A significant part of the insurance industry is rooted in conventional insurance distribution and requires an immediate evolution to survive in the market. This is why “75% of insurance organizations plan to replace or significantly upgrade their core management systems by 2025,” as per Resources.
Meanwhile, insurers that still operate insurance distribution with disparate tools and outdated infrastructure will continue to struggle to manage, scale, and integrate into modern workflows. Such disorganised insurance distribution results in insurance companies failing to meet the digital-first expectations of their modern customers and gradually losing them.
In this blog, let’s break down more such key challenges in traditional insurance distribution, so outdated systems don’t slow your growth or restrict your abilities to adapt and deliver modern insurance solutions.
Challenges in Traditional Insurance Distribution Setup and The Way Ahead
Resources say, “Up to 70% of insurers’ annual IT budgets go toward maintaining outdated legacy systems.” Being preoccupied with maintaining legacy insurance distribution platforms, companies overlook the need to adapt and grow with modern digital solutions. They often overlook the fact that conventional insurance systems typically lack API integration, real-time analytics, and automation—the key drivers of fast-growing insurance businesses in the modern market.
Let’s take a closer look at these challenges and how they can be avoided in order to ensure smooth insurance distribution in the tech-driven world.
Manual & Paper-Based Process
The manual insurance process, accompanied by excessive paperwork, is extremely time-consuming for both borrowers and insurance companies. The modern world operates at a fast pace, demanding quick insurance processes and their efficient distribution. Built in a time when customer expectations were static and processes were linear, legacy insurance distribution systems now struggle to keep up with the pace of the evolving digital landscape.
The way forward
Digital Insurance Solution for Insurers must replace their conventional insurance setups with a paperless, automated insurance onboarding and distribution process, making it quick and convenient for customers.
Fragmented Communication Channels
Conventional insurance distribution has fragmented communication, which is a crucial challenge for the insurance industry. To keep track of insurance status, claims updates, and renewal alerts, a scattered communication approach can confuse buyers and make the insurance process disorganized.
What’s needed
An all-in-one digital insurance platform can help insurance companies with seamless operations, organized insurance distribution, and provide real-time updates across all channels. This will ensure transparency between the insurers and the insurance buyers.
Absence/No of Smart Business Process Management or Solutions (BPM)
Conventional insurance procedures frequently rely on outdated technologies and an excessive manual workforce, which slows down the process and results in a higher number of errors. It has a negative impact on both customers and employees.
The modern way ahead
However, by utilizing a mindful blend of technology and industry expertise, Smart Business Process Management (BPM) helps insurance companies improve accuracy, speed, and efficiency. It improves the way every department accomplishes its tasks, which results in better customer service, fewer errors, and a more effective insurance experience for all.
No Real-time Data & Poor Tracking
Without access to real-time data, companies lack the efficiency to meet their customers’ requirements and offer personalized insurance options. Insurers lack insights into sales performance, customer data, or agent productivity. They fail to track KPIs or make informed decisions due to not having a centralized setup or analytics to support their growth planning.
The modern solution
Nevertheless, having a centralized data management system can help insurers to initiate, navigate, and track the entire insurance distribution process or related insights without any hassle. This helps them keep a real-time data track of their customers and offer personalized insurance products.
High Operational Costs
A conventional insurance distribution setup relies on a manual workforce and requires high operational costs. With this, even a slight mistake made by employees can cost insurers substantial errors, massive rework, or even compliance penalties.
Whereas, digital insurance distribution platforms work as a perfect cure for such insurance industry challenges, without charging you an excessive price to manage operations. Digital insurance distribution integrated with AI automates the entire insurance process at an affordable cost. Moreover, as per Patra, “Agencies using AI and automation can slash operational costs by 30–40%, while placement efficiency improves by 50–60%”
Compliance and Data Security Risks
Conventional insurance distribution platforms are highly prone to performing manual paperwork that lacks digital audit trails and has a higher risk of regulatory breaches. This can cause any insurance company significant reputational damage, penalties, or legal setbacks.
What’s needed
A digital distribution platform with integrated capabilities to adapt to changing regulatory compliance and market shifts can help insurance companies achieve reduced default rates and enhanced risk mitigation, while adhering to regulatory and business compliance.
Limited Scalability
Conventional insurance distribution limits the scalability for insurance companies, making it one of the biggest challenges for the insurance industry. Manual paperwork, scattered operations and communications, and more such inefficient features limit the scope or growth for insurance companies, and they fail to survive in the market, eventually resulting in their demise.
In contrast
There is a rapid rise of tech-driven insurance companies that operate automated insurance processes and solutions. It allows them a margin over the companies relying on conventional insurance distribution, keeping them ahead in the competition.
Prone to Risk and Changing Market Demands
Traditional insurance models are vulnerable to shifting customer expectations and rising compliance directives. They lack agility, exposing insurers to operational and reputational risks. Manual processes can’t meet the need for speed, personalization, or real-time decisions.
The way forward
However, modern insurance distribution platforms are designed to adapt to constantly changing market demands, predict possible risks, and make informed decisions.
5 Cs to Choose a Robust Digital Insurance Distribution Platform
For insurance companies facing growth obstacles due to the conventional insurance distribution setup, it is essential to switch to an efficient digital insurance distribution platform. A digital platform that can ensure insurance companies have the 5 Cs of insurance, i.e:
- Communication
- Customization
- Connection
- Cognition
- Consensus
Accomplishing these 5 Cs with a manual workforce and legacy insurance systems is nearly impossible. Hence, opting for a prompt, automated digital insurance setup is all you need! For this, consider contact experts like Ensurite, who excel in developing digital insurance platforms tailored to your business preferences.
The Takeaway
The insurance sector no longer functions according to the same timeline as before. Traditional distribution setups are becoming less of a legacy and more of a liability in a world where speed, personalization, and data are paramount. The flaws are obvious, ranging from slow customer service and limited scalability to high operational costs and manual inefficiencies.
However, insurance companies opting for digital insurance platforms are fiercely competing in the insurance industry, tackling all the insurance industry challenges with a powerful automated setup. It’s high time you switch your legacy insurance approach to a digital distribution platform to stay in the competition.
Hence, let the best help you! Ensurite assists insurers, re-insurers and digital insurance distribution partners in overcoming the obstacles posed by outdated insurance procedures by automating workflows, integrating with legacy systems seamlessly, and providing real-time insights. The goal is to upgrade what is holding you back, not to replace what is effective.
The distribution of insurance is not going to change in the future. It has already arrived. The only question is whether your company will stay ahead of the competition or fall behind.
Explore more Blogs: https://ensurite.ai/blog/
Frequently Asked Questions
How does outdated technology impact insurers and agents?
The conventional insurance process lacks modern technology and impacts insurers and agents as it:
- Slow down the policy issuance and claim processing method.
- Has higher errors and administrative burden.
- Limits scalability and agility in a competitive market.
- Reduces customer satisfaction due to delays and a lack of personalization.
How does Ensurite improve operational efficiency for insurers?
The conventional insurance process lacks modern technology and impacts insurers and agents as it:
- Slow down the policy issuance and claim processing method.
- Has higher errors and administrative burden.
- Limits scalability and agility in a competitive market.
- Reduces customer satisfaction due to delays and a lack of personalization.
How does Ensurite enhance the customer journey in insurance sales?
Ensurite offers services for insurance distribution partners, insurers, and reinsurers that cater to their unique needs. Our experts develop a digital insurance distribution platform that helps insurers and their customers with a seamless insurance experience. Check out Ensuite for or connect with our experts directly for personalized assistance on how we can help you with the services that can help you provide an enhanced customer experience in insurance sales.