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POST COVID OPERATING MODELS FOR INSURANCE

lookdeeper@exlservice.com

Jonathan PhillipsSVP and Head UK & Europe, EXL

Written by

May 11, 2020

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Governments won’t have an appetite to dig as deep into their pockets to bail out the economy if anything like this were to happen again. To this end Governments around the world are likely to be putting pressure on their industry regulators, and we can expect to see further tightening of operational resilience requirements, particularly for insurance carriers who have ‘captive’ operations in India, the Philippines, and elsewhere, which haven’t been able to switch to a ‘work from home’ stance in good time, or in an orderly fashion, to serve their customers.

The COVID19 experience and the challenges around Operational Resilience will change the market dynamic and cause an acceleration of discussions in Insurance company boardrooms about what is truly their ‘intellectual property’ and distinctive propositions that they should continue to own and run, and which end to end sections of the ‘insurance factory’ can be optimized and digitized more effectively by a 3rd party on their behalf, and run within a more operationally resilient model.

The performance of much, but not all, of the 3rd party Operational Management suppliers have shown a greater capacity to weather the storm of the COVID19 crisis, establishing a 95%+ effective work from home stance within a few working days of full ‘lockdown’.

Having successfully implemented the new WFH model EXL has already moved onto the question of ‘what happens next?’, and the answer to this question has posed three important considerations:

• A recalibration about ‘where work gets done’, this will apply to both onshore and offshore operations. The crisis has debunked the traditional view that ‘underwriters need to be at their desk in an office in the City of London or other HQ locations’. With underwriters now working remotely using video conference and other technology to effectively complete their work, the whole concept /purpose of a ‘Head Office’ will have to be re-thought. Equally for the traditional BPO providers an establishment of a new WFH ‘norm’ will enable them to reduce the cost of operations for their customers. The new norm for WFH will require a sea change in how we use technology to transform the management of staff working remotely. Performance management will move to ‘outcome based’ model, aligned to what the BPO world has already done at a macro level in moving from an FTE to an Outcome based commercial model. Maintaining staff morale and the ‘connectivity’ needed to ensure that employees still feel ‘part of their organization will become key challenges for the Insurance company and 3rd party supplier alike

• An acceleration of the digitization of the insurance factory process. Many insurers have over the last 5 years started to implement true digital capabilities but this activity has usually addressed ‘hot spots’ within the value chain, and this has left brokers, and customers with some level of ‘self-serve‘ capability, but in most instances there is still significant ‘analogue drop off’ which still needs to be transformed

The COVID19 pandemic of 2020 will without doubt change the world in many ways for all of us as individuals. For the insurance industry previous operating model theories and best practice will have to be discarded for ones with greater resilience to protect the company, its employees, shareholders, and customers alike.

POST COVID OPERATING MODELS

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• An acceleration of automation to remove reliance on humans from the ‘production and administration’ process. Again Insurers have made some progress but there remains significant opportunities to go much deeper and wider across the value chain for legacy systems and processes.

The final question for the insurance company is whether to complete the remaining digitalization and automation of their legacy systems/processes, or to ask a 3rd party like EXL to complete this on their behalf. Continuing to spend significant sums on the digitization and automation wrappers on ‘legacy systems’ is likened to putting lipstick on a pig. In EXL’s view it’s better for the insurance companies keep their ‘pig in the pen’ allowing 3rd parties to manage the pen, which allows the insurer to concentrate on new fully digital systems and processes to serve the customer of the future

To support this final question EXL is making some enhancement to its business services model:

• Providing expert consultancy services and thought leadership to clients in order to assist them in rethinking their approach to ‘post COVID19’ Operational Resilience

• Applying the ‘new norm’ of ‘work from home’ to create a new hybrid operating model which can reduce cost to our clients

• Investigating the potential to own and/or partner with clients on core systems of record, and the related IT infrastructure for ‘legacy systems’

• Considering upgrading our regulatory status in key markets in order to provide all services across the insurance value chain to our clients

• Looking for opportunities to acquire TPAs who address only one part of the value chain, and in particular those who have lagged in digitization and who are now most likely struggling to service their clients effectively, and to transform them in order to provide better service at a lower price point for our customers

For more information please contact Jonathan Phillips, SVP and Head of Geography for the UK and Europe at Jonathan.Phillips@exlservice.com

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EXL (NASDAQ: EXLS) is a leading operations management and analytics company that helps our clients build and grow sustainable businesses. By orchestrating our domain expertise, data, analytics and digital technology, we look deeper to design and manage agile, customer-centric operating models to improve global operations, drive profitability, enhance customer satisfaction, increase data-driven insights, and manage risk and compliance. Headquartered in New York, EXL has more than 32,600 professionals in locations throughout the United States, the UK, Europe, India, the Philippines, Colombia, Australia and South Africa. EXL serves multiple industries including insurance, healthcare, banking and financial services, utilities, travel, transportation and logistics, media and retail, among others.

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