Does individualization affect insurance efficiency?

As technologies like AI and machine learning increase efficiency and improve customer experiences, the once-crowded field of insurtech is now limited to players offering truly effective solutions that improve processes across the board.

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

Addressing workforce challenges

With estimates that the U.S. insurance sector could lose over 400,000 workers by 2026, this looming talent shortage will force companies to optimize the productivity of their remaining workforce. Although AI tools can significantly improve this effort, there is a risk that an over-reliance on the technology will 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-customization of accounts, resulting in significant downstream inefficiencies and waste,” Epstein shared.

To address these challenges, Epstein emphasized the importance of building a foundation for digital readiness. This includes understanding workflows, finding the right balance between customization and standardization, documenting procedures and maintaining clean data. Additionally, sound technology and human resources management practices are essential to developing effective process disciplines.

The complexity of regulatory frameworks

“If you want to unlock broad opportunities for using AI to increase efficiency and productivity, a standardized environment is critical,” Epstein emphasized.

He noted that his customers typically have to make about 70 changes to their standard operating procedures (SOPs) each month. While insurtech can play a critical role in managing these changes, each requires careful management, auditing and documentation. This constant change increases the complexity of the automation landscape and makes it more difficult for companies to effectively implement optimized processes.

Although market choice has pushed out insurtech providers that failed to offer truly valuable solutions, there is still an overwhelming range of options. However, not all technical solutions are designed to integrate seamlessly with each other, making it difficult to implement coherent strategies.

This variability is compounded by state-specific regulations that dictate acceptable practices in the insurance market, creating additional challenges for companies seeking efficiency and compliance.

An argument for standardization

In an environment where insurance-as-a-service is becoming the norm and buzzwords like “customization” dominate discussions, introducing a degree of standardization can bring significant benefits to the industry. By adopting a more standardized approach to insurtech, the industry can achieve several benefits:

• Easier extension: Insurers can more easily enter new markets or regions with standardized solutions because these systems and processes are already established.
• Predictable processes: Agents and customers can expect consistent workflows and procedures that reduce confusion and increase satisfaction.
• Collaboration opportunities: A more standardized environment will facilitate collaboration between insurers and insurtech companies, encourage innovation and improve service offerings.