Analyzing challenges and leveraging opportunities: an insurance conundrum


Over the past few years, the insurance industry has experienced an influx of opportunities. However, they are not free from consequences. In the face of post-pandemic fervour, most businesses turned to technology for navigating emerging physical limitations. What arose was a connected insurance infrastructure, backed by AI-enabled claims processing and underwriting, hyper-personalized experiences and cloud-driven data ecosystems. While these technologies have been around for a while, the pandemic fuelled their adoption.

Take for example, a Mckinskey report that explains how a large auto-insurance player could easily double profits by digitizing their existing process. This could be achieved by gathering comprehensive data acquired through digital technologies such as sensors and wearable devices, expediting underwriting initiatives. Most insurers have understood the potential of innovation and have taken necessary steps to integrate disruptive technologies into legacy systems. However, despite the surge in premium growth post 2020, looming threats of inflation, increasing interest rates and rising competition all point towards a drastic downturn. 

How can insurers curve these challenges? The answer might lie in riding on the digital transformation momentum. Read on to discover the upcoming challenges for insurers and how they can capitalize on the digital revolution trend.

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Dealing with roadblocks: Major challenges faced by insurance businesses

Even though the industry has shown great resilience during trying times, the road ahead is paved with roadblocks. It was found that most of the insurance revenue in developed countries is derived from higher premium rates rather than the volume of claims. This challenges the industry’s future relevance. But that is not all. Cyber risks, ESG claims and climate change further threaten growth. To find solutions, let’s first get to the root of the major pitfalls faced by the industry.

  1.  Cyber security: Insurance companies are often preyed upon by cybercriminals. Ransomware attacks are a common phenomenon, especially if the insurer offers cyber insurance cover. A breach of sensitive B2C retail policy-holder data can result in a series of losses for carriers. In March of 2021, a ransomware attack on a U.S. insurance company led to one of the largest ransom payments ever reported. Access to the company’s mainframe was gained through an employee’s workstation via a malicious browser update. Moreover, PII data such as dates of birth and Aadhar card numbers of individual policy-holders in the carrier’s network or third-party systems can also be misused for malpractice. With more businesses taking to the cloud and hosting data on external servers, the threat of cyberattacks is more real than ever, as are the resulting financial losses.

  2. Sustainable insurance: ESG concerns and regulations are forcing more insurers to venturing into sustainable insurance. While opportunities abound, they are also fraught with uncertainty. Insurers will need to adjust their underwriting portfolios in response to increasing pressure to adopt renewable energy sources. Additionally, these developing areas may pose new types of exposures, so claims teams must remain flexible.

  3. Climate change-related risks: Insurers are significant players in the global effort to combat climate change. With their long-term investment capacity and risk management expertise, they can help others build resilience to climate change. Nevertheless, climate change can also increase insurers’ financial risks, such as higher claims from extreme weather events and a decline in property investments value. In order to cope with climate change, insurers must integrate governance, risk management, investment, and underwriting decisions into their business operations. Otherwise they may become subject to litigation, shareholder challenges, regulatory pressure, and an inability to adapt to changing business and economic environments.

  4. Crypto-currency risks: The crypto and virtual currency market is in a state of turbulence. Few insurers currently offer crypto insurance coverage, including theft coverage. In order to attract new investors, crypto firms advertise that their policies are backed by insurance companies. It is important for insurers to guard against losses caused by the activities of the insured who may be involved in cryptocurrencies, and to prevent policyholders from filing claims for cryptocurrency losses.

  5. Inflation risks: While global inflation has declined steadily since 2022, it has left a lasting impact on insurers. Rising claims costs and increased operating costs have caused insurers to hike premiums, impacting consumers negatively. This can result in consumers dropping coverage altogether due to increased costs. Furthermore, inflation can also cause insurance companies’ investments to lose value, affecting their solvency.

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Leveraging digital innovation: insurers' way forward

So far, the insurance sector has adapted well to enterprise-wide digital transformation efforts. As a result, it overcame many obstacles, especially those related to the pandemic and socioeconomic stressors. However, leading a customer-focused and value-driven insurance organization has far more potential. Moreover, there are still a few hurdles to overcome. How insurers can take advantage of technology and navigate challenges. 

  1. Targeted customer experience: By leveraging data analytics, artificial intelligence, and machine learning, insurers can better understand customer needs and preferences and offer tailored products and services. It can further help insurance companies manage inflation risks by streamlining operations and reducing costs. Innovations like robotic process automation can automate manual processes, while AI and machine learning can improve claims processing and underwriting. By leveraging digital channels like online marketplaces and mobile apps, insurers can reduce distribution costs and offer more competitive pricing to consumers.


  2. Enhanced Risk Assessment: Digital technologies such as IoT sensors, wearables, and telematics can help insurers collect more accurate and real-time data on policyholders’ behaviors and risks as well as data on weather patterns and natural disasters. This can enable insurers to develop more accurate risk profiles, improve underwriting, and price policies more competitively.


  3. Increased Operational Efficiency: Digital technologies can automate many manual and time-consuming processes, allowing insurers to reduce costs, improve speed and accuracy, and focus on value-adding activities. For example, chatbots can handle customer inquiries, AI can analyze claims, and robotic process automation can streamline back-office operations.
  4. New Revenue Streams: Digital transformation can also help insurers identify potential business opportunities and revenue streams. For instance, insurers can partner with insurtech startups to offer innovative products and services or leverage blockchain technology to offer various types of insurance products, such as parametric insurance. Insurers can also explore new distribution channels, such as online marketplaces or mobile apps, to reach new customers.
  5. Data-driven decisions: By leveraging data analytics, insurers can identify sustainable investments and assess risks associated with different environmental factors. Innovations such as parametric insurance can help insurers offer new types of coverage for natural disasters and climate change-related risks. Therefore, insurers can incorporate ESG concerns and regulations into their underwriting and investment decisions.


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Transforming the Employee Experience through BPM

One of the key ways organizations can leverage BPM to improve the employee experience is by automating repetitive and time-consuming tasks. By allowing employees to focus on more strategic and value-added activities, BPM can lead to increased job satisfaction, as employees can spend more time on tasks that align with their strengths and interests. Furthermore, by simplifying complex processes, BPM can reduce the learning curve for new employees and minimize the potential for errors and frustration.

Another important aspect of leveraging BPM to enhance the employee experience is providing employees with real-time data on their performance and the status of their projects. This information can help employees make more informed decisions, identify areas for improvement, and track their progress toward personal and organizational goals. By fostering a data-driven culture, organizations can empower employees to take ownership of their work and drive continuous improvement.

BPM platforms can also facilitate cross-functional collaboration, breaking down silos within organizations by providing a common platform for employees to collaborate on projects and share best practices. This can lead to more effective communication, better decision-making, and increased innovation. Additionally, by creating a culture of collaboration, organizations can encourage employees to develop new skills and take on new challenges, leading to higher levels of job satisfaction and retention.

Lastly, BPM solutions can be used to create personalized development plans for employees based on their skills, performance, and career aspirations. By tailoring development opportunities to individual needs, organizations can demonstrate their commitment to employee growth and foster a culture of continuous learning.

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Post-pandemic necessity, socio-economic concerns and insurtech competition have initiated an overall digital transformation of the insurance industry. Industry growth can still be hindered by rising regulations, climate concerns, and inflation risks. By mapping and optimizing existing pain points through digital solutions insurers can continue to build resilience and scale business benefits. To learn how EOSGlobe’s Digital Solutions can help your insurance business in the face of challenges, reach out to us.

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EOSGlobe is a leading business process management organisation that strives to provide high quality services focusing on exceptional customer experience and digital technological innovation. EOSGlobe is committed to becoming a value-driven organisation with the highest standard of services to their customers. With an exceptional team having rich domain expertise and robust digital solutions, helps businesses to transform their futuristic goals into reality. It aims for strategic partnerships with its global clientele to build a culture of innovation and business transformation at cost effective rates and with more productivity.

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