Biggest Challenges Facing the Insurance Industry and How to Overcome Them?

The insurance industry is about to be beset with challenges in the coming years. Emerging from the shadows of the pandemic, the industry must make innovation, speed, and agility the cornerstone of its strategy. The challenges include making up for the shortage of resources, meeting the changing compliance needs, developing highly competitive products, cutting down on spiraling costs, and more. Through this article, let us discuss some of the challenges that are likely to be faced by the industry -

1. Resource Crunch

   One of the major challenges that insurers will be facing this year is a resource crunch. In a niche sector like insurance, attrition has taken its toll on the industry during the pandemic.

   This problem is further compounded by the fact that a majority of the staff in the industry are of median age. Finding the right replacement will be an uphill task. Additionally, to attract fresh talent, the insurance providers will have to overcome challenges like overwork, lack of incentives, growth opportunities, and inadequate pay.

   Solution

   The problem of resource shortage can be addressed in two ways. At in-house levels, insurance companies must chalk out improved ways to promote reskilling and upskilling. However, there is a downside to it. The promotion methods need to be continuous as the average tenure of newcomers in this sector is not more than 2 years. This makes training a costly and less productive alternative.

   The other way to deal with this problem is to outsource back-office tasks to insurance BPO providers. Third-party partners will have adequate resources available at any time of the year to assist insurance providers to meet their fluctuating needs.

2. Rising Costs

   In the post-pandemic age, inflation is a cause of concern for the industry. Carriers will have to go the extra mile to keep costs under control. At the same time, they will have to remain competitive to stay afloat. Two of the primary cost drivers in the industry are compliance with regulatory requirements and products marketing. For instance, to stay ahead, insurance companies need to come up with more products and therefore expend more. Cutting down on product lines will lead to diminishing margins.

   Solution

   Insurance companies can keep costs under control in two ways. A proven way to save costs is by having a centralized location for back-office work. This location can be anywhere. The other available option is to keep back-office work decentralized across various locations based on time zone advantage. Either way, it will help companies cut down on operational expenses of maintaining an establishment.

3. Legacy Systems

   Digitization has taken the insurance industry by storm. This is primarily because digitization has ushered in ways by which insurers can reduce their operational expenses. They can get this done while simultaneously maintaining compliance with regulatory requirements and enhancing customer service. However, to migrate to a digitized platform, it is important to keep workflows and processes optimized and up-to-date.

   However, the challenge lies with outdated systems. Most insurance companies run their operations on legacy systems. These systems are fragmented which makes streamlining a challenging task. The over-reliance on this system makes migration to the digital platform even more difficult. As a result, insurance companies find themselves stuck and unable to make the most of the economies of scale offered by digitization.

   Solution

   The solution lies in business process outsourcing. The three critical requirements for modernization are talent acquisition, access to a remote workforce, and cloud computing. Insurance BPO providers have surged ahead of insurance carriers in adopting these models for process execution. Insurance carriers tied down by legacy systems can piggy ride on the success of insurance BPOs to make the most of digitization. This comes with the dual advantage of digitization and cost-cutting.

The Conclusion

The insurance industry can overcome these challenges by partnering with an able back-office service provider. Good insurance BPO providers will bring their experience to the fore to deal with these challenges. The partnership will help carriers meet the demanding and ever-changing efficiency levels at half the cost. However, the carriers need to be careful about choosing a partner. Only an insurance BPO company with a blend of experience, expertise, and technology can bring about the value additions needed to meet modern-day challenges.

Contact us to learn more about how effective partnerships could overcome the insurance industry challenges.