In the insurance industry, policy lifecycle management involves creating insurance products that meet the needs and account for the risks unique to each policyholder. Needs, circumstances, and risk exposure can transform over the lifespan of the policy. Lifecycle management requires reassessing the policy and the client’s situation to detect and define these changes.
Policy lifecycle management usually requires using data to assist with the initial underwriting and policy creation process. Insurers continue relying on information systems to collect data related to the policy and the client. They can use these insights to decide if coverage or pricing modifications are necessary to account for new risks or other changes.
Here is a closer look at how policy lifecycle management can provide benefits to insurance companies and ensure those they insure get the necessary protection.
How Does Policy Lifecycle Management Help Insurance Companies?
Policy lifecycle management strategies can help insurance companies increase the accuracy of their coverage so that customers get what they need and do not have any gaps. At the same time, it can reduce cost for insurers by defining risks and allowing for coverage adjustments that alter the details of the policy to limit exposure.
Policy lifecycle management can affect different aspects of insurance coverage. Here are three of the most common examples of this process in action.
- Policy tracking: Involves logging existing policies and their details. Software tools, such as information systems that track and manage risks, can track each policy and the current coverage requirements. This information is essential for the insurer to understand its current liabilities.
- Policy revisions: Are an important aspect of lifecycle management. New risks continually arise. The calculations that the underwriter made when creating the policy may become outdated by the time the policy is up for renewal. The insurer may need to charge higher premiums to compensate for increased risks. Using AI, this process can also be automated through a policy management software.
- Also, the client may need to change their policy to cover new activities or items at any time. It’s often more efficient for both insurer and insured to revise the existing policy rather than create a completely new one. A simple example would be adding a new car to a family auto insurance policy.
- Compliance requirements: Can change if authorities draft new regulations or legislators update or create laws. If this happens during the lifecycle of an insurance policy, the coverage or agreement needs to be updated to ensure full compliance.
- Also, in some cases, the customer may need to update coverage to meet new requirements. For example, a new law may require an increase or change in worker compensation coverage. The insurer has to update the policy so that their customer can comply with the new rule.
Insurers can enjoy certain benefits if they have a well-planned policy lifecycle management system, which typically includes software that collects necessary data and automates some of the processes.
Here are some of those advantages.
- Operational efficiency: Insurers can centralize policy management, avoid redundant workflows, and find solutions for existing policies rather than scrapping them and creating new ones.
- Increased customer satisfaction: Active policy management can help customers get the coverage they need in changing risk environments, and reveal compliance changes that they need to meet.
- Reduce costs: By accounting for risks that could require expensive settlements and limiting unnecessary underwriting costs by altering existing policies instead of creating new ones, insurers can lower costs and increase profits.
One of the most important advantages of a well-managed policy lifecycle is the ability to perform ongoing risk assessments. Risk assessments can offer early warning about changes that could increase risk exposure. With this information, insurers can adjust policies to avoid unnecessary risk exposure.
What Are the Steps Involved in Policy Lifecycle Management for Insurance?
An insurance policy starts when the client asks for a quote or begins an application process. It runs until the policy expires, at which time it can be renewed, replaced, or discarded.
Here is a closer look at the steps.
- Insurers will typically begin the process of creating a policy by getting initial information from the customer, which they use to create an estimate for the cost of the desired coverage (a quote).
- If the customer wants to take the next step after seeing the quote, they provide more information and exact details about the type of coverage they would like.
- The insurer takes this data and begins the unwriting process. The underwriter obtains more information, if needed. They assess the risks and accept or decline the customer’s request for coverage.
- The insurer presents the terms, including the cost of coverage, to the customer. If they accept and make the initial agreed-upon premium payment, coverage begins.
- The insurer continues to assess the policy to look out for any new risks or information and add any claims to the calculations.
- The collected data can be important for the renewal step. When the policy is set to expire, many insurers offer to continue coverage with the same terms. However, there could be slight differences based on certain risk factors. This new information could lead to adjustments in coverage, deductible amounts, or premiums.
- This lifecycle simply repeats until the customer or insurer decides not to renew or to cancel the coverage.
Policy administration software can automate aspects of this process, especially when it comes to data collection and renewals.
The Benefits of Policy Lifecycle Management
Automated policy lifecycle management can bring cost savings in multiple ways.
- Cuts down on data collection, analysis, and risk assessment. This means insurers spend less time on manual tasks like updating records. They can operate with fewer employees and free them to work on higher-level tasks.
- Data collected by policy lifecycle management tools can help create a more accurate picture of the client’s risks, creating better policy costs.
- Strong policy management can ensure that customers receive accurately priced coverage and that it meets their needs and complies with the insurance laws for their industry or personal use. This personalized level of service can help with customer retention, which ultimately positively affects the company’s bottom line.
- Finally, a strong policy management system can ensure coverage and claims automatically comply with relevant insurance regulations for your jurisdiction.
If all the information is centralized on one platform, it can serve as the primary source of information about the policy for everyone involved in serving the customer. Underwriters, claims agents, customer service reps, and insurance brokers can have access to the same data to ensure they offer personalized service and the most accurate pricing.
Challenges of Policy Lifecycle Management
Policy lifecycle management can be challenging for several reasons. Firstly, some companies and stakeholders in the insurance industry are resistant to change. While you may have adopted technology to better manage data, compliance, and policy renewals, some of the information you get will still have to be entered and processed manually.
You may also come across outdated technology that is not compatible with your more-modern, efficient system for policy administration.
Even with the newest automated software and platforms for policy management in place, it can be difficult to keep up with the pace of change in some sectors. Tools like predictive analytics can be integrated with a policy management platform. In this context, they can help provide early warning about changes that could affect policy details for existing customers. Also, they can help inform the underwriting process for new enrollees.
Streamlining Compliance Through Automation
Insurance management tools can help automate various aspects of the policy lifecycle. This automation can be especially important when it comes to complying with regulations governing the industry. These rules can be different from state to state, meaning they can get confusing for insurance providers who operate in more than one jurisdiction. With compliance requirements built into policy creation, claims, and renewal systems, you can take mistakes out of the process. This feature alone can help mitigate risks associated with compliance.
Automated systems can also use data from claims, trends, and other factors to define key risk indicators (KRIs), which are possible events that may outweigh the current level of preparedness. Insight into KRIs is essential for managing the insurance policy lifecycle.
With the right software to manage an insurance policy lifecycle, an insurer can cut down on operating costs, improve efficiency, and help you create more accurate pricing for policies and renewals.