In the insurance industry, digital transformation is firmly on the agenda in 2024. Insurers want to find innovative ways to deliver increased efficiency, cost savings and improve customer experience. They then look to emerging technologies to help them achieve these goals.
The insurtech market is booming and expected to continue growing over the next decade— from $18.71 billion in 2023 to a forecasted $496.56 billion in 2033. Solutions are available to optimise every part of the insurance process and with so many options all promising operational excellence, it can now feel like being a kid in a sweet shop.
The challenge we’re now seeing is insurers have indeed invested in a plethora of insurtech solutions to solve specific challenges, but haven’t been able to unlock the true value of a digital claims process. Insurers have become stuck in a catch-22 where they’ve implemented more insurtech to improve efficiency only to find the outcome more fragmented (and expensive!). Over the past 30 years, spending more on tech hasn’t led to the promised productivity gains, and employee productivity may even have fallen.
The route out of this cycle and towards a truly innovative claims process lies in moving away from this purely additive approach of adding new tech into legacy stacks in favour of an alternative approach that allows insurers to innovate in the cloud as a wrapper on top of legacy where they can bypass legacy limitations – that’s what we explore here.
Insurers have become stuck in a catch-22 where they’ve implemented more insurtech to improve efficiency only to find the outcome more fragmented
What is the additive approach?
A lot of the time, the approach that insurers take to digital transformation and insurtech is constrained by legacy systems and processes, rather than what will deliver optimal outcomes for themselves and their customers.
When they try to innovate they discover that they have a set of core processes that they cannot re-engineer due to the age of the underlying systems or the risk of impacting downstream systems by making a change that introduces unexpected bugs. This leaves them hamstrung in what they are able to actually change or implement.
To combat this, they typically stick to introducing technology that is a like-for-like replacement of their current systems, or innovating on the fringes of processes so that any issues they encounter aren’t business critical. While this does reduce the risk to business processes, it also keeps them stuck operating in the same inefficient ways without an end in sight. They keep adding more and more technology (each with its own hefty price tag, long-winded procurement process and complex integration), but not intelligently enough to actually move the needle.
What is the problem with this approach?
The overarching issue with this approach is that it severely limits insurers ability to truly innovate in a way that delivers a significant benefit to themselves or their customers. On a more granular level, this manifests as:
Innovation is restricted by legacy systems
By taking a purely additive approach, insurers are limited by their existing systems that were designed for a back-office first, rather than a customer-first era. Without innovating their current systems, there is only so much impact new insurtech can make.
Insurtech is expensive
Implementing new insurtech is expensive. License fees, procurement costs and onboarding processes all take time and money. If the impact of the new technology is significant for the business and their customers, it can be worthwhile. However if the difference it makes is minimal it leaves businesses wondering if the juice was worth the squeeze.
Increased integration complexity
Trying to integrate multiple insurtechs with existing systems and processes is no mean feat. It comes with intense complexity and a large price tag. For this reason, many insurers simply decide it’s not worth it to onboard new insurtech or replace prior integrations that aren’t working or are obsolete.
Additionally, while insurtech may be able to connect to the core system of record, they often can’t integrate with each other. This increases the burden on legacy systems (leading to more restriction in the future) and contributes to a fragmented workflow.
A disjointed customer experience
All of this different technology being implemented to different extents to improve specific parts of the claims process results in a disjointed customer experience.
A new approach is needed
72% of insurance CEOs said they have an aggressive digital investment strategy for 2024. This, alongside the challenges we’ve outlined above, makes it clear that a new approach to insurtech is needed. This approach involves changing the way insurers innovate as a whole and embracing transformation that goes beyond adding more tech.
Identify innovation opportunities and use cases
The best approach insurers can take when it comes to insurtech is working backwards from a vision and aligning the technology to make their vision a reality. This will usually start with a specific goal, for example, resolving 75% of claims within the first touch.
Evaluate and shrink legacy business processes
To make significant progress in the next wave of claims transformation, insurers need to find a way to break free of these constraints.
The aim should be to shrink legacy systems down to the core, thinking of them as a system of record rather than as the foundation for transformation. Critically, this step allows them to re-imagine the process as a whole.
Insurers can then start innovating specific claims processes and moving them into the cloud with the intention of meeting this goal. For example, this may include a re-imagined claims payout process where customers can see the money in their account within seconds of a payment being approved.
Implement one strategic core solution, not multiple tactical wins
We know this change in approach can seem daunting – how exactly do insurers start innovating in a completely new way in the cloud? It’s much simpler than it seems.
By implementing Claim Technology as a wrapper on top of their core systems and processes, insurers are able to leverage new technologies in an integrated, seamless way that delivers positive outcomes for insurers and customers.
The Claim Technology insurtech marketplace allows insurers the freedom to re-imagine their business processes and implement the tech they need when they need it. With a single licence fee, low-code/no-code integration and no time-consuming procurement and onboarding processes, insurers are able to focus on innovating in a way that delivers true impact to their business and customers.
To learn more contact us at hello@claimtechnology.co.uk or find us on LinkedIn.
