Original article appeared in PiMA Insights June 2022
The following is part of a series on affinity distribution and the future of insurance through the lens of PIMA Company Members who are seeking innovative ways to address industry challenges. Discover their visions for the future:
FINEOS launched in 1993 with a technology suite built specifically for the life insurance market to offer a single view of consumers across channels. With greater visibility into the customer journey, the Dublin-based software development company hoped to equip providers with the capacity to improve customer service and drive significant value with each interaction.
As a leader in the industry for nearly 30 years, FINEOS has continued to evolve and reinvent its product offerings. Today, its focus is the development of customer-centric core systems for the life, accident, and health insurance sectors, as well as the affinity market. This area is of particular interest, as legacy systems often service organizations instead of employees or customers. FINEOS ultimately focuses on helping employees help their customers through technology solutions.
The Future of Affinity Distribution
With the industry undergoing such profound change, the future of insurance can seem unclear. According to Chuck Johnston, CMO of FINEOS, one thing is certain: Customer expectations have grown more than ever. An increasing number of people want the customer experiences offered by insurers to be similar to the experiences of using Amazon, Netflix, and other technology platforms. Fortunately, opportunities for insurers to participate in digital transformation efforts are emerging rapidly, allowing insurers to better respond to these consumer preferences.
Johnston explains that much of the insurance industry-specific digital transformation has been supported by core system modernizations. For companies with multilayer business models across the sales service continuum, in-context connectivity within these systems is a critical issue. Johnston explains that companies can better evaluate customer wants and needs with the right contextual information provided by technologies such as machine learning and modern digital engagement tools. With these technologies, companies can also offer customer experiences that positively influence the purchases of given products or services.
Beyond that, the value chain in the insurance industry is shifting, with more emphasis on intermediary services organizations, such as benefits administrators through digital channels. Yet, a number of providers still operate using older legacy methods and systems, explains Johnston. With other players (i.e., eligibility firms, insurtech companies, etc.) in the mix innovating within the insurance sector — and the affinity market as a whole — it’s important for distributors and insurers to update their methods and technologies. This is especially critical because organizations and consumers have more options for the products they want and the kind of customer service best suited to their specific needs.
The question then is, how do you build a new value chain? As an insurer, how do you provide differentiated value when connectivity and data transformation have become ubiquitous and low-cost? With so many options, it’s vital that insurers explore opportunities to become competitive and visibly differentiate themselves to reduce loss ratios, better define risks, and increase market shares.
Technology can help build a value chain for tomorrow. We’re operating in the analytics age, after all. Data is readily available to help providers inform underwriting models, recognize risk factors, accelerate claims processes, and so on. Johnston believes technology does more than just plumbing: The right technology can enable new products and frictionless service models and ultimately reduce the risk of managing risk.
The Next Generation of Insurance Industry Leaders Can Push the Sector Forward
As the next generation of insurance industry leaders moves into the affinity market, Johnston offers a few suggestions. Chief among them involves a company’s current portfolio in relation to its tech stack. It’s often best to let business drive technology investments rather than the other way around. Consumers want new systems for new products, which calls for an incremental approach instead of a large-scale digital transformation. End-to-end digital transformation will ultimately be required, but a phased approach to core transformation is critical for any business beyond the earliest greenfield stage.
Building business relationships should also be a focus, explains Johnston. People still worry about the additional expenses that tech partners bring to channel service costs. Insurers are getting the brunt of the cost pressures, so it is important to use technology to reduce total end-to-end costs, not increase them. Building business relationships and developing technologies that reduce intermediaries, such as the recent efforts to create more data transaction standards, will be key to overcoming these challenges and getting everyone on the same page, particularly around digital innovations that could improve the value chain.
As far as technology goes, Johnston believes that machine learning and other digital solutions can help insurers improve speeds, reduce costs, and remain relevant. Although not all business models have yet caught up, now is the best time to launch such initiatives. In theory, you could recreate insurers digitally with the right core systems, AI-enabled ecosystems, and blockchains to manage processes with minimal investments in people, warns Johnson. Alternatives are available for any company to get into that kind of value chain and offer micro-services that would be of interest to consumers — and at competitive prices.
It’s more vital than ever for companies to accurately assess what they need before launching digital transformation initiatives. Ultimately, Johnston suggests giving consumers what they want, uncomplicating the value chain, and making strategic technology investments to secure a place in the affinity market of tomorrow.