Claims performance has historically focused on improving efficiency. McKinsey spoke with Virginie Vitoux, an associate partner in the Paris office, to understand more about why health and protection businesses should think holistically about claims performance.
McKinsey: What’s happening in the health and protection environment?
Virginie Vitoux: Insurance companies operating in health and protection are facing multiple challenges. Currently, there’s limited opportunity to increase prices, given strong market competition. Claims costs are increasing structurally as the public system progressively transfers costs to the private sector. And customers are becoming less loyal, a trend that’s being reinforced by new regulations such as nonautomatic renewal.
Overall, insurance companies in health and protection need to find new ways to create value and sustain it in a regulatory environment that is increasingly challenging because of solvency rules and a marketplace that is changing as a result of COVID-19.
Historically, insurers haven’t looked to claims as a way to create new value. But health and protection insurance players are showing a new interest in transforming the core claims function and taking a fresh look at the claims ratio to keep leakage under control. Indeed, focusing on claims can add value and improve insurers’ bottom line. But long-lasting performance is only possible if thought about holistically.
McKinsey: What does it mean to think about performance holistically?
Holistic performance addresses efficiency and effectiveness but also positively affects customers, employees, and society.
Virginie Vitoux: Insurers must move beyond materially improving profitability—for example, the claims ratio—via targeted claims controls and reduced lead times. Holistic performance addresses efficiency and effectiveness but also positively affects customers, employees, and society.
In terms of customers, insurers can improve retail and corporate customer experience and satisfaction by, for example, improving and simplifying claims processes, clarifying contractual documents to avoid misinterpretation, and reducing the administrative burden. Improved customer interactions also generate leads and cross-selling opportunities, thus potentially boosting top-line growth.
When it comes to employees, it's important to create an environment and a culture that become more customer-centric than process-centric. This shift will not only improve customer satisfaction but also engage the organization and create a work environment where employees, in a context of increased process automation, see the value of their jobs and feel purposeful. It requires companies to rethink the jobs of tomorrow and upskill and reskill accordingly.
Succeeding in this structure will provide a basis for high and sustainable impact and will ensure the long-term health and protection of organizations.
And a holistic approach positively affects society by ensuring smooth claims processes for people who have been in an accident, have a critical illness or disability, or need long-term care. It also encourages innovation in the health marketplace. In the context of the COVID-19 pandemic, it has become even more critical for people to be able to access health and protection businesses and have the right insurance coverage.
McKinsey: What is your advice for insurers embarking on this transformation?
Virginie Vitoux: Leading insurance carriers are ready to invest in talent management in combination with new digital solutions, instead of fully automating and reducing the employee base. They are repositioning themselves in the health and protection ecosystem by partnering with public stakeholders and new actors, such as leading start-ups. And they are thinking about the long term.
It requires time and effort to mobilize an organization to anchor new and holistic performance mindsets and behaviors throughout the whole value chain. But succeeding in this structure will provide a basis for high and sustainable impact and will ensure the long-term health and protection of organizations.
Virginie Vitoux is an associate partner in McKinsey’s Paris office.