What are the biggest challenges carriers are facing today?
To kick off our recent webinar, Addressing Changing Market Conditions: Carrier Solutions for Rapid Product Adaptation, we asked attendees to identify the biggest issue they were currently grappling with. As the following graphic reveals, two concerns stood out above all others.
At a time when all carriers are facing volatility on many fronts, their attention seems to be focused on generating new sales and releasing new products. While these have always been primary issues of concern for insurers, it has probably never been more important to be able to rapidly adapt products and processes to be able to adjust for changing conditions affecting the industry.
As Rob McIsaac, Executive Vice President, Research & Consulting, Novarica noted during the webinar, the answers show that “the pandemic has certainly brought into starker relief longer term trends that carriers are dealing with. Namely, that it doesn't alter where the industry is going, but has accelerated when we will get there.”
As Rob and I talked about the current insurance landscape, several important themes emerged, including 3 key disruptions that require rapid product adaptation:
Key Challenge 1: Extreme Expense Pressure
Insurance carriers have faced expense pressure for a long time. But those challenges were mitigated by gains in mortality and morbidity, as well as investment income that exceeded what was priced into many products.
However, the current low interest rate environment has increased insurers’ focus on expense reduction. And that creates a need for changes to existing products in order to improve their profitability. The ability to make these adaptations rapidly is critical in reducing the impact of less profitable products on a company’s bottom-line.
Key Challenge 2: Demographic Shifts
In 2020, more than half the US labor force was made up of millennials. In less than five years, that number is expected to grow to 75 percent. The products and services that are needed by consumers in that younger cohort are different than those that suited their older siblings or parents.
Going forward, new products will need to be developed to meet those shifting expectations. Companies with the ability to quickly go to market with new solutions will enjoy considerable competitive advantages.
Key Challenge 3: Heightened Customer Expectations
Customer expectations around annuities, investments, and insurance products are growing to match the experiences consumers have in other verticals—like online retail, banking, even restaurant delivery.
Millennials have come to expect fast, if not instant, omni-channel, and hyper-personalized service. This has led companies to begin to develop products that are simpler and more easily distributed online.
As products become more commoditized, competitive advantage won’t come from developing the latest and greatest product features. More important will be the wrapping. The experience customers have in every interaction with the insurer.
And optimizing those client journeys requires continual experimentation and innovation. Companies that are agile, and have accelerated speed to market times, will be able to deliver the best client engagement solutions more consistently.
Hurdles to increasing speed to market and efficiency
Solving the challenges insurance carriers face today will not be easy for many traditional organizations. Carriers are often operating under the weight of generations of inherited technical debt. They’re running multiple core systems that are adequate for administering yesterday’s business, but not well-suited to today’s need for rapid innovation.
Rob McIsaac, Executive Vice President, Research & Consulting, Novarica
These carriers struggle to reduce product development times because of core system complexity. And it’s difficult to deliver superior customer experience with out-of-date sales and service tools. If front end solutions can’t integrate with back-office systems because the PAS doesn’t support APIs, a carrier won't be able to deliver on their future business needs.
Carriers need to modernize. Now.
The best way to succeed in the digital transformation that will be required to meet the ongoing challenges, is to reduce long implementation and testing cycles. Start with a small project scope, then innovate and iteratively expand the solutions. Convert big, career-defining transformation projects into a series of short sprints, each one focused on delivering concrete value.
To find out how carriers can accelerate speed to market and tackle ongoing market challenges watch the Addressing Changing Market Conditions: Carrier Solutions for Rapid Product Adaptation webcast.