Break from Tradition in Insurance Industry

In the face of challenging economic times, pressing regulatory changes and increased competition for market share, insurance companies are struggling to maintain their balance.

The time does not allow insurance companies to navigate traditionally as the storm shifting through will favour those in the industry who take advantage of today’s market to position themselves for long-term future business.

Capitalising on the current challenge and turning it into a real opportunity will require new strategies that leverage human capital and increase productivity.

Manual processes, customer retention, underwriting effectiveness, customer service response and claim cycle times are all areas in which change is required to approach businesses in a more dynamic fashion. In particular, we should keep in mind that the Ethiopian insurance sector has always been a highly regulated industry. New legislation and regulations are proposed and adopted on a regular basis and in some cases when there is some emerging risk or malpractice in the sector. Directives may be a proactive move and show the responsiveness of the regulator towards risks.

Traditional insurers have aggravated their operational inefficiency as well as service delivery since they have been doing their business in a reactive way.

Another challenge for change-resistant companies is an increasing compliance demand from federal, state and other regulatory bodies demanding for more vigorous processes that can evolve and adapt on a continuous basis, but that also offer varying levels of control over how they are executed. In the Ethiopian insurance sector, a single directive affects the overall process in typical insurance companies which are not ripe for transformation.

Insurance companies that understand the truly compelling need for this transformation and that have the advantage of tools available today to increase operational efficiency and improve critical insurance processes, will be leaders in the industry for years to come.

Business Process Re-engineering (BPR) and Business Process Management (BPM) technologies, including adaptive case management solution and business architecture tools, can help insurance companies apply new strategies to reduce operational cost, eliminate a significant stream of paper work from their processes, improve the customer experience and grow their business.

The insurance sector in Ethiopia has not operated proactively with regard to mitigating risks arising out of the impacts of directives.

Whether the company faces an economic crisis or not, pressure in the business environment urges insurance companies to be more flexible. For instance, directives of no premium no cover, minimum required capital, corporate governance and federal proclamations like Vehicle Insurance Against Third Party (VIATP) were implemented because insurance companies found them difficult to plug all directives into their operation system because they were operating traditionally.

But we should not wait to react for directives to come, without having contributed to their design, proactively applied strategies to work accordingly and turned them into opportunities for business development.

Had there been the culture of professional debate and discussion involving all who are relevant, much cost and effort would have been saved.

Insurance Companies must always find a way to break traditions which perpetuate a limited view of the customer and books of business. They should map out their risks and mitigate them proactively before they materialise.

What is the way out for this infant and acrimonious traditional business? Can we name any bank or insurance company that is international in any shape or form? If not, why do we use the name ‘international’ when we name or brand our intuitions? Is it because we think globally and do things locally? Alas, this thinking is also traditional.

New models of business and enterprise architecture need to arise; where integrating with new technology solutions and affecting process improvements that leverage the capabilities of existing personnel and applications can become the norm.

Mere automation is not change, it is the know-how and knowledge-based service which should be underscored.

As insurance companies must identify their core process with the multiple support process and avoid multiple touches both in the core as well as support process, they need to simplify complex work flows and handoffs and implement an integrated seamless process to have a competitive advantage.

Automation has to be properly in place in this process so as to get the right information from disparate data sources for optimum decision making, and fight very-rigged application environments to ease the effect of inefficient business process.

Some insurance companies in Ethiopia introduce automation in the context of a very rigid management philosophy, or attitudes cemented in anti-change stance. There are still some others who love the status quo and keep telling their clients about the merits of the old days.

In an ever changing business environment, there is a period of “storm and strike” and traditionalists will eventually be pushed out.

With the issues addressed so far (change plus automation), companies must be prepared to focus on retaining profitable customers, attracting new customers through myriad distribution channels, delivering new products, and providing high quality customer service.

Insurance company executives who dare to change their companies – to streamline processes and deliver improved performance to support profitable growth strategies must work on the four key strategies.

They need to change their core business process that will enhance operational efficiency and control expense across their service value chain, driving for leverage. Moreover, they should integrate automation across silos.

Change the overall mindset and attitude of employees, and management is also critical. Last but not least, is the introduction of business ethics and accountability to secure change tools and control conspiracies to undermine the change.

When real BPR and BPM take place and the role of traditionalists is minimised, a typical insurance company’s claim process and claims leakage will be managed in an improved manner, fundamental market growth through word of mouth can be achieved, optimisation of customer service and cover handling will happen. In addition, there will be expanded report capabilities to proactively manage work and directives, an enhanced compliance monitoring and management scheme will take root, customer request response time will highly be minimised, and the number of employees “missing in action” will be reduced

Insurance companies need to do away with traditional approaches to their business models if they are to meet emerging challenges of the 21st Century.


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