Building vs. buying: What’s your path to digital excellence?
To increase customer retention, insurers need to focus more on their customers' holistic digital experience.
Creating a seamless digital experience for insurance customers is a forever goal.
Many P&C insurers specifically are placing bets on technology investments intended to meaningfully improve customer experience (CX) and enable internal efficiencies.
The challenges are clear: Customers expect the ability to interact digitally, and they dislike friction. At the same time, P&C employees are strained by the need to do more with less, thanks to the “great resignation” and dwindling profit margins.
Investing in tech or digital solutions can be a Herculean effort. The first decision: Should P&C insurers invest in building these capabilities themselves, or look outside their walls to buy the technology?
Why invest? One (digital) strike and you’re out.
Industry research indicates it can be seven to nine times more expensive to acquire new customers in insurance than other industries.
But acquiring them is only part of the challenge. Many customers leave their insurance company after filing a claim. In fact, an Accenture white paper said that 41% of policyholders who submit a claim are likely to switch insurance companies within a year.
In a Lexis Nexis Future of Claims Study, nearly four out of five millennials and two out of three GenX-ers said they are comfortable with automated and digital claim processes. Insurers have long been thinking about how to update their technology to meet consumers where they are today, but the pandemic accelerated customer expectations. The pressure is on carriers to get it right.
To increase customer retention, insurers need to focus more on their customers’ holistic digital experience, including the claims payments process.
Pros and cons
Technology is essential to success regardless of whether your goal is reducing the time to pay out claims, streamlining processes, identifying fraud, increasing customer loyalty or any combination therein. P&C companies have no shortage of options to advance their digital capabilities, from talented teams on staff to outside consultants and software providers.
Each carrier is unique and must consider its individual resource and budget constraints. The pros and cons of each path vary, so it’s important first align on the end goal. Then, consider your options as you make your digital investment decision.
Here are some of the considerations when developing a homegrown solution.
Pros: The chief benefit of developing technology internally is being able to customize the tool to your customer, your company and your team’s precise needs. Developing technology internally also allows employees to have ownership over the process and choices, which can make it easier to design and execute new solutions and create efficiencies. After all, employees are one of the biggest stakeholders of digital transformation.
Cost is also a factor, as internal resources can be redeployed or refocused without as much out-of-pocket, up front cash investment.
Cons: When considering costs of going it alone, factor in opportunity cost: What is your internal team deprioritizing or back-burner-ing to work on this initiative? How long will it take? The time between project launch and completion is likely much longer for those that choose to build in-house, even for insurers with ample resources and a sense of urgency.
Additionally, ongoing maintenance, upgrades and long-term scalability are often overlooked when building technology in-house. These factors can be costly and should be carefully evaluated when considering the total cost of ownership of an in-house development versus an outsourced product.
Finally, consider the skillset of your team. While carriers may have resources, many projects require specific expertise and knowledge that would be best handled by a highly skilled and dedicated third party.
Here are some of the considerations when hiring tech consultants or buying digital tools.
Pros: Speed and expertise are two of the most notable benefits of buying an off-the-shelf solution or working with a technology provider to develop new capabilities. Most tech providers have a time-tested process for implementation and customer service resources ready to troubleshoot and provide support. That means the buying path often can get you to a better customer experience or investment return (ROI) faster than going it alone.
Outsourcing can also help you catch up to competition and respond faster to regulatory changes. Ongoing maintenance and scalability is less of a concern, especially when buying a “software as a service” (SaaS) product.
Cons: Managing a third-party can be challenging. It’s essential to find the right partner who can meet your customer, service and process expectations.
When evaluating providers, determine whether the product can be customized. Also, find out if the provider has both technology experts and industry expertise, to ensure a smoother, faster and more cost efficient integration and implementation. Finally, make sure the technology can connect to your current infrastructure; it’s vital that the data and processes will be able to speak to each other.
Today, the availability of high quality, off-the-shelf products and the rise in flexible low-code platforms has made outsourcing a more viable and desirable option than ever before.
Unless you are building something truly unique that provides a competitive advantage to your business — and it’s not available for purchase elsewhere — carriers often overpay to build in-house when considering the opportunity cost and long-term total cost of ownership.
Regardless of the path you take, it’s important to start creating a roadmap to address your customers’ digital needs.
Matt Walsh (mwalsh@metromile.com) is director at Metromile Enterprise. These opinions are the author’s own.
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