PwC US today released, Top Issues: The Insurance Industry in 2013, which identifies several areas of opportunity and challenges for insurers this year. PwC's annual report points to several key issues that are having a profound impact on the industry.
Companies in the vanguard are focusing on new ways to improve data collection and analysis, as well as claims, billing and other operational areas. These efforts are part of an industry-wide effort to more effectively engage with customers, exploit information and analytics, and manage risk.
"All of these initiatives have a common goal of increasing efficiency and growing the business," said Jamie Yoder, U.S. Insurance Advisory Practice co-leader, PwC. "These developments will touch every part of an insurer's business - from risk management to product development to customer service."
In the year ahead, insurers are expected to encounter challenges and opportunities in the following areas:
The growth of e-commerce and mobile technology over the past two decades has led consumers to expect convenience, simplicity and transparency. Moreover, changing demographics in the U.S. and globally have created new market segments with new needs. For the most part, customers feel that carriers are falling short of meeting customer expectations and in turn missing out on a vital competitive differentiator. Competitive carriers will continue to invest in understanding consumer and policyholder expectations.
"It is important for insurers to tap into technological advancements to stay current but also have an open line of interaction with clients," said Yoder. "Revisiting customer experience programs, changing traditional distribution platforms, designing products that balance consumer and producer needs and differentiating value proposition through new models of advice will help open the door to new opportunity, business and profit."
Information Advantage & Big Data Analytics
Analytics was once a back-room operation driven primarily by actuaries and statisticians, but it is now a cross-functional group with executive level visibility. Insurers who leverage analytics should find it easier to identify and make key business decisions as well as quickly mobilize teams to better connect to the customer - all qualities that can set an organization up for success and growth.
In 2013, we will likely see insurers increasingly bring in external sources of information and combine it with internal data to deliver business intelligence to the field," said Anand Rao, principal in PwC's U.S. Insurance Advisory Practice. "Leading insurers are exploiting advanced big data analytic techniques to go beyond predictive modeling in an effort to simulate future scenarios and visualize the impact of their decisions on operations."
Billing and payments can help insurers achieve far more than just the collections of premiums. The operational and accounting function of a company can create a better knowledge of customers and stronger relationships with them. By combining a customer-centric view of the billing process and applying the most effective technologies and tools available, insurance carriers are significantly streamlining their billing processes, reducing costs, reducing errors and enhancing customer satisfaction and loyalty.
Like other parts of insurers' businesses, claims functions are investing billions of dollars, often with outside vendors, in new technologies and processes that improve the claims process and help manage the torrent of data that has become available. In order to manage costs and increase claimant satisfaction, carriers are refining how they manage vendor relationships by embracing new technologies, such as smart phone applications and sensors, promising more actionable insights into customer behavior and expectations.
Emerging Changes in Auto Insurance
All of the above are coalescing and could have the most visible impact on auto insurers. Recent auto technology advancements have helped insurers better manage risk, but the rise of affinity groups, changing ownership patterns and autonomous vehicles necessitates the development of innovative new products and approaches to distribution. Carriers that can think creatively about new markets and the changes in automotive technology will be the ones that are most likely to successfully navigate the path to the future.
Yoder added, "As the results of PwC's 16th Annual CEO Survey further validate, 2013 is a year of moving forward for insurers. They are taking the customer experience and advanced analytics pilot programs out of the testing stage and into the action stage. This action will likely be a defining moment for the industry."
PwC's Top Insurance Industry Issues report also addresses the state of enterprise risk management among U.S. insurers, as well as the deals environment, accounting for insurance contracts, principles-based reserving (PBR) and tax compliance.