Focus on fully delivering on your ambitious insurance vision, says industry voice of the customer research

Across property and casualty (P&C), life and annuity (L&A), and reinsurance insurance segments, carriers are seeking new ways to grow profitably and serve customers better through technology and operational transformation. While the promises from their external partners have risen in the age of insurtech, clients are disappointed with the level of execution by their global IT services and business process services providers. Insurance leaders within service provider firms must address client needs for more robust talent pools, progress on automation, and process optimization across the insurance value chain.

Service providers have sold the “vision” for insurance, but they struggle to deliver

Diving into the voice of the customer metrics of our recently published HFS Top 10 Insurance Service Providers 2019 report, we found insights from 119 insurance carriers, including an HFS survey of reference checks and input from HFS’ industry survey research.

What emerges as a resounding theme from the 2019 insurance voice of the customer (VoC) data is the collective insurance service providers’ failure to fully execute on the bold, innovative visions that they have sold to their clients. Exhibit 1 shows that insurance business leaders are more satisfied and give higher scoring overall to innovation-related metrics, compared to execution-related metrics for their service providers across insurance consulting, IT and business process services, and industry-focused emerging technology services and solutions.  

Exhibit 1: Insurance VoC suggests that execution lags innovation for the industry

Source: HFS Industry survey, 2019, n=86 insurance executive clients

Experimenting with insurtech is pushing forward the innovation agenda

On the one hand, we heard from multiple carriers that one of the principal reasons they chose their service provider was that the providers came in with a great understanding of core insurance issues and had a progressive stance on insurtech, promising collaborative innovation opportunities. As the senior vice president of Digital and Individual Markets at a leading US-based L&A carrier stated, “The biggest strength of our service provider is their collaborative approach and vision for the future.” This observation is a definite improvement from a few years ago when HFS was noting the lack of innovation from insurance service providers.

The threat of insurtech disintermediation has led many carriers to recognize that they need to place a far greater value on innovation to be able to stay relevant in their marketplaces and attract and retain new categories of customers with an expanded portfolio of insurance coverage products. This necessity also led carriers to value innovation from their central service providers, as the need for external partnerships grows in an increasingly hyperconnected insurance market. Service providers have clearly stepped up, and many are articulating a clear vision for the industry and their role as services partners to their insurance clients.

On the flip side, what is starting to get lost with the “insurtech buzzword bingo” is some service providers’ focus on execution. Clients are reporting lower satisfaction levels on execution, including overall service delivery performance for day-to-day operations, as well as a clear path from service providers to execute on the areas of innovation that matter most to the clients.

Insurance clients want three execution criteria improved: better talent pool, progress on automation, and process optimization

Insurance executives in our study are clear about their execution needs from service providers, with three significant criteria jumping out:

1. Better ways to attract and retain talent. The head of operational excellence at one of Australia’s largest carriers highlighted the importance of talent in our study, wishing that their service provider improved the “multidisciplinary skills of their employee base.” Attracting and retaining high-quality talent with core insurance domain knowledge is a challenge for enterprise clients and service providers alike, across emerging technology areas such as machine learning, AI, and automation, as well as domain experts that can run complex insurance processes. Service providers must step up to provide better talent retention and training capabilities such as digital learning platforms in support of the education system and internal development programs for reskilling employees and plugging vulnerable talent gaps.
2. Smarter ways to orchestrate processes. As the global head of finance operations at a specialty insurance carrier shared, “The biggest area of improvement for my service provider is identifying and delivering improvements in offshore operations. The Ops team seems buried in service delivery, with not enough focus on how we can optimize processes.” HFS’ recent 2020 predictions blog post outlined the potential way forward to address this gap, where smart enterprises will explore a broader toolbox of process discovery, process mining, process automation, and data ingestion to help them orchestrate true end-to-end processes that bring an enterprise’s customers, employees and suppliers closer together.
3. Tangible progress on automation. Our research has shown that insurance is the most ambitious of industries in its implementation of automation technologies. While the past few years have represented a training ground for RPA, AI, machine learning, and smart analytics, clients now expect scaled-up automation initiatives that can deliver tangible operational and cost benefits to core insurance operations. The director of strategy and implementation in the Direct to Consumer division at one of the largest North American financial institutions brought up this point, stating, “My service provider needs to execute on automation and speed to market for those automations, along with better planning and execution for new service delivery.”

The Bottom Line: Innovative thinking and planning cannot come at the expense of losing sight of flexible service delivery, continuous process optimization, and a solid talent pipeline.

During this research study, HFS tracked multiple ways in which innovation is fostered for insurance service providers, such as their vision for the industry and their future roles, the role of automation in core insurance processes, and investments in future talent and technology needs. While several providers demonstrate great vision, all of this must eventually be perceptible and delivered to their insurance clients. Carriers are making crucial links between their key strategic initiatives and the role of their partners in executing against them.

The progress on innovation is perceptible, but service providers must keep an eye on the ball when it comes to execution.