How can insurers plan for the next “big storm”?
Property and casualty (P&C) insurers are at a tipping point, as escalating claims inflation threatens to erode profitability. Inflationary pressures, global supply chain disruptions, and increasingly severe weather events are wreaking havoc on already razor-thin margins.
Insurers around the world are facing similar challenges, The Bank of England stated in October 2022, "We expect high claims inflation to affect every general insurance firm, although the nature of the impact will vary depending upon the firm’s business model and risk profile." High inflation alone led to an increase in P&C claims of 5-7.5% across five key markets, including the United States, in 2022, according to Swiss Re .
When insurance companies fail to accurately forecast claims and suffer financial losses as a result, it becomes a wake-up call to act. But it shouldn’t be this way. Keep reading to find out how you can more accurately forecast claims to protect your combined operating ratio and overall profitability
Quicky pivot your plans to stay competitive
Macroeconomic pressures are always a disruptive part of the business landscape, and they’re not going to disappear. The current factors at play won’t always be the same; they’ll evolve and so must your approach to forecasting change. Being caught off guard repeatedly is not an option if you want to stay financially stable in an increasingly unstable world.
The fast-moving insurance landscape makes traditional forecasting and planning methods inadequate today. Insurers pull and wrangle data from multiple systems and potentially hundreds of spreadsheets, resulting in processes that are error-prone, unreliable, and put data privacy and security at risk.
Furthermore, forecasting in spreadsheets doesn’t provide the accuracy and agility needed to respond to shifting market conditions. The result is inaccurate forecasts, inadequate reserves, and surprising claims volume and costs. Insurers need greater visibility and agility in their finance and workforce planning to improve how they respond to change.
With agile planning, you can quickly respond to market changes and emerging risks, allowing you to make timely adjustments to your business plans.
In addition to greater flexibility, agile planning enables better cross-functional collaboration across your organization with real-time, secure access to accurate data. This allows teams in underwriting, customer service, and claims to better assess risk profiles, process claims more efficiently, and deliver a seamless experience to your customers.
Are you equipped for agility?
The ability to consider different scenarios combined with accurate claims forecasting helps you make timely and informed decisions to protect margins and minimize risk. To benchmark your organization’s ability to respond, here are three questions you need to ask:
1. Do I have access to integrate data?
If the answer is no, then it will be impossible to surface strategic insights quickly.
Relying on disconnected systems and spreadsheets is not sustainable. Forward-thinking insurers recognize this and agree that a unified planning platform is a better approach. After all, strategic business decisions depend on having access to accurate data from all your disparate systems.
With advanced planning platforms like Anaplan, you can integrate financial, operational, and market data from a variety of sources into one centralized platform, ensuring decisions are made using accurate information. With this integrated view, you can more accurately assess risk exposures, identify trends, and anticipate potential claims surges.
2. Can I dynamically model scenarios to prepare for potential change?
If the answer is no, you’re walking blindly into scenarios that could leave you exposed to more risk.
It’s time to equip your teams with the right planning platform to quickly gauge the impact of different scenarios on your bottom line. With powerful, multi-dimensional modeling capability at hand, you can assess the impact of changes and determine when to take corrective action to avoid disruption and loss.
For instance, connected planning platforms like Anaplan help you:
- Use multi-scenario modeling of severe weather events to assess the impact of claims frequency and volume, allowing you to calculate the appropriate reserves amount and level of staffing to support incoming claims.
- Overlay claims inflation patterns with historic and projected economic markers to build more accurate cost of claims.
- Model the impact of sociopolitical events on repairs and human capital, enabling you to take remedial action and ensure dynamic pricing takes into account claims cost fluctuations.
By identifying potential issues early, you can not only determine the impact across the entire business but also proactively address them to stay ahead.
3. Am I confident that my workforce can meet customer and business needs during claim surges?
Research shows dissatisfaction with the claims experience is a key reason customers switch insurers. In fact, 30% of dissatisfied claimants said they had switched carriers in the past two years, and another 47% said they were considering doing so, according to a report from Accenture.
Furthermore, overwhelmed call centers that can't handle call volumes are also likely to leave the door open for fraudulent claims that get missed in all the noise.
Understaffing also increases unplanned expenditures on agencies and overtime for call center staff, reducing your margins. Overstaffing is not ideal either as you are incurring salary costs with no business impact. But how do you know when and how much you need to ramp up or ramp down your staffing levels?
With advanced planning solutions like Anaplan, you can take the guesswork out of workforce planning. Plan at an intra-day level and increase SLA (Service Level Agreement) and NPS through rightsizing skills and capacity. Better predict claim surges by analyzing trends across transactional volumes over time to forecast required agent capacity and skill levels. Minimize the risk of being under (or over) staffed again.
Before implementing the Anaplan platform, RSA Group had a tedious spreadsheet-based, nine-month planning cycle riddled with data quality issues. Their situation was further compounded by siloed, functional fragmentation across the company. As a result, the finance team was spending a significant amount of time cleansing data rather than analyzing it to provide insight to key stakeholders throughout the business.
With Anaplan, RSA Group reduced its financial planning process from nine months to five months. The workforce planning team also experienced a 50% improvement in productivity.
Stay ahead of market changes
For insurers, accurate claims forecasting is not just a competitive advantage; it’s a necessity to safeguard profitability and your combined loss ratio. To learn more about how Anaplan can help you navigate the ever-changing insurance landscape with confidence and resilience, visit anaplan.com/industries/insurance.