Insurance Industry Challenges

Transforming Insurance Carriers

More than superficial changes are needed to compete in a sluggish economy.
By: | January 20, 2014 • 3 min read

Insurers will need to make “transformational” changes to their business models and systems in order to stay ahead of the competition and boost their long-term growth.

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Gary Shaw, U.S. insurance leader at the Deloitte Center for Financial Services, told Risk and Insurance® that a growing number of companies were already making wholesale changes to their claims, underwriting and pricing systems, rather than short-term tweaks.

Firms were also shaking up their marketing, distribution and finance functions – a trend he expects to gather pace in the future, said Shaw, who contributed to Deloitte’s 2014 Property & Casualty Insurance Industry Outlook.

“Insurers will be hard pressed to achieve more consistent and higher rates of growth if they count on external conditions, usually outside of their control, to increase their top and bottom lines,” he said.

“Rather than making superficial changes in their systems and business models, carriers should instead be thinking about taking more transformational steps to raise their game above the performance of competitors and the industry as a whole.”

Gary Shaw, U.S. insurance leader, Deloitte Center for Financial Services

Gary Shaw, U.S. insurance leader, Deloitte Center for Financial Services

Shaw also expects to see an emphasis on simplifying and reducing the length of the insurance cycle in order to improve customer satisfaction and to establish more direct access to the customer.

He added that greater integration of capital allocation, business processes, technology infrastructure and personnel management strategies were required across the board.

“To win the information arms race,” he said, “carriers are being challenged to upgrade their data management and predictive modeling capabilities in underwriting, pricing, and claims, while grappling with a host of related technological and liability challenges along the way.”

Insurance Information Institute President Robert Hartwig told R&I that many of the core transformations that need to be made by insurers will be driven by technology, for both sales and distribution, and advanced analytics.

“At the individual carrier level, many insurers are still grappling with legacy systems and need to make additional investments to integrate and upgrade those systems before they can take full advantage of the latest in sales, underwriting and analytics technologies,” he said.

A Host of Challenges

Deloitte’s outlook report said that, despite the insurance industry finishing 2013 in a record capital position, insurers face a host of challenges to meet evolving consumer demands and to incorporate new data sources, all within an increasingly uncertain regulatory environment.

Furthermore, the report found that digital strategies need to more closely engage with policyholders and improve customer experience, while mobile technology can be used to increasingly transform the sales process through improved education around product features.

Shaw said: “To capitalize on emerging opportunities instead of being undermined by the disruptive changes likely to alter the competitive landscape, top insurance executives should be more predisposed towards bigger-picture innovations.”

Meanwhile, the report also stated that the Federal Insurance Office had direct authority to enter into “covered agreements” with major reinsurance trading partner countries.

The Reinsurance Association of America’s President Frank Nutter told R&I that this represented a “significant opportunity” to align a system of cross-border reinsurance in order to produce efficiencies and enhance capacity both for the United States and its trading partners.

Howard Mills, Deloitte’s insurance industry group director and chief adviser, said: “The overriding goal is for insurers to integrate risk management into decision-making at all levels of the enterprise, and for regulators to be able to confirm that there are no regulatory gaps that could threaten a company, a group, or the entire financial system.”

Sam Friedman, Deloitte’s insurance research leader and primary author of the outlook report, said one of the key challenges for insurers was maintaining positive growth in a sluggish economy.

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“Carriers will be looking to differentiate themselves by developing new products for underserved markets (such as cyber liability), testing new distribution systems (such as selling small-business insurance direct to consumers), and making themselves more relevant in the everyday lives of their policyholders (perhaps through the creative use of mobile apps),” he said.

Shaw concluded: “Rather than wait for a rising economic tide to provide lift, insurers should consider transforming the ways they do business to compete more effectively. Regardless of the emerging favorable market conditions, insurers face a full host of challenges. We anticipate a growing number of organizations will re-evaluate their business models to more effectively compete in today’s marketplace.”

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]