The Future of the Insurance Industry
At Stonehill, we have the privilege of working across industries to help innovate and implement process improvement strategies. We are seeing increasing trends toward business-to-business partnerships in standardizing pricing structures and ensuring quality services. In the insurance industry, this translates to preferred provider networks. These have a proven track record in the auto and health insurance industries, but very little presence in other insurance sectors. This missed opportunity for many insurers is poised to radically change the insurance landscape. Preferred provider networks are transformative to the insurer’s value chain, customer experience, and bottom line. With the right tools and agile mindset, this will become a game-changer for the innovative insurer, and early adopters will enjoy a competitive advantage over their less adaptive counterparts.
Preferred Provider Network - When someone is in a car wreck, they call the insurer, not the mechanic. When someone is sick, they visit their health insurer’s preferred providers. In these scenarios, all parties benefit from the strategic alliance. Networks streamline claims processes, improve payback scenarios, and ensure quality work for the customer. That’s not the case for other insurance claims. When those same individuals sustain water damage in their homes, they google “plumber near me.” When those same individuals’ businesses sustain cyber-attacks, they google “cyber security near me.” The result is inconsistent service and more time and effort spent between the insurer and the service provider. It’s time for that to change.
Communication is Key - Policyholders in the health and auto insurance industries use preferred providers. Why? Because the auto and health insurers make sure their policyholders know to use those providers. So why don’t those policyholders do the same thing when they have other insurance claims? It’s all about communication. Insurers outside of the auto and health industry are not educating the policyholder to make sure they know to use preferred providers. Establishing the network is the first step, but the real work comes with process change and education.
Process Change Isn’t Easy (But It’s Worth It!) - It’s a lot of work to establish and implement this innovative change. Capabilities, processes, culture, behaviors, organizational structure, budgets, performance metrics, analytics, and technology all must change… and not just at the insurer but throughout the insurer’s value chain (agents, providers, vendors, etc.) For an insurer whose claims are serviced mostly out-of-network, we’re talking about a transformational change across the enterprise. It requires a long-term commitment and sponsorship from executives, creative strategic thinking, change management, and analytical rigor.
But the benefits vastly outweigh the effort. The insurer and policyholder will see claims resolved faster and to a higher standard of work. This superior customer experience makes for happier customers, which means improved retention and word-of-mouth and fewer follow-on claims. Claims will be processed more quickly with lower overhead and fewer errors because insurers and preferred providers can standardize as they work together.
For the same claims, insurers will pay less for higher quality work. This is where the strategic competitive advantage comes into play because the insurer can then pass these savings onto policyholders via lower premiums, thereby outbidding competitors.
Establishing provider networks will allow an insurer to deliver a better customer experience for a lower price, reduce a major cost, and streamline claims-processing activities. The insurance industry is beginning to embrace this idea, and the race is on to be the first firm to implement this transformational change, deliver a superior customer experience, and win in the marketplace.
The insurance landscape is changing and size is no longer its own competitive advantage. The focus now is on visionary leadership, agile operations, and innovative culture to facilitate sustained competitive advantages.