A perfect storm is engulfing the insurance industry. Incredible demand volatility and increasing claim complexity has provoked new, unprecedented – and unpredictable – spikes in workload. If leading players can’t respond with agility to this short-notice, high-intensity demand for digital insurance workers, then service levels, customer loyalty, trust, reputation and operating margins are under threat.
These damaging demand spikes are being driven by four key factors:
The pandemic has been a real eye-opener for insurers. Standard business continuity plans proved inadequate as business leaders faced dual imperatives of equipping and training a remote workforce – often within days – and dealing with huge spikes in demand for customer support. Previously, low-cost operations spanning multiple territories required enormous manpower just to ‘keep the lights on’, at exactly the same time as claims volume grew exponentially. Now, despite vaccinations, demand levels aren’t dissipating. British insurers face £3 billion in COVID claims from 2020 alone, many of which are highly complex. Ongoing uncertainty around lockdowns, legal claim challenges and staff absences due to shielding and sickness will create further pinch points in the months ahead.
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Industry players – especially those with a footprint across Europe – responded with laudable agility to prepare for the legal implications of Brexit. New legal entities were created and data, expertise and offices were relocated to ensure operations were compliant and change-ready. But post-Brexit impacts including ongoing supply chain blockages have led to increased claims from the likes of property services companies, while soaring costs of materials are driving up claim severity and claim indemnity. As geopolitical tensions ramp up between Britain and the rest of Europe, further logistical and supply snags will soon lay extra demand at the doors of already at-capacity insurers.
Regulatory upheaval is a continual headache for insurers. Each time the law is changed, operations must adapt with new training, new workloads, new processes, upskilling and knowledge transfer to those on the front line, plus additional reporting requirements. In 2021 in Britain alone, there have been significant regulatory moves on the ‘loyalty penalty’ in home and motor insurance, and changes for pricing and governance, with more regulatory disruption ahead. Each update impacts beyond the predictable spike in workload, as regulatory moves are often driven by a desire to encourage increased competition. This means legacy players must dovetail new process and training rollouts with greater investment in customer service – again placing increased demand on the operation. Failing to improve service levels will mean loss of both customer volumes and competitive differentiation.
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Global warming means we all know weather events will happen more often; we’re just not sure exactly when they’ll occur or with what severity. Therefore insurers must adapt to the always-on possibility of enormous volumes of claims at short notice. As a recent reminder, November’s Storm Arwen created thousands of calls over a single weekend and estimated losses of £300 million in the UK. Claims volumes rose 16-fold in a single day after Storm Ciara in February 2020, followed by a further uptick from Storm Dennis only a week later. Insurance businesses – particularly those globally-exposed – need to build flexible systems that can react swiftly to climate change-induced weather events that drive claims volume – often within the space of hours.
Of course, the industry is no stranger to fluctuating demands. ‘Predictable’ spikes, for example regulatory or operational change, ‘cyclical’ spikes, such as intense renewal periods, and ‘event’ spikes such as severe weather have been a fact of life for insurers for decades.
The difference is that today insurers are facing unheard of severity, volume, and complexity of claims, at unpredictable times and against a climate of increased expectations from multichannel customers and intense competition from numerous digital-first Insurtechs. In this environment, failing to build capacity, flexibility and agility into operations is a recipe for disaster.
Unfortunately, insurers have few choices. In their fast-moving digitally-disrupted industry, long-tail IT projects with questionable or delayed ROI are no longer viable. A global talent shortage and a need to drive down cost of claim makes recruitment of additional human resource unpalatable. And increased competition acts as an impetus for new cost-models that can be ramped up or down with demand.
For many the answer lies in a high-performance digital workforce. Breakthrough technologies including intelligent automation, advanced natural language processing and robotic process automation (RPA) have been shown to drive up service levels while driving out operational cost and complexity.
Short-term demand spikes can be resolved by digital workers working to strict quality controls. A multi-skilled pool of digital labour – and preferably priced by the minute – can not only free staff time by taking on mundane repetitive tasks but can also aggregate information that exposes insights that provoke increased conversion rates, higher C-SAT scores and greater customer loyalty. With the right digital workers, customer and insurance employee effort is reduced, the self-service experience is enhanced, and margins and loyalty improve.
For insurers the time is right to think about a digital workforce to cover demand spikes. With RPA they might even turn the perfect storm into the perfect opportunity.