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Time for Insurers to take bold decisions to drive change

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Nic Smit, Head of Product and Pricing at Bidvest Life

Like most industries, the insurance industry has had to deal with major disruption caused by Covid-19. In early 2020, we quickly went from working on our planned projects to having to negotiate serious business challenges, including enabling an entire company to work from home, nurses being unable to travel to do blood tests on new applicants, and dealing with a flood of additional claims. 

Insurers are familiar with stress-testing their balance sheets against the impact of significant changes to the assumptions that are used to value the business. COVID-19 was effectively a massive stress test on our systems and processes, and it shone a light on several areas where we needed to rethink how we do things. These include an increased drive to improve business efficiency and remove any unnecessary bureaucracy.

In this regard, many insurers are looking at using technology to improve their operations: automating the underwriting decision process, using alternative data sources to reduce the number of blood tests, and using machine learning to solve all sorts of business problems. But what COVID-19 has taught us is that before we can use these high-tech solutions, we first need to take a good, hard look at the day-to-day processes that we use. It is incredibly difficult to implement a smart, digital solution on top of a manual, analogue process.

Let’s take the example of automated underwriting. The process of underwriting is one of the bigger barriers to selling an insurance policy, and by automating parts of the underwriting process, a lot of hassle is avoided. Insurers have invested considerable time and money in building smart underwriting engines and codifying their underwriting rules to make the lives of their advisers and clients easier.

While the benefits of automated underwriting are exciting, many of these benefits are negated if we don’t rethink the way applications are submitted. To implement an automated underwriting engine, it is as important to ensure that you get the application in the best possible format as building the underwriting engine itself.

Even today, the process of applying for an insurance policy often starts with the applicant completing a physical paper application that is then scanned and emailed to the insurer. This application needs to be manually entered onto the system before it can proceed. If we need more information, we then need to go back to the applicant to ask them further questions.

Consider how this compares to a digital application. Once a digital application is submitted, the automated underwriting process can start immediately, even after business hours. The quality of information supplied is also of a much higher quality, as validations in the application form can reduce the chance of errors or inconsistencies. 

Furthermore, if the applicant has a pre-existing health condition like high blood pressure, a digital application can ask additional questions at the time of completing the application to get all the necessary information to make a decision, rather than having to wait on an underwriter to determine whether an additional questionnaire needs to be sent. 

Improving processes is often easier said than done. Most insurance companies have legacy systems and processes that need to be overhauled before significant improvements can be made. More important, though, is for the insurer to consider how these changes impact their advisers. While an insurer might have good reasons for making a change to their processes, if advisers do not buy into these changes, any advantages of the update could fail to be realised.

To ensure that processes are changed as smoothly as possible, insurers must do everything they can to ensure adviser buy-in. Insurers contract with many advisers, each with their own way of running their businesses and their own feelings towards technology. When designing any new solution and communicating these changes, an insurer should remember that advisers will engage with their processes differently.

That’s why it’s vital to spend some time showing advisers how they will benefit from these improved processes. While we might assume that the advantages are clear, advisers have their own priorities, and may feel that adapting to change will be a hassle for them. 

The actual implementation needs to be smooth, and insurers will need a clear process for pipeline business. Once an adviser decides to try to engage with a new process, that process needs to be as pain-free as possible and deliver the promised benefits.

Lastly, even if a new process is implemented and communicated perfectly, there will still be some advisers who view the update negatively. An insurer that waits until everyone is happy with an update before moving forward is likely to fall behind.  

Peter Drucker famously said that culture eats strategy for breakfast. In this case, implementation eats strategy for breakfast. There are many smart people in insurance thinking about strategies to improve how their business works. The businesses that will be successful will be the ones that implement them well. It will require clear thinking, excellent communication, and bold decisions.

About Bidvest Life  

Bidvest Life, formerly FMI, is a life insurer that has protected the salaries of all working South Africans for over 27 years from the risk of injury, illness or death through a combination of income protection, disability, critical illness and life cover options. For more information visit bidvestlife.co.za or follow us on Facebook, LinkedIn or Twitter.