Articles - Cost reduction is the new black

Everywhere we turn, we are getting pounded with negative news; Stock markets are falling, inflation is rising, and mortgage rates are increasing. The future looks increasingly gloomy, and as public confidence falls, consumers are less likely to spend money on things they deem unnecessary. The insurance industry is a sector which is particularly vulnerable to public sentiment, as consumers find it an easy option to drop or decrease their insurance cover when the pressure on their monthly budget grows too high.

 By Tom Murray, Head of Product Strategy, LifePlus Solutions at Majesco

 Getting them to focus on distant financial risk while battling a present one isn’t easy. As for investing for their long-term future, this can appear to be a luxury that is no longer affordable.

 The onus is on life insurers to prove that insurance products are both necessary for customers and are an excellent way to spend their diminishing disposable income. To do so, insurers need to cut their own costs and perform at a higher level of efficiency. Those of us old enough to remember previous downturns will be familiar with the focus being on cost-cutting and efficiency measures; for younger employees in the insurance industry, as in many other sectors, this may come as a new experience.

 The tools available to management to streamline their operations are much better now. Insurers that have adopted digital platforms have much more information available about both their customers and the operation of their own businesses, how the company engages with the client and where the bottlenecks are easily monitored and will provide a deeper insight into the company’s performance.

 The use of technology also allows insurers to transfer much of the routine work to the customer in the form of self-service tools. Even simple things like changing addresses can be handled through digital portals, reducing the need for staff to do such mundane work and giving the customer the ability to carry out the process quickly and at a time that suits them rather than the company.

 Making better use of this information will give an insurer the edge when it comes to streamlining their business and focusing on their strategic objectives. Senior management can gauge how they are doing against their key performance indicators and adapt earlier to meet those targets. Digital platforms allow insurers to drive this rapid response to issues, ensuring their processes are optimized to deliver to the customer efficiently and effectively.

 Staffing is a crucial cost for any business, and digital platforms allow many ways to automate repetitive processes, reducing costs and increasing efficiency. Cloud-based solutions enable the delivery of information and services to customers 24x7 at a fraction of the cost that traditional systems would require.

 They also allow staff to be recruited from a much broader base, as digital insurance platforms support remote working far better than before. Insurers who still require onsite in-office staffing to deliver their products and services carry a huge overhead, which ultimately will be passed on to the consumer. In these straightened times, this may be a luxury that insurers cannot afford, leaving them bloated and expensive compared to their more nimble digital competitors. Difficulties in recruitment in the post-pandemic era are cropping up right across the business world, and the ability to recruit from a broader base and facilitate a more lifestyle-friendly remote-working environment can be key to winning the battle for experienced employees.

 As is often the case, the response required to the current economic downturn is counter-intuitive for businesses. Insurers who have not previously moved to digital solutions to support their business must now revisit their strategy. Without the benefits of efficiency that come from operating a digital platform, they will struggle to control their costs and compete in this new environment. Ironically, their best approach to cost control will be to invest money in the technologies that can help them streamline their business and automate those areas that deliver the best returns.

 That investment will allow the insurer to monitor their processes and streamline them to cut out costs and deliver better value to the consumer. It will be the only way to remain competitive in a world where the business environment looks set to be difficult for a considerable time to come.

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