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Promoting public trust in the insurance industry by building adequate human and financial capacity

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The insurance business, perhaps more than any other, thrives on trust and commitment.  Any contract between an Insurer and the Insured is a contract of utmost good faith and as such requires honesty and trust from both parties.  For this to happen successfully, the insurance sector must first win the trust and confidence of the insuring public.

Unfortunately, the common challenge facing the industry is low public confidence coupled with a deep seated mistrust of insurance companies.  Some of the reasons for these issues can mainly be attributed to:

  • The very high expectations of members of the public of insurers.
  • Greater awareness of how insurance operates elsewhere in the world;
  • The increasing level of education with its associated awareness of legal rights.
  • Bad claims experiences encountered by policyholders;
  • Lack of clarity of insurance policy documents,

The above issues provide a perfect environment for breeding suspicion in the minds of clients.

There are two fundamental questions that if properly addressed will help minimize the erroneous public impressions about the insurance industry.

These are:

  • Can insurance companies live by their promises to pay genuine claims promptly?
  • If a policyholder or claimant is aggrieved, are there provisions or avenues for redress without the need to go through cumbersome legal processes?

The answer is “YES”. That being so, what then is the problem as insurers? Putting the question the other way round “What then is the public’s problem of insurers?

It is a common knowledge that majority of those who purchase insurance products do so either because they:

–   require some form of protection, or.

–   are compelled (either by law or other contractual provisions/conditions) to buy insurance.

This form of involuntary buying of a product is what I would like to refer to as “grudge purchase” that is, buying when you would have wished not to buy. By that I mean all things being equal, people would wish they do not have to purchase insurance, except that they feel compelled by circumstance to act against their wishes, and so they grudgingly purchase insurance for say contractual or to meet regulatory requirements.

So when their expectations are not met, their level of frustration goes up through the roof. They bad-mouth all insurers and so provide more fuel to public mistrust of insurance.

What Is The Level Of Mistrust?

On the part of the insuring public, the level of mistrust is best measured when you sample opinions randomly.

Comments you hear are like;

  • Insurance people are quick to take the premiums but when it comes to paying claims they keep dragging their feet, and sometimes even refuse to pay.
  • Insurance people charge huge premiums and only reduce it when another company offers a lower premium for “the same risk”.
  • Without a solicitor, you cannot make an insurance claim.
  • Once the premium is taken, you do not see them until renewal is due.

From the insurers point, at certain times, we tend to be very rigid with the claims because we suspect the client has likely exaggerated the claim quantum or has faked the entire claim altogether.

How To Promote Public Trust In The Insurance Industry?

Promoting public trust is a herculean task but not insurmountable.  An effective promotion of the following will be a sure step in the right direction in addressing this critical issue:

  • Effective communication at the point of selling and at the time of claim.
  • Professionalism in handling clients at both underwriting and especially claims handling stages.
  • Changing the attitude of our front line staff,
  • Being innovative in our approach to business by embracing technology to enhance service delivery
  • An effective and robust Regulator to ensure and monitor standardization across the industry as well as create awareness to the public.

Building Adequate Human Resource Capacity

There could be no other effective approach to tackling issues of the industry than building adequate human capacity. A systematic attempt at training and retraining the human resource base across the industry is key to promoting the insurance industry.

This industry approach should cut across the operational triangle of the industry.

The three [3] stakeholders are:

  • Insurers
  • Intermediaries
  • Regulators

The approach must be holistic and most importantly be on a sustained basis to ensure that technology does not overtake our industry.

It is very critical that the Human Resource base of the insurance industry is well motivated, adequately resourced in terms of job tools and competitively remunerated to ensure they acquire the inner drive to deliver effectively and efficiently.

The doctrine of UTMOST GOOD FAITH which is the operational pillar of insurance must be emphasized at all levels of training.

Need For Financial Capacity Building

In the absence of an adequate and self-sustaining Financial Capacity, no insurance company is able to fulfill its mission for being in business and also to motivate the Human Resource base.

Financial Capacity building for an insurance company implies that the necessary steps that insurers need to undertake in order to have a stronger ability to appropriately manage the expenditure items that befall them.

Of particular interest is the organization’s ability to manage its claims and management expenses – especially staff cost, within its own resources without recourse to loans and overdrafts.

Building financial capacity would involve, among others the following:

  • Growing premium income,
  • Taking concrete steps to reduce cash flow-out (e.g. claims payout, management expenses, etc.)
  • An investment regime that targets putting funds in solid financial systems within the ambit of the regulatory regime.
  • Effective Executive leadership
  • Strategic Board Governance.

The core strategy should involve:

  • Developing very realistic and accurate overall budget that involves all cost centers of the company to the extent that everyone makes an impact into revenue and expense projections.
  • Periodic financial updates to all parties showing expenses to date matched with actual revenue vis-à-vis the budgetary provisions.
  • Engagement of Management with staff who are already adequately briefed on the financial status so deliberations could bring up what needs to be done to keep the finances on course.

With these strategies in place, it is important the companies put structures in place to check financial leakages in the system to ensure that capacity is sustained.

Issues to Note

Currently, there are some skills gap that needs to be bridged, hence the urgency in building our human resource capacity backed by sustainable financial capacity – a capacity level that can support the existing businesses and new opportunities that will be created.

It is therefore incumbent on the industry to find creative ways to build up financial capacities devoid of sole dependency on premium income.  Forming partnerships will help spread the cost of innovations and therefore help the bottom line.

On the human resource front, insurers need to do a better job in the area of customer-centered processes.

This will include the following:

  • Delivery and execution by exploring the process of “doing more with less”.
  • Close the skills gap through training and hiring “new generation” staff that understand this tech-generation.
  • Fully understand the customer journey – from information through purchase and claims.
  • Enhancing and understanding the human processes in commerce – this will enable us to travel with the client on his/her journey as a client.
  • Interconnecting the traditional way of doing insurance with digital models including taking advantage of current social media, etc.

It is unfortunate to say insurers have aided the development of mistrust for the industry from the insuring public. To stay relevant in the competitive environment, the insurance industry must discard the one way approach to issues and embark on multi-disciplinary approach.

This approach will greatly enhance the building of robust human resource capacity.  This approach brings a new perspective for the insurance industry in understanding the importance of investing in individuals and organizational human resources, and the implementation of capacity building strategies.

It is also essential to note that it is the responsibility of insurers to help educate the general public in order to improve upon the low awareness and understanding of insurance which has led to mistrust.

Also, insurers need to re-engineer the processes that will build a robust financial capacity to sustain the new opportunities.

Above all, insurance companies must also manage their operational risks within the framework of Enterprise Risk Management in order to be able to critique the risk areas relating to leakages, and non-performance. For insurers to see tomorrow, they must first survive today.

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Insurance

Differentiating in a Radically Changing Marketplace– Customer-Centricity in Insurance, Digital Innovations

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Sweeping technological advances have created major growth opportunities in the Global insurance space, both for industry leaders and for innovative third-party providers. Insurers are reinventing their consumer engagement experience models, digitizing their distribution and operations, and embracing big data and analytics as they seek to lead the industry wherever they find themselves.

Against this background, many insurers all over the world are leveraging new Technologies to gain the upper hand from their data and transform their new and old business models to align with the new digital age.

Today’s consumers have more complex needs and are more knowledgeable about their choices and needs and therefore require personalized offerings as well as customized communications. They expect insurers to deliver services that meet the high benchmarks set by global digital giants with offerings that gives shorter response times; personalized service, top of the range quality services, seamless interaction among others. To survive in this new digital natives’ market-space, insurers must become truly customer-centric, embrace innovation to remain relevant, satisfy and retain their customer in today’s radically changing marketplace.

Why has is it Become Necessary to Innovate:

Moving towards customer-centric Insurance through digital innovations, there are some critical questions that as insurers we must ask ourselves:

  1. How effective would digital and mobile channels help insurers achieve growth and profitability in the market by retaining existing customers and most importantly gaining new customers.
  2. What are the best steps to take to close the communication gap and strengthen relationships with customers – this emanates from the fact that the modern consumers want frequent, meaningful and personalized communications.
  3. And thirdly, how can insurers build on first-generation agency portals with new capabilities through digital innovations to support distribution channels – this is because, insurance sales executives, agents and brokers always want better data and tools to better serve their customers and most important compete for new businesses.

The scale, reach and pace of tech-driven disruption in the insurance industry continue with such unprecedented speed pushing insurers to a new phase – adaptation of underlying business models.

Digital innovation through new technologies is the key driver of change in the insurance sector hence leading to customer-centric gains.

Innovation and new technologies have the potential to affect the fortunes of insurance companies. Examples the world over shows that the rewards are significant for companies that create strategies that successfully use digital channels.

These channels allow insurers to engage directly with customers, a critical requirement in the new digital age when customers expect continuous interactions with their service providers. Again, through these innovative channels, insurers can gain insight into unmet needs that provides ideas for new offerings. Third, insurers can gather information that helps them improve how they underwrite and market their products. 

In answering the above question on why has it become necessary to innovate, I dare say that innovation has become an imperative for insurers because without a strong digital strategy to differentiate oneself in the digital natives’ market-space,  insurance companies could lose the slice of the margins they earn from distribution and eventually impact their bottom line negatively.

How insurers responds to these economical and society-wide technological innovations, and provide insurance processes and policies that integrate such changes to bring about differentiation in the industry is a discourse worth considering.

Permit me to share with you a good example of one such disruptive innovation that has led one company to differentiate from the competition in the insurance space.

The Case of BIMA

BIMA is a leading insurance tech player that uses mobile technology to disrupt the global insurance industry. Even though it is a Swedish Microfinance Company, BIMA provides insurance services in developing and emerging markets in Africa in particular.

In Ghana, BIMA mostly provides mobile-delivered insurance and health services to the underserved market mostly within the informal sector thus pushing the agenda of micro insurance and insurance penetration forward. BIMA is less than ten years in Ghana but through its disruptive digital strategy, it currently serves and adds about 575,000 customers to its base monthly bringing about 75% first timers to insurance on board.

The BIMA business model allows their customers to register for an insurance policy via their mobile handset and pay for cover through deduction of prepaid airtime credit, or through their postpaid bills.  BIMA has developed an industry leading pay-as-you-go (‘PAYG’) insurance product that is the first of its kind in most markets.

The concept of real-time visibility has become a reality. This is the observation of processes or events in the precise time of occurrence. Real-time visibility helps in improving customer experience by proactively solving needs and concerns, cuts down on operating costs and improves business agility. Internet technologies and the use of digital hand held devices are making it possible for insurers across many markets bring about differentiation. Smart contracts have become enabled by the use of blockchain technology which has dramatically decreased paper-based transactions and turnaround times.

Cloud technology strategy is another digital innovation which provides an agile, scalable and flexible technology to improve the overall modeling capabilities for insurers.  These cloud technologies are been used in delivering value to business customers as well as building and managing bespoke IT systems to give cost competitive advantage and differentiation to many insurers. As pointed out by an article in The Record in the winter 2017 issue, “by leveraging high-performance computing (HPC) in the cloud, insurers are achieving levels of risk modeling that were not possible before”.

Despite the intense competition within the insurance industry, new non insurance-industry entrants into the insurance space is also raising the levels of competition and consequently increasing choice and consumer expectations.

To remain relevant in this radically changing marketplace, tomorrow’s insurance leaders and winners must prepare for the adoption of these new digital innovations. Great strides have been made in this direction and insurers leading the pack on the innovative front are taking action and making investments now that will help them become more customer-centric, improve their pricing to stay ahead of the competition and create operational efficiencies.  With these ever-changing digital environment, the question is, “where are the right areas to focus to achieve the expected goals”?

  • Research done by Celent found out that 37% of insurance customers prefer using smart technology rather than having someone physically to talk to. This gives customers immediate answers to their questions, their inquiries whenever they want. This empowers consumers and facilitates quick decision making. For example, Progressive Insurance’s Flo Chatbot that combines Artificial Intelligence (AI) and quoting technology to answer questions and start the auto insurance quoting process on Facebook Messenger  has created a niche that reaches the younger generation that are hooked to new technologies. This innovative approach has separated Progressive Insurance from its competitors in its market.
  • As indicated by Accenture, a global management consulting and professional services firm that provides strategy, consulting, digital, technology and operations services “The biggest innovations in insurance over the next three years will not be in the technology tools themselves, but how insurers design them with customers, agents, employees and other human partners in mind”.

In conclusion, a research conducted by Goldman’s Sachs Investment Research Department in 2016, found out that there is a strong recognition that the millennial cohort, which is one of the largest age group worldwide and are entering their highest consumption period and have a preference for digital solutions available for transactions.

As insurers, differentiating in a radically changing marketplace and becoming customer-centric in our insurance delivery through digital innovation is a must!

For our customer-centric based systems, we need to be strategic and take advantage of the various modern technologies such as AI, Blockchain and the cloud to help us deliver to customers’ expectation, profitability and remain highly competitive.

Whilst deploying these technological and innovative digital systems to ensure that our companies are the most efficient and customer-centric in our industry, we equally have a responsibility to develop clear strategies for fostering and managing these digital innovations.

These strategies must aim at enhancing the capabilities of our workforce and the efficiency of our operations.

Again our strategies must address the issue of integration where insurers extend the benefits of our technology enabled value chain to other industries to create dependable ecosystems with other service providers.

And finally, our insurtech strategies should grow and position our companies to share and possibly sell developed, tested and deployed innovative technology solutions to other industries.

The insurance industry has recognized this new phenomenon and through introspection, the industry is reviewing how to approach product and service distribution, claim management among other processes. The millennials are clearly dissatisfied with the conventional insurance solutions hence it has become imperative for our industry to adapt to solutions that digitally innovative so we can remain differentiated and relevant in the face of radical changes in our marketplace.

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