UK Group risk insurance – the operating model of the future: Balancing efficiency and growth

Balancing operational efficiency and growth is a critical challenge in the UK group risk insurance market. This article argues for a transformative operating model that not only lowers costs but also removes barriers to growth. Key components include strategic automation, enhanced connectivity, business agility, and the importance of high-quality internal data. As the industry evolves, leveraging modern technologies like AI and cloud computing becomes essential for sustainable growth and competitive differentiation.

Let’s cast our minds forward and imagine what an ideal operating model would look like for a UK group risk insurer.

 Automate everything
That everything in group risk insurance can be automated is probably a stretch. The complexity and sums at risk in this market mean that underwriters and actuaries will always be needed. However, much of the routine work carried out now can and will be automated in the future, allowing for skills and expertise to be focussed where it matters most.

Designing systems for automation from the ground up is key, as processes are getting more complex as the trend continues towards more sophisticated and personalised product offerings. The current ways of working and the systems that support them will become increasingly inadequate for managing processes they were never built for.

Connectivity

Connectivity is vital, both for automation and for providing updated and personalised product offerings. In an industry where standards are limited and data flows fragmented, facilitating connectivity becomes paramount. In the context of group risk, being able to connect to third parties offers many advantages – let’s look at a couple.

Dealing with external data

Group insurance relies on external information to specify the basis and types of cover and then calculate cover and price. A significant amount of intermediary data needs to be dealt with manually. New intelligent document processing technology, including Natural Language Processing (NLP), computer vision and data wrangling techniques, empowers insurers to ingest external data automatically and remove a significant burden that currently falls on internal resources. Brokers can supply the data they have and get quicker responses whilst insurers can free up valuable resources from manual data tasks.

Ecosystems

The rise of employee benefit platforms and the increasing use of third-party health and well-being services means that group risk insurers need to embrace the ecosystem approach to be able to serve their market. In this context, web services and APIs are required for seamless connection to third party apps and services.

There is little value in offering employees access to view their cover levels if they use a benefits platform to view and modify their benefits, or a well-being service that is duplicated through a benefits package. But, if there is no benefit platform, then having the flexibility to provide an employee portal view would be of value, especially if the insurer has the ambition to allow employees to upgrade cover or purchase other products.

Explore the related article: Taking an ecosystem approach in the UK group risk insurance market

Business agility

Business agility, enabled by adequate systems support, is fundamental for modern, profitable value propositions. In particular, group risk products need to be continuously adaptable to change, to reflect legislative changes, and to meet new market requirements. Today, insurers often struggle to operate multiple variations of products or product packages due to limited or outdated system capabilities.

The increasing popularity of personalised cover (either through flexible or voluntary cover options) creates a new dynamic where insurers need to cost-effectively manage individual choices through group scheme arrangements.

Modern system designs support the operation of unlimited product variations where each detail of the offer can be configured at a business level, rather than requiring slow and expensive core system changes.

The value of trusted data

As data-driven insights can offer a critical edge, access to high-quality internal data is vital for insurers in the UK group risk market. Real-time data is at the core of a modern operating model, enabling predictive analytics, optimising risk assessment and driving pricing strategies.

Good internal data facilitates not just cost efficiency, but also the creation of tailored products that meet evolving customer needs.

Conclusion

Future operating models for group risk insurance are not a choice between low costs and business transformation. Enhanced operational efficiency will foster an environment where sustainable growth is enabled as many of today’s barriers fall away.

As the marketplace becomes more sophisticated, current operating models will grow increasingly unsustainable. The good news is that the enablers for transformation are available now and increasingly being used: AI, cloud-enabled computing and APIs all play an important part in the way forward.

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