It seems like everyone’s trying to find ways to reduce expenses these days, and the insurance industry is no different. Inflation, rising costs of raw materials, and disruption in supply chains have led to a higher cost of doing business in 2023. Is it possible for insurance companies to thrive in this economic environment? Just as in the case of individual households, the answer goes back to managing the expenses of day-to-day operations. Here are six ways to reduce operating costs in your company.
1. Optimize Operations to Lower Overhead
One of the best ways to reduce costs is to conduct a self-audit of your current operations. According to McKinsey & Company’s benchmarking report, operations, combined with IT, account for almost half of an insurer’s costs overall. Optimizing your operations can massively cut costs by improving efficiency.
Begin by checking to see where policy issuance, servicing, and claims management can be streamlined. This can reduce processing time and improve customer service. Consider having employees serve as specialists in certain areas and keeping management layers to a minimum.
Since IT is such a large part of operations, find ways to make it more cost-efficient. Consider outsourcing IT support or using automation technology to reduce operations expenses.
2. Outsource Key Services
IT isn’t the only department you can delegate outside the office. Other key services to consider outsourcing include accounting and payments, underwriting, data processing, and claims handling. Even adjudication and fraud investigations can be outsourced.
Delaying these time-consuming tasks to companies who specialize in them removes pressure on the insurer. As a result, more time and effort can go towards improving in-office operations and improving the customer experience.
3. Automate What You Don’t Outsource
If you don’t outsource underwriting, consider automating it with in-house data analytics software. That frees up underwriters to spend time on problem-solving and other more complex tasks.
Payments can work the same way. Automating payments ensures they are consistent and timely, improving user experience and leading to better retention. It can also reduce the workload of the accounting department, customer service, and collections teams.
Payment automation removes the need to create and print invoices, bring them to the post office, process checks, do manual reconciliation, and more. These departments are now freed up to improve the customer experience or do other projects.
Filing claims can be automated, too. There are First Notice of Loss (FNOL) forms that policyholders can fill out online, and payments can be made digitally. There’s also the option of automated data collection and even fraud detection. Claims can take a lot of time in person or over the phone. Automation helps move the process along much more efficiently.
4. Reduce Costs in Agent Onboarding
In almost any industry, human resources are the greatest operating expense to the company. In the insurance industry, that includes the time and costs associated with agent onboarding.
The onboarding, licensing, and appointing can take plenty of time and resources, and then there’s the added risk of business loss and failing to comply with constantly changing regulations.
To reduce the costs of the onboarding process, it’s worth checking into what can be automated through technology. Two examples given by Aite-Novarica in its 2022 report include switching to automated agent contracting and using E-signature technology.
5. Streamline Management & Compliance
Once an agent has been onboarded, an insurer can again use technology to create agent portals. These can be used to help manage appointments, send reminders, track licensing, and more.
What would otherwise take staff time and resources can now be streamlined and automated.
6. Make Good Use of Social Media
Connecting with potential clients doesn’t have to be costly. Even American Family Insurance and Geico are on Facebook. Agencies of all sizes and networks utilize Instagram, YouTube, LinkedIn, Twitter, and other social media platforms to get their name out.
Although there are options for paid ads, these social networking platforms are generally free to use. If your agency already has a presence on these sites, find ways to use them to their fullest potential. Creating consistent video content and using the events section to promote an open house are just a couple of ideas.
Facebook even has forms that can be used to offer insurance quotes online. Think outside the box when it comes to social media. These platforms have a lot more uses than first meet the eye.
Closing Thoughts
Although it may seem as though you’re doing everything possible to run a lean operation, there’s always another way to streamline processes, reduce expenses, or get the word out at little to no expense. The latest technology is helping with all three of these — it’s just a matter of assessing the current situation, doing some research, and implementing a few new strategies.