In today’s fast-paced insurance environment, it’s more important than ever to stay ahead of the competition. One of the most effective ways to remain at the forefront is through benchmarking: the process of measuring your organization’s performance against that of your competitors.
By comparing your company’s operations, processes, and results to industry standards, you can identify areas where you are excelling and areas where you may need to improve. This can help you set realistic goals, develop strategies for improvement, and enhance your organization’s overall performance.
At its most optimal level, benchmarking can help insurers facilitate the industry’s momentum of ongoing innovation and shift the emphasis onto building a customer-centric approach.
But what does benchmarking specifically look like in the insurance industry? And how can implementing it be used to drive optimization? Let’s take a look.
Benefits of benchmarking in the insurance industry
First, benchmarking helps your insurance organization identify areas for improvement. By comparing your performance against specific industry standards, you can pinpoint areas where you are performing below the average and then take steps to improve them.
Some of the most common areas for improvement in the industry include claims handling and customer service with the aim of increasing the speed of processing, accuracy, and responsiveness. Operational efficiency is another common area for improvement, with insurers looking to optimize metrics such as cost per policy.
Second, benchmarking helps your insurance business remain competitive. By regularly comparing performance against your competitors, you can identify areas where your business is outperforming competitors as well as areas for improvement to stay competitive.
There are multiple opportunities for insurers to carve out a competitive edge over peers. These include the use of data and analytics in the insurance industry to deepen the understanding of customer behavior and needs as well as identify trends that insurers can capitalize on. They also include the cultivation of strategic partnerships such as with industry associations to access new markets.
Third, benchmarking can help you make more informed business decisions. By comparing your performance against industry standards, you can get a better understanding of what is working well and what needs to be changed and can use that information to make data-driven decisions to improve operations.
Benchmarking can provide a comprehensive view of performance, enabling better, faster decisions such as which areas to invest in and which areas to cut back on. By utilizing benchmarking data, you can identify and prioritize opportunities for growth and development, allocate resources more effectively, and optimize operations to better meet the needs of your customers.
Lastly, benchmarking can help attract and retain customers. By demonstrating that your insurance business is performing at or above industry standards, you can build trust and credibility in the market, which can help you attract new business and retain existing customers.
One of the most noticeable trends that we’ve seen is that there is an ongoing fight for the customer within the insurance arena. Global investment in insurtechs has been soaring, according to McKinsey, growing from $1 billion in 2004 to $14.6 billion in 2021.
More and more insurers are focusing on marketing initiatives and distribution segments in the value chain to optimize their ability to solve common customer pain points. Part of this is to develop distinctive digital experiences built on insight from customer data, helping to drive greater customer engagement and loyalty.
Beyond these benefits, insurance companies can leverage industry subject matter experts (SMEs) to optimize benchmarking strategies. This will provide valuable insights, guidance, and recommendations for improving performance and meeting industry standards.
There are key reasons to engage an SME in your benchmarking journey. Here are four:
- To provide valuable insights and guidance on what benchmarks to use in the benchmarking exercise. They can help identify relevant industry benchmarks and best practices and can provide guidance on how to use them effectively.
- To interpret the results of the benchmarking exercise. They can provide valuable context and insight into why certain performance metrics may be higher or lower than industry standards and can offer recommendations on how to improve.
- To identify areas for improvement and suggest potential solutions. They can provide valuable input on what changes or improvements may be necessary to bring an organization’s performance up to industry standards.
- To ensure that the benchmarking exercise is relevant and aligned with the organization’s overall business strategy and goals. They can provide valuable input on how the benchmarking results can be used to support the organization’s overall objectives.
Benchmarking is a valuable tool for insurers looking to improve performance, stay competitive, make informed decisions, and attract and retain customers. By regularly benchmarking performance against industry standards, your insurance business can continuously improve and stay ahead of the competition.
Are you looking to optimize benchmarking processes for your financial services business? Connect with us.