Sharpen Your Combined Ratio with Three Digital Insurance Advancements
Insurers are under increased pressure to improve their profitability, and digitalization provides a clear way forward.
According to McKinsey & Company, weak insurance combined ratios are plaguing the P&C insurance industry, and change is needed. At the same time, COVID-19 has accelerated the need for digital transformation, with 60% of service operation leaders saying that more than 50% of customer demand will be met online in the next two or three years.
Simply put, digitalization is an investment that insurance companies can’t afford to disregard. Here are three ways a digital upgrade can lead to cost savings and improved profitability.
#1: Digital Payments
Payments are arguably the most important interaction between insurance companies and their customers. Insurance customers pay premiums, and if a claim occurs, the insurer pays the claim. This is the very nature of insurance.
It therefore follows that if you want your insurance processes to be fast, convenient and cost effective, you should make sure that your incoming and outgoing payment processes are fast, convenient, and cost-effective.
The Payment Cost Benchmarking Survey from the Association for Finance Professionals found that paper check transactions are far more costly than automatic clearing house (ACH) transactions. Sending paper checks is about ten times as expensive as sending ACH payments, while receiving paper checks is about five times as expensive. A company that receives 20,000 checks per month will spend about $360,000 a year on check processing.
Electronic payments have other benefits, as well. They’re fast. They also can’t get lost in the mail, and premium payments can be set up on a recurring basis. This reduces the chance of missed payments and lapsed policies, further helping the insurer’s bottom line.
When customers have a question, they want help, they want it fast, and they want it 24/7.
HubSpot has found that 90% of consumers say getting an immediate response to customer service questions is important or very important, while 33% rank waiting on hold as the top frustration.
Chatbots can help. Chatbots provide instant responses, day or night, to many common questions. They also free up time, making it easier for the customer service team to deal with issues that cannot be resolved using chatbots.
Some people may still prefer to talk to a human, but many prioritize speed and convenience. According to ZDNet, a survey found that 54% of respondents will always choose a chatbot over a human if it saves them 10 minutes.
Keeping customers happy is the key to keeping them as customers. Anything that improves satisfaction also improves retention, and that improves profitability.
#3: Digital Claims Processes
The claims process puts the insurer-customer relationship to the test. If it goes well, the insurer may win a loyal customer for life. If it goes badly, the insurer will likely lose the customer sooner rather than later.
Once again, speed is important. J.D. Power’s 2020 U.S. Auto Claims Satisfaction Study reveals that claims satisfaction has reached a record high, and a big part of the increase appears to be a reduction in the time required to process claims. Due to a pandemic-fueled decrease in claims, the claims cycle for repairable cars dropped from 12.6 days before the pandemic to 10.3 days during the pandemic.
At some point, traffic and auto claims will likely creep back up, but there are other ways to speed up the claims process - namely digitalization. Another study from J.D. Power, the 2020 U.S. Property Claims Satisfaction Study, shows that even if customers aren’t ready to fully embrace digital claims yet, digital tools for first notice of loss, claims estimation, and self-service can have a positive effect on the claims process. This is good news for insurers looking for a new way to boost retention and profitability.
Ready to take the next step?
Digitizing payments is an easy place to start. At One Inc, we can help you increase policyholder satisfaction by accepting payments through multiple channels. We can also help you close claims faster with our exclusive ClaimsPay® disbursement platform.