Chips. Who knew they could be such disruptors?<\/p>\n\n\n\n
As COVID impacted supply lines throughout the world, it was the manufacturing and supply of computer chips that seemed to cause the most disruption. Everything from PlayStations to pickup trucks were placed on wait lists \u2014 parked in anticipation of necessary microprocessors and controller boards. The fallout is pushing some industries to their limits. This one supply chain issue can be linked to a host of consumer disruptions.<\/p>\n\n\n\n
Take auto rental as an example. At the onset of COVID, rental companies decided to thin their fleets in an attempt to ride out the travel-sparse months with low auto rental demand. At the same time, computer chips weren\u2019t arriving at auto manufacturers in time to keep up with new car demand. New car lots emptied out. Used car lots emptied out. Used car values skyrocketed (+40% in 2021).<\/p>\n\n\n\n
Now travel picked up. Rental car companies can\u2019t meet demand. They can\u2019t expand their fleets with new cars. Many are scrambling to find acceptable used cars. No matter what they do, they can\u2019t shift gears fast enough to meet the market. They are forced to raise their prices to all-time highs.[i]<\/a> The result is that they are sending frustrated customers straight to Uber, Lyft and Turo.<\/p>\n\n\n\n Choosing to wait on technology transformation in insurance can be just as disruptive to an industry as not receiving timely technology in manufacturing. When circumstances or people command enough market attention, insurers need to rapidly adapt and let market demand pull them into the future. <\/p>\n\n\n\n Recently, Majesco released a jointly-authored thought-leadership paper with Deloitte entitled, Insurance Billing and Payments: From Back Office Calculators to Channel Growth Accelerators<\/a>. The paper examines how and why insurer\u2019s billing and payments operating model is changing \u2014 as seen through the eyes of insurance executives at a recent round table.<\/p>\n\n\n\n In our last blog<\/a> on billing, we established the case for billing transformation. Using current data and interviews with engaged insurance executives, we discussed how next gen transactions and today\u2019s customer service is increasingly difficult without next-gen, digital billing. Difficult service will soon become impossible service as new products and value-added services require new billing models. These models are not compatible with yesterday\u2019s billing systems and patchwork solutions are not feasible.<\/p>\n\n\n\n \u201cHow agents and insureds are dealing with every other type of bill or payment is the last experience that they think about. Insurance legacy systems are not the way they want to deal with insurance.\u201d <\/em><\/p>Roundtable Participant<\/em><\/cite><\/blockquote><\/figure>\n\n\n\n The convergence of different forces is driving new customer behaviors and creating new risks. At the same time, new expectations for the interactions between customers and companies are rising in communications, education\/researching, transactions, problem resolution, and buying. In Majesco\u2019s customer research, we found strong interest in using new, innovative methods for pricing, billing and payments for insurance across a range of methods as well as the demand for value-added services. These new products and services demand innovative new billing and payment options. <\/em><\/p>\n\n\n\n The result of these changes is creating a series of \u201cfrom \u2013 to\u201d shifts that have huge implications for billing and payments. We\u2019ve identified six of the shifts as those that need a quick response in order to align billing models with customer trends.<\/p>\n\n\n\n Digital data and advanced analytics now allow insurers to break apart the \u201clump\u201d of contents coverage in a standard property policy to focus coverage on a limited set of specific items of highest importance or value to the customer.<\/p>\n\n\n\n Similar to single item coverage, digital data, advanced analytics and mobile technology now let insurers break apart the standard lengths of insurance policies into flexible, non-contiguous \u201cchunks\u201d of coverage whenever they are used, as determined by the customer, not the company. Parametric insurance uses defined parameters that trigger different elements including on\/off coverage and payout, such as insurance for Uber or Airbnb coverages for the Sharing Economy. Parametric insurance makes a mess of traditional billing systems. (For an example, read the introduction to our last billing blog<\/a>.)<\/p>\n\n\n\n Usage-based insurance (UBI) requires billing to be more flexible and transparent based on mileage driven or timeframe of use. UBI includes the capture of real-time data to calculate the price.<\/p>\n\n\n\n Platform companies like Uber, Lyft, VRBO, Airbnb and Turo have liberated people\u2019s assets from the confines of \u2018personal use only\u2019 by connecting them with people who want to use them temporarily and are willing to pay to do so. Since many personal assets like cars, homes or rooms within homes can include significant periods of non-usage that still incur costs for their owners, these platforms empower millions of asset owners to earn money at a scale that was never possible before.<\/p>\n\n\n\n Insurers have decades of historical data on losses, so it is well known how often different perils occur and how much monetary damage they incur. The problem is that this knowledge is only created after the losses have occurred. Sensors and IoT technology are lifting the veil on these events as they\u2019re happening or even before they happen, making it increasingly possible to prevent losses from occurring in the first place, or limiting the damage they cause.<\/p>\n\n\n\n Subscription billing has grown very popular across many industries, but insurance is just now beginning to catch up. Subscription types require more than just calendarized transactions. Subscription capabilities include frequency changes, free trial periods, and the application of promotion codes. Billing\u2019s subscription capabilities should also extend to freemium or premium services \u2014 mimicking popular app features, where services could be supplemented by ads. <\/p>\n\n\n\n Insurers have traditionally shied away from seasonal insurance products and those that you can turn on and off \u2014 likely because of the loss of consistent income and the possibility that once the product is turned off, it may not be turned back on again. The consumer, however, might rather pay for the seasons in which they are using the insured property. <\/p>\n\n\n\n Ultimately, what is required is that billing and payment solutions must be built to adapt and flex as the market, product, services and customer expectations continue to shift. Insurers need the flexibility to deal with anything new that might be thrown at them, enabling agility, innovation, and speed. <\/p>\n\n\n\n \u201cThe big challenge is keeping up with the customer because they are groomed by forces outside of insurance. They pay online. They order online. They pay with credit card, Venmo, PayPal and even Bitcoin.\u201d <\/em><\/p>Roundtable Participant<\/em><\/cite><\/blockquote><\/figure>\n\n\n\n Most carriers are primed for growth as the economy rebounds, with firms bullish about top and bottom-line gains fueled by greater technology investments. According to a 2021 survey of top executives by the Deloitte Institute for Financial Services, most surveyed insurers have pivoted to a post-pandemic growth strategy, often doubling down on technology investments that allowed them to engage with customers to drive further efficiencies and deliver long term business model upgrades. Given the need to digitize and virtualize their operations overnight, 96% of firms are accelerating major digitization and platform initiatives, intending to enhance efficiencies and improve customer experiences.4<\/sup> <\/em><\/p>\n\n\n\n While recognizing that delivering near and mid-term ROI is a key lens by which firms need to develop and execute a sustainable technology vision, it is critical that technology executives keep two key long-term trends in mind:<\/p>\n\n\n\n \u201cWith today\u2019s technology it shouldn\u2019t be a moonshot to be able to know who the customer is, what products they have, and what information will be most valuable to anticipate and help them. Data and analytics can help them digitally and predict and meet those needs.\u201d – Roundtable Participant<\/em><\/p>\n\n\n\n In addition to collaborating with business and operations executives to re-design operating models, executives need to design their technology vision based on a few key considerations:<\/p>\n\n\n\n The technology stack that supports billing includes engagement, integration, core and data layers. Innovation pace at each of these layers is different and so are the time horizons to capture value. Engagement and data \/ insight capabilities have the power to deliver significant value while core platforms are more foundational investments. Build vs. buy decisions should be dictated by speed to market, speed to value and sustainability criteria.o.com | info@majesco.com 9<\/sup><\/p>\n\n\n\n Insurers need to consider much more than just re-architecting for a modern solution. Instead, they must shift to an enterprise model with modules and services, a configurable chassis and a robust ecosystem of partners that provide new capabilities, data and services that together can help insurers rapidly adapt to changing market demands. <\/p>\n\n\n\n Fully digital insurers can react to insurance trends<\/a> and establish a presence through multiple sales channels, and storefronts. To get a better picture of the importance of establishing an API platform in the cloud, read last week\u2019s blog<\/a>.<\/p>\n\n\n\n In addition to regulators, external stakeholders, including the customer, as well as distribution and servicing partnerships, will increasingly need data access. Internal access to data and insights is more critical in the near-term while expectations of external stakeholders on access will increase over time.<\/p>\n\n\n\n The scale and complexity of billing modernizations requires very detailed planning and risk management across operations and technology. This is usually further complicated by the complex legacy architecture landscape involved. A few considerations include:<\/p>\n\n\n\n An enterprise billing chassis provides the configurability and flexibility needed to respond to the requirements of innovative new products, services, and payment methods and it answers the need for customer service capabilities that will pay off in customer engagement, loyalty and retention. A payment gateway can provide flexibility through security within its domain, but payment integration outside the gateway. <\/p>\n\n\n\n \u201cBilling has been underinvested for a long time. The entire paradigm of what we need to do in the future, how we need to shape all the investments that need to be done versus playing small ball must change. We need to show the bigger picture of what\u2019s at stake.\u201d <\/em><\/p>Roundtable Participant<\/em><\/cite><\/blockquote><\/figure>\n\n\n\n Caring for the customer experience is key. It is becoming clear that the product shifts required to meet customer demands will mandate the long-overdue modernization of billing and payments. Now is the time to act to ensure that billing technologies won\u2019t be the disrupter of insurance experiences and insurance profitability. <\/p>\n\n\n\n To learn more about the future of insurance billing and payments and read more executive quotes from the Deloitte\/Majesco round-table discussion, be sure to read the Majesco\/Deloitte report, Insurance Billing and Payments: From Back Office Calculators to Channel Growth Accelerators<\/a>.<\/p>\n\n\n\n Today\u2019s blog is co-authored by Denise Garth, Chief Strategy Officer at Majesco and Ajay Radhakrishnan, Managing Director at Deloitte Insurance.<\/em><\/p>\n\n\n\n [i]<\/a> Blanco, Sebastien, Car Rental Average Daily Price Up $35 Just Since December 2019<\/a>, Car and Driver, January 2022<\/p>\n","protected":false},"excerpt":{"rendered":" Chips. Who knew they could be such disruptors? As COVID impacted supply lines throughout the world, it was the manufacturing and supply of computer chips that seemed to cause the most disruption. Everything from PlayStations to pickup trucks were placed on wait lists \u2014 parked in anticipation of necessary microprocessors and controller boards. The fallout…<\/p>\nAre insurers on the cusp of frustrating customers as well?<\/strong><\/h2>\n\n\n\n
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Meeting the Shifts with a Tech Vision that Delivers ROI<\/strong><\/h2>\n\n\n\n
<\/strong>\u201cIf you take the technology and put it into the old operating model, it will underperform what you get from the investment, operationally and strategically.\u201d <\/em><\/p>Roundtable Participant<\/em><\/cite><\/blockquote><\/figure>\n\n\n\n\n
Understand where ROI is generated and the horizon for capturing it. <\/strong><\/h2>\n\n\n\n
Pursue a holistic, enterprise model with rapidly expanding capabilities for billing.<\/strong><\/h2>\n\n\n\n
Impose \u201cdigital first\u201d through APIs.<\/strong><\/h2>\n\n\n\n
Embrace the need for pervasive data access and insights for both internal and external stakeholders. <\/strong><\/h2>\n\n\n\n
Understand and accept execution complexity.<\/strong><\/h2>\n\n\n\n
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Develop an ecosystem of partners.<\/strong><\/h2>\n\n\n\n
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