36 AUGUST 2016 Claims Magazine PropertyCasualty360.com
the emergence of the autonomous car,
but they do provide data points and
trends that insurers should be monitoring and leveraging in pricing models for
future autonomous car insurance pricing.
Keeping in mind that this pricing evolution will be a step-by-step process, but by
monitoring the emerging frequency and
severity trends associated with emerging safety technology, insurers should be
able to model future pricing much better
than starting from scratch when the new
Strategic scenario planning
How the insurance market, product,
pricing and regulations for autonomous
auto insurance will change and develop
is up in the air right now. Additionally,
autonomous auto efficacy and adoption
is still unknown. With all this uncertainty,
insurers should adopt a scenario-based
strategy process for responding to the
market. Leveraging scenarios based on
different market outcomes, insurers can
have operational, product and IT strategies
in place, ready to execute based upon
market characteristics as they develop.
Flexible product environment
In standard markets that are not prone
to huge shifts, insurers find getting new
products to market quickly and effectively a major hurdle to their business
success. This hurdle is magnified in a
redefined and shifting market. Insurers
need to invest in systems that will enable
them to get new products institutionalized quickly. This doesn’t mean just filing
with insurance regulators, but being able
to update underwriting, rating, quoting,
front-office systems, and policy administration systems quickly and easily.
Most insurers don’t have the time or
the investment appetite to do wholescale
replacement of systems. Instead, a wrap
and renew process, where a service layer that supports users but separates the
underlying legacy systems, will work in
creating a responsive environment, in essence a bi-modal IT environment.
Flexible operational environment
Getting a new product filed is one thing.
Selling and servicing it is a completely
different issue. Insurers need to be able to
provide user platforms (direct sales, captive and independent agency sales, as well
as service) that will enable them to sell
and service the client without disruption
as products, underwriting, and processing changes. This includes pushing information to the agents and customer service representatives on how to position
new products effectively without taking
them away from their work to train them
every time a change comes about.
An insurer should have two goals when
preparing for the new auto market: mini-
mize the disruption for the user on the
sales and service side, and automate pro-
cesses as much as possible. With the ex-
pected lower premium base and uncertain
results, processing expenses need to be
kept to a minimum with straight through
processing as the norm wherever possible.
This may be the most important point.
Insurers will need analytics to help them
drive their strategy and reaction to the market as it develops. Winners in the upheaval
produced by autonomous cars will not be
the first insurers with a tailored product to
market, but the insurers able to monitor
the development of this reformed market
and respond quickly and effectively to how
it develops. This means tying analytics directly to underwriting and claims operations, watching how loss and expense ratios
develop, and being able to change the go to
market strategy immediately.
This could entail changing pricing, underwriting guidelines, claims processes,
market segmentation, and more as results
develop. Implementing actionable analytics will provide insurers with insight into
how the business develops and the ability
to pinpoint where results are not meeting
expectations, highlighting where changes
needs to be made. Analytics should be
tied very tightly to scenario-based planning, leveraging established plans prepared before the market shifts, instead of
having to respond on the fly.
To paraphrase Louis Pasteur, fortune
favors the prepared. There is no doubt
there will be upheaval in the auto insurance market. How much change and how
intense it will be remains to be seen. Being
early to the market with prepared products will always give an insurer first mover
advantage. However, the ultimate winners
in the marketplace will be the insurers
that plan strategically and have nimble, efficient operations that can respond quickly and effectively to market changes.
Tom King is the senior director and industry
principal of insurance at Pegasystems
( www.pega.com). King has more than 25
years of experience in the insurance industry,
and much of his career has been dedicated
to helping insurers leverage technology in
conjunction with defining business strategy.
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How the insurance
market, product pricing
and regulations for
insurance will change
and develop is up in
the air right now.