Why The 4E Framework Is a game changer for the Insurance industry
Author : Ravi and Kedar, Wurth IT India
The insurance sector is in the midst of a major transformational shift that is being influenced heavily by technology. Traditional business models are giving way to digitally empowered business models. The pace of change has been so rapid that insurance companies have been forced to adapt quickly to meet the requirements of a fast changing digital landscape. While some companies have surged ahead, many insurance firms are still lagging behind in a big way.
From our experience of dealing with many insurance firms, we have conceptualized a framework, which we call the 4E framework. If insurance companies follow this framework diligently, they can be at their most competitive bet.
The 4Es that can drive the next generation of insurance solutions are:
#1 Expectations
#2 Experience
#3 Efficiency
#4 Ecosystem
The 4E framework speaks about expectations, experience, efficiency and the ecosystem. Let us now look at how these 4Es can create a significant impact on the insurance industry.
EXPECTATIONS:
Today, the nature of the insurance industry has completely changed. In line with the trends observed in other industries, the expectations from the insurance sector has also increased substantially. Customers of insurance expect the same type of user friendly interfaces and instant resolution of queries, as they have been experiencing in other online mediums. This applies even to internal stakeholders such as sales. For example, if an agent is selling to his customer, via any medium, then the customer as well as the agent, as an internal stakeholder of the insurance company should find it very easy to use the application. The application must be simple to use, as complicated systems are not really adaptable. So when we look at expectations, it is for both internal as well as external stakeholders. Due to growing competition and new age millennial consumers, insurers are naturally stressed with building and thus distributing new products. Insurers in developed countries are coming up with more leaner and specific products, while the insurers in the developing countries are trying to modify existing products to suit these needs.
EXPERIENCE: Most companies have been looking at shaping experiences by having an ‘Inside Out’ view. This perspective has to change. We must rather look at the ‘Outside In’ perspective. The ‘Outside In’ part has to be brought in to meet expectations. Today, customer perceptions have changed significantly, and expectations have grown significantly. The customer today us not expecting the same kind of experience, as say, a couple of years back. With experience, the experience should be obviously intuitive.
A big part of ensuring good customer experience comes from the way the customer interacts with an insurance company. If a customer has to buy insurance or service his claims or make any changes to his policy, then it has to be done in an extremely easy and seamless manner. Hence, insurance applications have to be designed to be highly configurable and be able to integrate easily. The integration part is very important, because over a period of time, we have seen that the legacy systems that most insurance companies have built over years, have become monolithic and have been very difficult to talk to each other. To ensure customer satisfaction, there has to be a seamless integration with all the internal and external systems.
EFFICIENCIES:
Considering the expected turnaround time, insurance companies today have to be extremely agile and efficient in every aspect – from issuing policy certificates, processing claims or answering queries. If the turnaround times are faster, the processing and the operational overheads are taken care of. This has a direct impact on efficiencies. This is also dependent on the various channels of distribution (COD). In the developed markets, insurers are challenged with optimizing these COD. They are hence interested only in continuing with the more profit making COD while discontinuing with the lesser profit making ones. In the developing markets, insurers mostly struggle with on-boarding of the various COD as they are hungrier for business. The efficiency of an insurance company is hence dependent heavily on the pace at which it can adopt new distribution channels very quickly, in developing markets. In both these markets, the COD must be able to do new product rollouts extremely fast and that is what the insurance sector demands today.
ECOSYSTEM:
The efficiencies of an insurance company also depends heavily on the pace at which it can adopt new distribution channels very quickly. This completely depends on the ecosystem, which has to play a constructive role in aiding the rollout of new products. The ecosystem can also play a big role in quicker on-boarding of the new COD. A digital ecosystem which can issue policies quickly using self-service modes or an AI-enabled underwriting system which enables faster processing of claims are all components of an ecosystem which can facilitate what the industry wants today. The development of the ecosystem also depends equally on the regulatory policies which can play a proactive role in developing a strong digital foundation by encouraging ISVs and startups to contribute innovative solutions.
Today, technology makes it possible to create or use an underlying platform, which will be able to cater to all the four E’s that we have elaborated in the 4E framework.
In summary, for succeeding in the intensely competitive insurance sector, all the 4E’s in the form of expectations, experience, efficiency and ecosystem, cannot be done in isolation. All these factors have to work cohesively to address the two important objectives of customer centricity and rapid digitization.