By Sabine VanderLinden

The insurance industry is facing an unprecedented number of business challenges brought on by a harsh economy, low investment returns, increases in claims and fraud, and greater consumer and agent expectations. P&C carriers are under pressure to sustain profitability. They have been hit with low investment returns that are not sufficient to offset major underwriting, and several years of soft-market pricing. To improve profitability, their focus must shift toward increasing customer retention and growth.

Life carriers, on the other hand, are recognizing that to remain competitive, they need to become diversified financial management organizations. To facilitate a move beyond classic insurance products, life carriers are looking for ways to speed new product introductions, and increase cultivation of the existing customer base.

Challenges

Manual process is still rampant. From new business initiation and policy issuance to subsequent policyholder servicing and claims processing, the business is fraught with inefficient, manual operations. With increasing channel, product, rules and regulatory complexity, the situation will only get worse.

The number of inflexible, legacy systems siloed by line of business makes it difficult to improve servicing and increase business agility. The inherent inflexibility of core transactional systems makes it difficult to introduce new products, streamline processes, drive automated decision-making and leverage best practices across the enterprise.

Insurance carriers have few defining moments of customer contact: when the policy is sold, when it renews or changes, when a claim is reported and when a claim is adjusted. Insurers need to make the most of each of these interactions if they are going to retain and extract more value from existing customers. Life insurance carriers in particular suffer from lack of customer contact. Significant portions of their customer base are "unassigned" because of agent turnover.

Solutions

There are several innovative technologies to help insurers overcome their business challenges. These technologies can enable insurers to dramatically transform their business models, increase business agility and drive new levels of processing efficiency across the organization.

Business process management (BPM) gives insurers the ability to transform the way they do business. BPM-driven solutions provide a cost-effective way to modernize inflexible legacy systems by "externalizing" business logic (the organization's unique best practices and rules) from underlying applications. This separation, combined with intuitive modeling tools, empowers business analysts to create, manage and change best practices and rules without IT programming. The integration capabilities inherent in BPM technology facilitate the consolidated presentation of customer information to users across the enterprise to significantly improve servicing efficiency and effectiveness.

Insurers are beginning to use component-based applications, service-oriented architectures (SOA) and Web services to cost-effectively modernize their legacy infrastructures. These technologies enable new and different applications to be created through the real-time assembly of application components, which are orchestrated by business processes. Orchestration is accomplished by the BPM system underpinned by SOA.

As insurers recognize that stronger, more enduring customer relationships are critical to profitability, marketing is evolving from a line-of-business, tactical focus into a customer-centric enterprise operation.

Insurers need to anticipate and leverage each customer interaction and life event into opportunities to retain and expand the relationship. Combining marketing automation with real-time servicing events can drive significantly higher response rates. By standardizing and automating the marketing planning-through-execution processes, insurance organizations can support increasing customer, product and channel complexities, reduce time to market, and maximize return on investment.

Analytics can be used to predict customer needs and compute offers in real-time to increase relevance and accuracy. It also predicts future behavior to more adequately assess underwriting risk and improve reserve accuracy. This plays a key role in detecting suspicious claims activity in real-time to reduce fraudulent claims payout, while proactively optimizing resource planning and operations management.

A combination of these solutions should be considered to transform operations with process-centric technologies into profit centers.

This article was originally published on InsuranceNetworking.com.

Sabine VanderLinden is director, Worldwide Insurance Solutions for Chordiant Software, Cupertino, Calif.

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