The insurance industry has seen significant changes in how it and its customers operate in recent years. The pressure on insurers to have a leaner cost base has risen due to financial difficulties linked to the post-COVID downturn, rises in inflation and the cost-of-living crisis and other current economic factors. However, because the market environment has been fundamentally altered, previous cost-cutting strategies are now obsolete, and insurers need to get more strategic.
To maintain competitiveness, more flexibility, as well as reduced absolute costs, should be prioritised. Insurers will need to think about cost optimisation as a strategic initiative, to invoke large scale operational changes and new financial models, enabled by technology. The priority should be around increasing growth sustainably and maintaining competitive advantage.
Are legacy systems a barrier to cost reduction?
Digital transformation can reduce the expenses associated with continuous maintenance of outdated, legacy systems and improve operations' efficiency and agility. It can enable workers to concentrate on work that adds value, whether they are working in the office or remotely, by implementing modern cloud-based systems and procedures.
The operational costs of on-premises technology have long been a concern. Insurers with critical on-premise IT stacks are facing issues with their legacy IT estates and are struggling to run business critical processes from large data centres, but 'rip and replace' of core legacy systems is not a viable option for most, due to cost and timescales to see any return on investment.
Cloud Cost Optimisation – savings delivered to Kainos customers
While many organisations move to the cloud with a view of saving money, lift and shift migration from legacy infrastructure doesn't always achieve this. Cloud cost optimisation is increasingly a focus for Kainos and our customers. For one financial services client, we were able to complete a FinOps assessment in just five days and identify optimisations that equated to 60% of total spend. Other examples of major savings through cloud cost optimisation are a 93% reduction in platform costs for a UK government department and a 50% reduction in VM costs for a global non-profit organisation.
New possibilities with Data
Harnessing data has never been as crucial as it is for insurers looking for deep visibility into their spending or wanting to engage customers in new ways or create new product lines (for example, subscriptions). There are also regulatory pressures like IFRS requiring better data transparency to improve and show compliance.
Companies that use data analytics have a highly detailed understanding of how business activities generate costs, allowing them to spot value opportunities.
Cloud-based data lakes enable businesses to gather data into a centralised repository and transform it into valuable insights through advanced analytics. Through this, meaningful insights like knowing how much money they're actually spending vs. how much they should be can be garnered.
Revolutionise with AI, ML, and Automation
The most revolutionary technologies in the insurance sector today are robotic process automation, machine (and deep) learning, and artificial intelligence. In fact, automation can reduce the cost of a claims journey by as much as 30%. Digitising resource-heavy processes like claims processing, underwriting, customer communications, finance, and HR through intelligent automation (IA) and artificial intelligence (AI) frees time for employees to focus on more complex tasks, with one Kainos insurance customer saving 100 days of administrative time by automating the migration of documents from one system to a new one which would have been a manual process otherwise, saving them time and money
Machine Learning (ML)-powered systems take it to the next level and can send warnings, provide real-time suggestions, or take action based on statistical trends. By using algorithms and computational models to detect speech, text, pictures, and patterns - behavioural or otherwise, ML frees up manual data input and analytic services. This lowers operational expenses while reducing the likelihood of human error.
Insurers can modernise their core systems with intelligent automation, alter digital interactions, get a complete picture of their consumers, and launch new services faster while spending less money on operations.
Optimise costs and stay competitive
The pandemic showed us the value of planning for the future. It exposed new client demands and showed how insurers, with the capability to act fast and boldly when required, can gain a competitive advantage. Through advanced analytics platforms, companies can understand how much they should spend and on what. Leaders can access and examine their expenditure and financial model to determine new, ideal cost structures.
Companies that use the instruments at their disposal achieve actual cost optimisation rather than merely cost reduction. Utilising a blend of innovative technology, including cloud, analytics, data science, AI, and IA, can help your insurance organisation overcome the challenge of building new digital services to improve how you work and stay competitive.
£2+ million in cost savings unlocked with data
Kainos unlocked £2+ million in cost savings over four years and £17 million in additional profit for a leading international savings, retirement, and insurance business. This was achieved by delivering a next-generation data platform to understand customer behaviour and drive efficiencies. Using Kainos' agile expertise, deep data, and cloud credentials helped the customer to develop a next-generation data infrastructure, data warehousing, data integration, analytics, and business intelligence programme.
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