Is customization killing insurance efficiency?

With technologies like AI and machine learning driving efficiency and enhancing customer experiences, the once-crowded field of insurtech has now narrowed to players offering truly effective solutions that are improving processes across the board.

However, Dan Epstein (pictured), CEO at ReSource Pro, pointed to a growing concern alongside this progress: the rise of over-customization. While streamlining operational processes is essential, excessive customization can lead to inefficiencies and chaos.

Navigating workforce challenges

With estimates indicating that the US insurance sector could lose over 400,000 workers by 2026, this looming talent gap will force firms to optimize the productivity of their remaining workforce. Although AI tools can significantly enhance this effort, there’s a risk that an overreliance on technology may lead to unnecessarily complicated processes.

“Getting people to focus on the right activities is a real challenge in this industry. There is a crisis of over-customization and over-servicing of accounts, leading to substantial downstream inefficiencies and waste,” Epstein shared.

To address these challenges, Epstein emphasized the importance of establishing a foundation for digital readiness. This includes understanding workflows, striking the right balance between customization and standardization, documenting procedures, and maintaining clean data. Additionally, robust practices for managing both technology and personnel are essential for cultivating effective process disciplines.

The complexity of regulatory frameworks

“If you want to unlock broad opportunities for leveraging AI to drive efficiency and productivity, a standardized environment is crucial,” Epstein asserted.

He noted that his clients typically face around 70 changes to their standard operating procedures (SOPs) each month. Although insurtech can play a crucial role in managing these changes, each one necessitates careful management, testing, and documentation. This constant flux adds complexity to the automation landscape, making it more challenging for organizations to implement streamlined processes effectively.

While market selection has pushed out insurtech providers that failed to deliver genuinely valuable solutions, an overwhelming degree of options still exists. However, not all tech solutions are designed to integrate seamlessly with one another, complicating the implementation of cohesive strategies.

This variability is further intensified by state-specific regulations that dictate acceptable practices within the insurance market, creating additional challenges for firms aiming to achieve efficiency and compliance.

The case for standardization

In a landscape where insurance-as-a-service is becoming the norm and buzzwords like ‘customization’ dominate discussions, embracing a degree of standardization can yield significant benefits for the industry. By adopting a more standardized approach to insurtech, the industry can realize several advantages:

• Easier expansion: Insurers can more readily enter new markets or regions using standardized solutions, as these systems and processes are already established.
• Predictable processes: Agents and clients can expect consistent workflows and procedures, reducing confusion and enhancing satisfaction.
• Collaboration opportunities: A more standardized environment facilitates collaboration between insurers and insurtech firms, fostering innovation and improving service offerings.