The Covid-19 Silver Lining – Lessons in Reinforcing Insurance Operations

For the insurance industry, physical supply chains are less significant than what they are for most other industries. But the sector is marked by complex business processes that involve multiple tasks and sub-tasks that demand close monitoring and timely intervention. And it has been the operations side of the industry that has taken a severe blow from the ongoing Covid-19 pandemic. The intricate interplay between the insurers and their external networks has been disrupted by the wide-ranging series of challenges posed by the pandemic. This has led insurers to suffer business losses, adopt severe cost-cutting measures, and even close down operations temporarily.

But even during the crisis, the industry has fared much better than most other sectors in coping with the effects of the disaster. And it’s no surprise that the insurance sector is already on the path to recovery owing to the smart choices of the leadership and their strict adherence to the necessary protocols in executing operations. Here is a list of the primary measures adopted by insurers to ensure the continuity of operations in the face of the pandemic.

Adopt Remote Working

In order to avoid contracting the virus, the insurance sector, like most other industries, adopted a mass shift to the remote working structure as part of their business continuity plan. The initial days were difficult as it was a new concept for the majority of the workforce, but adequate support from the management sorted things out. Most insurers also limited interstate and international travel by their staff members to protect them from the spread of the virus.

Supervisors are encouraging the use of digital channels to deliver and receive insurance services to minimize the risks of contraction. For instance, most insurance organizations have resorted to the use of electronic communication with policyholders and are settling claims using digital technology that require minimal in-person transactions. To reduce the burden on the supervisors and managers and instead allow them to focus on the delivery of services to policyholders, insurers have reduced their supervisory functions and extended certain reporting needs. To ease the pressure and provide optimum customer support, insurers are facilitating claims processing by waiving certain requirements and simplifying the paperwork involved. Even for the evaluation of physical evidence and to obtain expert reports, in-person visits are being replaced by digital processes.

Managing Solvency and Liquidity Risks

One of the worst effects of the situation has been the financial impacts on businesses, thus triggering a global recession. Organizations have witnessed revenue streams drying up due to the lack of business opportunities and are left with no choices other than brutal cost-cutting initiatives. Insurance companies have had to face their share of financial worries from the crisis. The value of their invested assets dipped drastically due to the volatility of the equity markets and the adjustments in bond yields related to the changing default risks and lower rates of interest.

As a response to the threat, most insurers began focusing on accurate reporting on the company’s financial and operational information and on meeting regulatory requirements. Data analytics is also being leveraged by insurers to obtain actionable insights and devise better financial strategies. They also introduced the right technology for financial control and reporting as a step towards establishing a stabilized cash flow. Technology is also helping insurers to streamline the digital workflow to cut down on the operating overheads and avoid business risks by spotting them early.

Calling on the Expertise of Insurance BPOs

Insurance BPOs have always been pivotal in enabling their clients to ensure smooth operations and profitable insurance business. Owing to the pandemic, the responsibilities of the insurance vendors have increased manifold, from enabling the employees to work remotely and ensuring smooth handling of insurance claims and customer service. The lack of adequate resources and manpower of insures have been compensated adequately by their off-shore partners who are extending unflinching support from their multi-data-center setup without time or location constraints.

The custom solutions of insurance service providers are enabling insurers to manage the spikes in service requests through a fully equipped customer service team. Trusted outsourcing firms are helping their clients to manage the additional workload and clear backlogs within a short period without compromising on quality. Outsourcing their back-office processes has freed up a significant amount of time for insurers, which they are investing in operations such as sales, marketing, and employee training. At a time when insurers are cutting overheads to balance the profit-loss sheets and reserve cash, the cost-effective services of insurance BPOs are proving their worth.

Living Up to Social Responsibility

Operational obstacles, dwindling finances, complex regulatory requirements, and more, the insurance industry has seen the worst this year. However, none of these has been able to keep insurers from dispensing their services to the society and living up to the expectations of the stakeholders, including employees and policyholders. For instance, some insurers are providing more flexibility in the grace periods for premium payments, waivers for certain aspects of claims processing to expedite payments, and cutting down on the documentation, thus winning the approval of the customers.

Other areas of improvement include policy renewal information gathering, where insurers have reduced the amount of information needed from brokers for policy renewals by applying data assumptions and using publicly available information. They are also improving the ways in which operations support teams collaborate with brokers to keep business on track. Insurers across the U.S. are also changing their compensation rules, giving credit and advance payments to agents and supporting them in obtaining government assistance to secure their distribution capacity for the future. Some are also reviewing the rate basis for their covers and exploring options to make downward rapid adjustments.

Lessons for the Insurance Sector to Reinforce Operations

Hopefully, the Covid-19 pandemic would soon be a thing of the past as there is massive progress in the development of vaccines. However, one thing is certain – nothing can rule out the chances of such or even more severe disasters in the future. Hence, it critical to acknowledge the lessons this episode has taught us and use them to prepare for future uncertainties. For the insurance organizations, there is a lot to learn from the situation and harness that realization to fortify their operations to ensure business continuity in the face of future difficulties.

A Secured Revenue Flow is a Must

Insurers, the small-sized ones, in particular, have faced severe cash crunch from the beginning of the year owing to the impact of the virus. By now, they should have realized the importance of having multiple revenue sources and not depend entirely on any one particular factor. For instance, an exclusive can insurance seller has probably been among the worst-hit businesses due to the fewer car sales during the pandemic.

Another lesson is to facilitate digital methods of payment since most policyholders today are either unable to come to the insurance office or visit the bank to pay their premiums, or they simply want the convenience of making payments from their phones. Insurers not responding to this demand are likely to suffer further loss of business.

Staying Current with Technology

For insurers to lead the change the world is undergoing, technology is the biggest leverage. Right from operational needs like setting up remote work stations to predicting upcoming market trends, those refusing the role of technology are heading for a disaster. Smart players are harnessing digital solutions for things such as integrated texting, electronic signatures, digital policy delivery, and paperless file storage, thus saving on resources while cutting down on turnaround times. Technology facilitates better process transparency, helps deliver omnichannel customer service, and in processes such as payment follow-ups, reminders, and collections.

Competent insurance outsourcing service providers can elevate the customer service quality by helping the client with chatbots and service request automation. A chatbot significantly reduces the need for human intervention in customer service by answering queries just like a human agent does, saving time and money for the insurer. Automating service requests and case tracking helps inject efficiency into the process to delight policyholders and prospects.

Everything Cannot be Managed Internally

Traditionally, the insurance workforce has never been the tech-savvy type, and hence changes such as remote working, reporting, and monitoring have been a source of major inconveniences for the stakeholders. However, as digitalization is a non-negotiable requirement for the future, outsourcing emerges as the best bet for insurers. Insures have to realize that by outsourcing, they can achieve optimal outcomes in services such as policy management (policy checking, renewal, loss runs reports, cancellation, reinstatement, etc.), claims management services (claims set up and verification, claims processing, adjudication services, etc.), and others.

There are competent insurance service providers that help their clients with end-to-end data management for easy storage and retrieval of business information. Handing over the accounting tasks to such an insurance endorsement processing service eliminates costly errors from the process while delegating the underwriting processes helps maximize the bottom line. Insurers can save substantially on their operating costs by entrusting a reliable partner with resource-consuming tasks such as AP/AR, payroll, profit and loss statements, and reconciliation, among others.

Customer Demands Would Only Rise

By now, it’s evident that the policyholder and the prospects need special treatment and insurers cannot take them for granted. The ongoing crisis has accelerated several digital and omnichannel elements that were already in their early stages. With decreasing face-to-face interactions, insurers must embrace digital-hybrid solutions by incorporating video conferencing, robo-advisors, and web chat. Since the frontline workforce cannot be eliminated entirely, there must be close integration of physical and digital channels when the crisis subsides.

Insurance agencies must focus on optimizing the customer lifecycle by extending omnichannel collaboration, personalized customer interactions, and by proactively reaching out to policyholders who are likely to lapse. This, in turn, will help them reduce their customer acquisition expenses by up to 50 percent and the customer churn by about 30 percent. For business growth, agents must be armed with advanced data analytics on their customer base and even centrally provided digital leads.

Pursue Excellence in Regulatory Compliance

The pandemic has triggered serious regulatory challenges for the industry. As regulatory risks rise, insurers must demonstrate robust compliance, oversight, and risk management standards in the increasingly complex environment. For an industry that requires strict adherence to quality standards, automating quality and compliance processes with a digital Quality Management System (QMS) can help boost efficiencies while maintaining regulatory compliance.

A competent insurance services provider can help insurers in replacing the paper-based QMS with an automated version that dramatically improves their ability to comply with regulations. Such vendors boast of industry insiders who can predict major regulatory changes in advance and help their clients to prepare and recalibrate the workflows accordingly. They can also help the client implement an audit management software system to facilitate all audit-related activities. Such an audit management software also helps the client with analytics and reporting features for enhanced capabilities.

2020 has been a difficult year for all, including the insurance industry. However, as the virus starts showing signs of subsiding, the insurance sector sees unprecedented growth opportunities that await their attention. But insurers must realize that things cannot continue the way they were doing in the pre-Covid world. They must start preparing for the new way of functioning that involves a high degree of digital technology and operations outsourcing.

Who We Are and Why Our Expertise Matters

Insurance Backoffice Pro is a trusted name in the insurance BPO sector. With over a decade of exposure to the ins and outs of the industry, today we are helping insurance companies across the U.S. to sustain operations in the face of the ongoing crisis. Our custom solutions enable us to extend reliable back-office services that help insurers to meet their targets and objectives. We are helping our clients in their transition to the new normal that includes remote work setup, digital customer services, and virtual settling of claims so that they can bounce back into the game once the crisis subsides.