Insurance operations: Are you relying on outdated processes or challenging the status quo?

Professionals in the insurance industry realize operational efficiency is no longer just a competitive advantage – it is a necessity. Outdated, manual, paper-based practices continue to increase operational costs, diminish customer satisfaction and stunt growth. As organizations across the industry strive to optimize their processes, the cost of continuing inefficient and manual insurance operations becomes an increasing burden.

Even with the ever-evolving digital landscape, insurers still have the opportunity to embrace digital transformation to streamline operations, stay competitive and improve margins – all without increasing premiums. The resulting savings can then be reinvested into strategic initiatives, fostering a cycle of continuous growth and improvement across the organization.

Challenges facing insurers and challenging the status quo

Even with digital advancements occurring daily, many insurers still rely on manual, even paper-based processes, that are difficult to scale, require more time and staff to execute and are prone to errors. Although these processes have been embedded into the fabric of many organizations, they can make growth challenging in a complex and competitive business.

Insurers who challenge the status quo of these processes find that customer service response times decrease, claims close faster and customer satisfaction improves. With customers increasingly expecting digital self-service options, it’s no surprise that digital-first insurance carriers are growing at 2.5 times the rate of traditional insurers [1]. Insurers who challenge the status quo with automated and efficient processes can offer faster and more reliable services, allowing them to increase profits and stay competitive without needing to increase premiums.

Opportunities to increase efficiencies and reduce cost

Investing in digital transformation to uncover and activate opportunities in your current operating model requires a strategic approach that considers technology, process improvements and a customer-centric mindset. The following outlines changes insurers can take to reduce operational costs:

1. Data-driven automation and AI integration

Previously operating largely behind the scenes, the rise of ChatGPT has brought artificial intelligence (AI) into the consumer spotlight creating widespread interest in its adoption. Insurers looking to leverage automation and AI should begin by assessing their current state operations to identify pain point areas plagued by manual, repetitive tasks such as rework, copy-pasting or Excel-based processes. These inefficiencies are prevalent in the industry and ripe for data-driven automation solutions or AI integration.

For example, claims processing traditionally involved handling handwritten PDF forms that required manual data entry. Today, while most forms come through pre-filled, the PDF format still requires manual review and data transferring into various systems. To solve this problem, insurers can automate this process with AI-integrated optical character recognition (OCR) technology. AI-powered OCR can read the PDF form and understand the content before digitizing the information to transfer it into source systems – effectively managing the entire process without the need for manual work. As a result, tasks that once required extensive manual work can now be automated, allowing employees to focus on the value-added tasks of reviewing, providing insights and validating information. By reducing manual touchpoints, insurers can increase accuracy and efficiency in their operational workflow.

2. System replacements

When organizations rely heavily on “outside the system” work, such as extracting data or reports to do additional analysis or performing manual workarounds to keep the system functioning correctly, it’s often a sign that the current system isn’t meeting their needs, and a system replacement may be beneficial. This doesn’t necessarily mean the system is outdated, it might just be the wrong tool for the required task or that the organization has changed enough to require a different approach. Additionally, if your operations currently function with disconnected systems that require duplicative data entry or limit the system functionality to a single purpose, it’s essential to assess whether your system needs to be replaced, upgraded or better integrated with your other technologies currently in use.

Introducing new technologies to extend your core systems can help to augment your integrations without requiring investment in a completely new core system. For example, building improved data integration between systems can address issues around manual data entry and extraction and ensure seamless data flow and consistency between systems and AI technologies can automatically extract data from digital forms and documents, creating a comprehensive solution for manual data entry, without replacing the entire system. Ultimately, an augmentation approach to system replacements allows for targeted improvements without the high costs associated with large-scale transformations. This method enables incremental improvements, addressing specific pain-points while avoiding the potential disruptions of a full transformation.

By implementing these changes, insurers can reduce manual processes and improve operational efficiency through faster processing, reduced bottlenecks, increased accuracy and consistency, improved data management and a reduction in repetitive work. By investing in automation, insurers can leverage internal resources more effectively, translating to significant cost savings while driving enhanced decision-making, growth, innovation and competitiveness in the market. Being able to complete more work with the same number of employees creates an increase in capacity, allowing teams to redeploy that capacity towards other strategic priorities or initiatives without needing to hire more staff.

Additionally, when reinvesting monetary savings back into the business, insurers should focus on more market facing activities. This could be investing in marketing initiatives, new product development or enhancing the online customer experience – ultimately making it easier for customers to do business with your company. By shifting from a cost center to a value-driving activity, insurers can stimulate top-line growth. Then, with a reduced cost structure, there’s potential for increased bottom-line growth, leading to higher overall profitability – transforming cost savings into strategic investments that drive revenue growth.

Improving your operational processes: Five steps to get started

It’s important to recognize that the effectiveness of any technology depends on whether you’re targeting the correct problems. Simply deploying a new technology without a clear purpose won’t yield solutions. Following these steps can help you and your team better understand your needs, who to engage and what could be helpful in the short and long term.

1. Assess your current state

It’s important to begin by thoroughly assessing your current state processes end-to-end to identify areas most in need of improvement. High-frequency areas, processes with significant manual intervention or duplicative work, or departments where hiring and investments are consistently high are all areas ripe for automation. Insurers should look towards engaging in a digital transformation assessment to evaluate their current state, identify future needs and develop a strategic road map for digital transformation initiatives.

2. Determine necessary solutions

Once opportunities for improvement are understood, insurers need to determine the appropriate solutions. This involves generating ideas, exporting use cases within the industry and aligning technological advancements with current challenges to ensure that the right solutions are applied to the right problems, effectively guiding decisions on where to invest.

3. Start a pilot program

Starting with a pilot or proof-of-concept (POC) project will allow your organization to validate the feasibility and value of a solution before committing significant funds. By starting small and demonstrating quick wins, your organization can build a case for broader implementation, ensuring the solution’s scalability and effectiveness before making a larger investment. This strategy allows for incremental transformation, showcasing value early on and paving the way for more substantial improvements. Additionally, your organization may qualify for research and development (R&D) tax credits, which can help to offset some of the costs of the pilot or POC project.

4. Engage employees

Engaging employees early in the process is critical for ensuring a smooth implementation and maximizing the benefits of the improved operations. Employees who feel involved and supported are more likely to adopt new technologies and processes, decreasing change resistance and fostering a positive attitude towards change.

5. Continuous feedback and improvement

Continuous improvement is essential for maintaining the long-term effectiveness of your implemented solutions. This involves regularly monitoring the performance of new systems and processes, identifying areas for improvement and implementing changes to optimize and foster innovation across your operations.

How we can help

As insurers continue to navigate the rapidly changing digital landscape, optimizing their operations plays a crucial role in creating an organization that is resilient, scalable and competitive in the market. Baker Tilly’s digital team can help your organization streamline operations to improve margins, reinvest savings back into strategic initiatives and challenge the status quo. Interested in learning more?