Insurance advisors face four digital challenges

The insurance market is a tough place to be right now. Advisors suddenly find themselves in a fragmented market, trying to meet rising customer expectations with outdated technology in newly challenging economic conditions.

In addition, new research suggests that, despite investing more in digital transformation than other industry segments, advisors are not transforming quickly enough. Much like the banking sector did five-plus years ago, advisors must quickly embrace advanced digital technologies to transform their operations if they're going to stop smaller, nimbler competition from gobbling up their market share.

Insurance advisors (and carriers) face four key challenges.

• Rising customer expectations. Clients want more personalized, timely products that they evaluate, buy, and manage digitally.
• Growing competition. Competition is increasing as insurtechs, backed by significant venture capital funding, look to disrupt the market by giving consumers exactly what they want using advanced digital technologies.
• Outdated technologies. Years of mergers and acquisitions in the industry have created a Gordian knot of technology for many advisors, which is complex and expensive to develop and maintain. And this makes it hard to provide efficient and effective service to clients.
• A talent crisis. High staff turnover and the graying of the industry, coupled with a lean recruitment pool in a tight employment market, means competition for talent is fierce and institutional knowledge is walking right out the door.

So what's an advisor to do?

To stay competitive, advisors are pursuing digital transformation programs. For this effort, advisors should pull on key levers to ensure lasting transformation in these three specific areas:

• Data services. A robust foundation for analytics that fuels data-driven enterprises, built with data engineering.
• Technology services. With integrated and modernized IT applications, a lean digital core powered by the cloud unlocks the benefits of intelligent and robotic process automation.
• Augmented intelligence. Artificial intelligence becomes augmented intelligence when blended with human expertise for predictive insights at scale.

First, the good news: According to a 2022 insurance survey by Information Services Group (ISG), advisors invest more than property/casualty or life/annuity carriers to develop digital sales, underwriting, and distribution modernization programs. In fact, 40% of advisors report that such programs are already moving to steady state. Meanwhile, P/C carriers lag behind advisors in this area at 13%. And not one L/A carrier reported a modernization program moving to steady state. Instead, 44% of L/A carriers either have made no investment whatsoever in such modernization programs or are still in the initial exploratory stage. But are advisors embracing change quickly enough? Probably not. The same research reveals that only 11% of advisors say they are moving to the steady-state stage of implementing an automation transformation involving machine learning or artificial intelligence. In this area, advisors lag behind both their P/C (14%) and L/A (24%) counterparts. Meanwhile, manual and siloed processes persist, even when a transformation is underway.

So, advisors need to get moving. But what areas should they look to tackle first?

1. Client interactions

Catering to clients should be the North Star of any digital transformation that advisors undertake. Their goal should be to implement solutions that expand their clients' options for support and product personalization while simultaneously increasing their own opportunities to cross-sell, upsell, and encourage renewals.

For example, advisors can use automation to eliminate redundant work, such as rekeying data, or improve submission quality with workflows and rules engines by creating a "fast lane" for applications that require no correction. Add in advanced analytics and risk modeling, and such solutions can enhance advisor decision-making too. By automating many of the analyses that make up the advisor decision process and using data insights to inform human judgments, advisors can offer clients better products and the right products at the right time, driving improvements to the bottom line.

Any attempt to transform client interactions should also focus on empowering the client. For example, advisors can implement self-service portals that allow clients to explore options and understand their existing products better in a direct, streamlined, on-demand way, which leads to an improved client experience.

2. Carrier interactions

The sheer volume of advisors' legacy technology, inherited and bolted together over years of mergers and acquisitions, means an ecosystem overhaul is urgently needed. The goal is for advisors to eliminate friction and introduce standardization into the process of insuring clients. This kind of transformation will have the greatest impact on speed and efficiency when it comes to carriers.

An advisor's ability to help carriers access customer data and risk insights accelerates the process of insuring customers and improves the experience for all stakeholders in the value chain. Advisors can greatly improve premium settlement and reconciliation, commission settlement, and other carrier interactions by increasing data transparency, measuring performance effectively, improving quality, and minimizing delays. Optimizing and standardizing key processes is the first step. The next step is automation, which reduces time-consuming work, minimizes human error, and facilitates performance monitoring. Through the improved service that results, advisors can avoid policy cancellations and release literally millions in working capital.

3. Employee interactions

Using data, technology, and augmented intelligence to boost employee efficiency helps in two ways. First, the advisor reaps the bottom-line benefits of higher productivity. Second, their employees have fewer frustrations, a better working day, and are less likely to move on with precious knowledge. Advisors frequently report difficulties with administrative burdens, where suboptimal systems and inefficient processes not only burden them but distract them from their market-facing activities.

Transformation in this area should look at busting up siloed ways of working using digital technologies. It should aim to minimize redundant or disparate processes by implementing routing and workflow management solutions. And it should use automation to reduce the administrative burden on employees. The result? Workers spend their time in the right places – winning new business and delivering higher levels of attention and service to clients.

Transforming operations with data, technology, and augmented intelligence empowers brokers to improve interactions with clients and carriers, untangle and enhance technology ecosystems, and boost employee efficiency.

This is undoubtedly an opportune moment. Although advisors have outperformed the rest of the insurance market and tend to be more technology-oriented than their P/C and L/A counterparts in general, challenging market conditions, rising customer expectations, and the rapid advance of competitors should dictate the pace of change. It's time to embrace transformation and take progress from steady to supercharged.

This article first appeared in Insurance News Net. It was authored by Dennis Winkler, director of insurance practice at ISG, a global technology research and advisory firm, and Yasir Andrabi, global head of insurance strategy, service lines, and solutions at Genpact.