: The Insurance Customer Experience Imperative in an Online Digital Mobile Society,” four factors are driving customer expectations: A shift in location of commerce from place to space; An expanding set of online information, search engines, and review sites; Continued growth of the number of mobile and smart devices; and A continual proliferation of social media. (http://insight.appliedsystems.com/Customer-Experience-Research-Report.html) This means agencies and brokerages are “on notice,” says Melissa Hillebrand, PropertyCasualty360 reporter. “Within the next two to four years, customers want the insurance space to catch up to the current marketplace and offer click-to-chat or click-to-call through smartphones and tablets, as well as e-signatures, PDF capabilities, and comprehensive portals” (http://www.propertycasualty360.com/2015/03/31/agencies-not-quite-grasping-what-customers-want-in). Image: Marjan Lazarevski (https://flic.kr/p/fGiud7)
- Most major economies remain sluggish almost eight years after the global financial crisis. The United States is performing better than many countries, but growth is forecast at less than 2.5% for 2016. The slowdown in China and other markets will continue to dampen growth prospects. Despite the conditions, EY predicts P&C carriers should do well in the year to come due to the “favorable underwriting performance of the commercial lines sector and rising personal lines premiums. […] But that is where the good news ends. In 2016, return on investment for firms is likely to continue to slip from its 2014 peak due to a combination of capital accumulation, competitive pricing, weakening investment returns, and rising loss costs” (http://www.ey.com/Publication/vwLUAssets/ey-2016-us-property-casualty-insurance-outlook/$FILE/ey-2016-us-property-casualty-insurance-outlook.pdf). McKinsey reports similar findings in its 2015 report: P&C growth is expected to remain stable, at about 5% annually until 2020. Emerging markets will show the highest growth, around 13% annually, while mature markets will only show growth of about 3%. Penetration rates in emerging markets are not likely to converge to the current levels in mature markets, but rather increase modestly, while mature markets will see penetration rates slowly decrease. […] US and European insurers, which once ruled the global ranks, have been steadily losing ground to Asian companies as emerging markets grow and mature markets slow down. Although both US and European companies have expanded into emerging markets, they have faced many challenges and still depend on the slow-growing mature markets for most of their business. Their struggle will likely continue, since local insurers are becoming more competitive. (http://www.mckinsey.com/insights/financial_services/global_insurance_insights_a_detailed_analysis_of_trends_that_shape_the_industry) Stability is good for the short-term. But the long-term outlook requires P&C insurers, particularly incumbents in the US and Europe, to embrace innovation and disruption. It’s the only way to survive. Image: NEC Corporation of America (https://flic.kr/p/o1upyJ)
- Other factors affecting the US P&C market according to EY are: Technology Pricing Regulations Catastrophes Technology is the most disruptive and impactful; carriers rank it a 10. Catastrophes are their least concern, ranked at 2. Pricing and regulations are ranked at 9 and 5, respectively. Customer expectations and economic conditions fall between the two, at 8 and 6, respectively. (http://www.ey.com/Publication/vwLUAssets/ey-2016-us-property-casualty-insurance-outlook/$FILE/ey-2016-us-property-casualty-insurance-outlook.pdf)
- Some carriers don’t heed the warning signs or misinterpret them. They’re much like ostriches burying their heads in the sand. They know disruption is happening. They might even see the benefits found with technology and innovation. However, they’re scared to make any changes. It’s understandable; change is scary. But they miss the point: change is happening. They either can unbury their heads and join the digital transformation, or they can stay where they are—permanently. Image: Peter Dowley (https://flic.kr/p/5TnCaP)
- In 2000, Netflix proposed a partnership with Blockbuster. Netflix would manage Blockbuster’s brand online, and Blockbuster would promote Netflix in-store. A smart idea, but Blockbuster currently ruled the roost. Why share the pie when it had the majority of it to itself? (http://www.forbes.com/sites/gregsatell/2014/09/05/a-look-back-at-why-blockbuster-really-failed-and-why-it-didnt-have-to/) The rest, of course, is history. Blockbuster declared bankruptcy. Netflix is valued somewhere around $28 billion, perhaps because it’s unafraid to “cannibalize,” as GE says, its business models. (http://gelookahead.economist.com/disrupt-disrupted/) Takeaway: Use competitive analysis to keep an eye on bubbling ideas. The upstart “Netflix” in your industry could be the proverbial upsetting of the applecart. Second, know the strength of your organization’s internal network. Innovation and disruption result from a network capable of acting on your ideas for change. Image: Elliott Brown (https://flic.kr/p/ebA7jV)
- Wang Labs, once a strong S&P 500 company, is but a distant memory for most. Says Gary Cokins, BusinessFinance contributor, “Wang Labs failed in part because it specialized in computers designed exclusively for word processing and did not foresee general-purpose computers with word processing software in the 1980s, mainly developed by IBM (pictured above)” (http://businessfinancemag.com/blog/why-do-once-successful-companies-fail). Takeaway: Stay abreast of changing customer needs and develop a culture of adaptability. According to Market Insight Group and Applied Systems, “Nearly 90% of North American agents identified email and face-to-face meetings (F2F) as the primary methods they plan to use in interacting with clients in the next two to four years. […] Researchers said they are ‘doubtful’ F2F will still be important for personal life property/casualty insurance, and are similarly unconvinced that F2F will satisfy the increasingly important small business customer” (http://www.ibamag.com/news/insurance-agencies-are-failing-to-meet-customer-expectations-report-21953.aspx). Image: Bruno Cordioli (https://flic.kr/p/8dxA2R)
- P&C firms that don’t innovate products and services will see costs, claims leakage (CL), and dissatisfaction go up. Customer demand will go down, as will efficiency, productivity, and profits. Eventually, these businesses will die. Says Marcus Lemonis, host of CNBC Prime’s new reality series “The Profit,” “Businesses come up with a specific format or a specific product or process. They fall so in love with themselves that they don’t listen to what the consumer wants, and they become obsolete. They don’t anticipate tomorrow” (http://www.cnbc.com/2013/07/29/Business-transformations:-The-good,-the-bad-and-the-ugly.html). So anticipate. Prepare for tomorrow by innovating today.
- “The next year likely will be one of continued disruptive change in the US property/casualty insurance market,” says Ernst & Young LLP, “and insurers will need to focus on innovation in all areas of the business to remain successful” (http://www.claimsjournal.com/news/national/2015/12/04/267405.htm). Adds Dave Hollander, principal, Ernst & Young LLP, and EY Global Insurance Advisory leader: Economic growth remains slow, regulatory pressures such as the Department of Labor fiduciary rule and systemically important financial institutions rules continue to intensify, competitive pressures from new entrants from other sectors and markets around the world abound, and technology has created refined distribution channels and risk-pricing approaches. A customer and digitally centric business model is essential to reduce costs and offer lifetime value for end customers and channel partners alike. (http://www.claimsjournal.com/news/national/2015/12/04/267405.htm). P&C insurance companies that follow Hollander’s advice will see: Improved scalability Greater efficiency and productivity Increased opportunities and profits Higher customer satisfaction and loyalty Decreased operating expenses Let’s look at each of the benefits in more detail. Image: NEC Corporation of America (https://flic.kr/p/nJ813Q)
- Most businesses think about scalability in relation to cloud computing and infrastructure. They aren’t wrong in thinking that, but scalability also applies to the applications and devices served by the cloud. Scalability is a competitive advantage for P&C insurance companies. They can compete against new entrants in the industry as well as meet customer expectation for on-demand service. Says Chloe Green, Information Age contributor: The convergence of cloud computing and business-critical applications is having a profound effect and is perhaps the most transformative technology trend affecting today’s workplace. Employees want instant access to their tools from any location, at any time, and so they increasingly want to use cloud-based solutions. These cloud systems offer unlimited scalability (emphasis added) of storage and data-processing capabilities, helping business-critical applications to run more efficiently than ever before. Businesses are consequently open to a wide range of growth opportunities, being more able to respond to dynamic market conditions and competition, serve new geographies, and to rapidly develop new products and services. (http://www.information-age.com/it-management/strategy-and-innovation/123459834/how-organisations-can-embrace-cio-cloud-enabler-not-cloud-gatekeeper) Scalability is essential with today’s competitive landscape and economic forecast. It’s the only way to continue to enjoy, as EY says, “the advantages of scale by established insurers” and to respond to the threat of “smaller players [who are using digital technology] to compete for market share through more flexible pricing models and new distribution channels” (http://www.ey.com/Publication/vwLUAssets/ey-2016-us-property-casualty-insurance-outlook/$FILE/ey-2016-us-property-casualty-insurance-outlook.pdf).
- Claims leakage (CL) and cycle time have always been pain points for insurance carriers. With the first, the goal is to pay out exactly the right settlement, no more and no less. Inaccurate claims due to adjuster inexperience, customer fraud, or simple human error have the same result: a hit on your P&L statement. Cycle time is one of customers’ top criteria when choosing a carrier. A fast—and accurate—resolution makes a difference. Any procedure or workflow that slows down the cycle time between FNOL and settlement impedes new customer acquisition and affects customer retention rates. Leading P&C insurance companies are reducing inaccuracies and inefficiencies with technology, mainly mobile video. By empowering adjusters and, in some cases, customers with smartphones and mobile devices, they are drastically reducing the time between FNOL and settlement, as well as improving the quality of inspections. Chris Bekermeier, VP of Sales and Marketing for PacMoore, has this to say on the subject, “Delegate some of the efficiency improvement to your managers by giving them the tools (emphasis added) they need to make real change. Make it so that when they find inefficiency or waste, they are able to do something about it without needing to go through extensive red tape. This speeds up the efficiency process and gets your managers involved in improving company operations, which benefits their work experience as well” (http://www.reliableplant.com/Read/29129/greater-workplace-efficiency). And those tools are technology and smart devices. F2F can be inefficient. In many instances, it’s unnecessary. P&C insurance carriers are removing those inefficiencies, resulting in less CL and shorter cycle times. The impact? Higher customer satisfaction and a growing bottom line, even in a seemingly stagnant economy.
- Mobile has transformed business productivity. Employees can work anywhere, any time, and on almost any device. They can access up-to-date information; connect with colleagues, senior adjusters, and customers in real time; and collaborate via mobile video or other platforms to complete tasks quickly. For example, The Hartford is using the cloud and other technologies in order to grow its group benefits, mutual funds, and property and casualty businesses. The approach, says Philip Guido, IBM, allows the company to better anticipate and meet the needs of both customers and agents. It also grants The Hartford the ability to improve system availability and business continuity capabilities. (http://www.forbes.com/sites/ibm/2014/11/03/three-companies-that-transformed-their-businesses-using-cloud-computing/) The aspect has a direct bearing on productivity. With improved system availability, agents are better equipped to do their jobs and to accomplish more in a given day. If they are using mobile technologies, productivity can increase almost exponentially. Take catastrophe claims as an example. They often require multiple, specialized adjusters. But if adjusters are augmented with mobile video and smart devices, they can inspect the property or other asset remotely via a colleague who is already on-site. The overall throughput of the entire claims team skyrockets.
- “The bottom line is the cloud saves companies money and increases their profits,” says John Engates, CTO of Rackspace Hosting. (http://www.cio.com/article/2387672/service-oriented-architecture/how-cloud-computing-helps-cut-costs--boost-profits.html) The provider’s 2013 survey of 1,300 companies in the U.K. and U.S. found: Eighty-eight (88) percent of cloud users experience cost savings. Fifty-six (56) percent say that the cloud has helped them boost profits. Sixty (60) percent find cloud computing reduces the need for their IT team to maintain infrastructure, giving them more time to focus on strategy and innovation. Sixty-two (62) percent of companies that are saving money reinvest the profits back into the business to increase headcount, boost wages, and drive product innovation. PwC puts the reality this way: “In essence, [the] cloud lets you say yes more often.” Leading insurers are taking a broader view of the cloud and realizing it can be “a new engine for business growth” (https://www.pwc.com/us/en/view/issue-13/cloud-computing-gets-strategic.html). They can use it to upsell existing products and services and to deliver an optimized customer experience. Both increase the pipeline and the long-term value of existing customers.
- Customers don’t purchase insurance. They buy peace of mind. On-demand service through technology reduces cycle time. Customers will remember that when it’s time to renew their policies. They’ll stick with the company that gives them the service and experience they want. Image: plantronicsgermany (https://flic.kr/p/dpdwSG)
- Lowered operating costs due to the cloud and related technologies was once hype. It’s been proven true over and over again the past few years. A global study of 1,000 senior-level IT decision-makers by Tata Communications found that 83% of enterprises are seeing benefits they didn’t expect. The top three are increased productivity (69%), improved access to data (65%), and reductions in [operating] costs (63%). (http://www.eweek.com/small-business/cloud-computing-reducing-costs-improving-productivity.html) Consider the potential reductions in the P&C insurance market. Adjusters can decrease travel time and expenses. Cross-training costs can be reduced through mobile video, too. Instead of sending senior adjusters out to shadow their junior counterparts, they interact with them via real-time video. That translates to not only saving on expenses but also on time and productivity. A similar case occurs when the adjuster goes to a flooded house like the one pictured above. They can assess the flood damage and, rather than calling out another adjuster to inspect the roof, they simply collaborate with a specialized inspector via remote video.
- Will you innovate, or will you die? Will you use new technologies to meet customer expectation and overcome the challenges of a sluggish global economy? Or will you bury your head in the sand and wait for the digital disruption storm to pass? (Hint: it won’t. Now’s the time to catch it and use it to give yourself a competitive advantage.)
- Pristine Eyesight is an innovative technology designed to meet the needs of firms in the P&C insurance market. The video’s real-time capability makes it ideally suited to meeting customers’ desire for on-demand services, while simultaneously improving the overall efficiency of the field claims team. EyeSight brings scalable, enterprise-level remote collaboration to insurance agencies and carriers, which drives more efficient, higher-quality claims and inspection services. The technology features encrypted video streaming, two-way audio, high-resolution snapshots, and other rich media. It connects adjusters with the expertise they need anywhere, any time, and on any mobile device.
- Pristine Eyesight is mobile video support built for customer service. It allows your inspectors to interact with customers before, during, and after calls. This not only differentiates your inspection service but also acts as a sales enablement tool for the service team. Think of mobile video as the equivalent of software as a service (SaaS) for the TIC market. With it, your service team has the potential for upselling and ongoing interactions with customers rather than only a once-a-year inspection visit. Eyesight is a way to add greater lifetime value to your firm’s products and services.
- Now’s the time to differentiate. Contact us to build video into your claims service and customer experience. Let us help you disrupt your business and the P&C insurance market. See EyeSight in action. Call 855-545-3777 to set up a demo!