Closing the Friction Gap: A Continuous Improvement Roadmap for Insurers

WHITE PAPER Insurers face a growing "friction gap"—operational inefficiencies that inflate costs, delay claims settlements, and undermine underwriting accuracy. These frictions directly impact the combined ratio (expense ratio + loss ratio), eroding profitability and competitiveness. This whitepaper outlines a continuous improvement framework to systematically identify and eliminate friction, driving sustainable gains in underwriting performance, claims efficiency, and customer satisfaction. © 2025 PS Advisory. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of the publisher. CLOSING THE FRICTION GAP: A Continuous Improvement Roadmap for Insurers

Table of Contents Defining the Friction Gap 01 Common causes of Friction 02 Measuring the Friction Gap 04 A Four-Stage Continuous Improvement Framework 05 Diagnose High-Impact Friction Points 06 Build a Culture of Incremental Change 07 Optimize and Automate Core Processes 08 Ongoing Leadership Action Plan 09 Next Steps 12 A Winning Combination: Salesforce and PS Advisory 10 Case Studies 11

1 Friction Gap [noun] The impact of imperfect processes, systems, and business practices on both the loss and expense ratios. Defining the Friction Gap is easy, fixing it takes vision, time, dedication and resources. It’s also not a “One and Done” solution. It requires adopting a new mindset of “continuous improvement”, without which friction will once again reassert itself. The Friction Gap is defined as “The impact imperfect processes, systems and business practices have on both expenses and underwriting results.” Defining the Friction Gap PS ADVISORY: Closing the Friction Gap

Legacy systems - creating data silos and process redundancies. Manual workflows - consuming a significant amount of time from underwriters, adjusters and support staff. Fragmented IT environment - currently, in most insurers, the “engine’ that is bridging all processes, systems and data is wearing sneakers. People are the glue tying together all of the fragmented systems and data repositories in place today. Inconsistent processes - many processes are part of an “oral history” at most insurers today. As people are on-boarded they are trained by others that interpret processes in a way that fit their needs, their unit or their line of business. This way, the exact same processes can vary across the organization. Insurers are often leveraging a strategy of hope, hoping that people are executing processes properly, hoping that they understand why they are important, and hope that both regulatory and internal guidelines are being followed. Too often, insurers find out processes aren’t being followed correctly when results take a downturn or when regulatory audits result in fines. Common causes of Friction Friction affects Underwriting, Claims and all supporting business functions within an insurer. PS ADVISORY: Closing the Friction Gap 2

Visibility issues: Fragmented data, inconsistencies and the need to manually track or consolidate data (usually leading to errors) makes it difficult to prioritize workload, understand current business status or make decisions. This affects both staff trying to process work efficiently and senior management trying to make both tactical and strategic business decisions. Work-arounds: All of the above often lead to work-arounds. The result of creative and resourceful staff that needs to get work done, work-arounds often start as stop-gap measures but often become standard operating procedure. Not because they are the correct way to process work but simply because it’s necessary in an environment suffering from friction. PS ADVISORY: Closing the Friction Gap 3

Expenses Premium Claims Premium Combined Ratio Expense Ratio Loss Ratio = + Measuring the Friction Gap Property Casualty (P/C) insurers have an advantage over Life and Annuity insurers from an insight to the cost of Friction. While both types of organization have the same impact from friction, it’s possible to measure friction much more effectively in Property Casualty companies. P/C companies leverage the Combined Ratio, which is equal to the Expense Ratio plus the Loss Ratio. Leveraging the combined ratio, P/C insurers track their own results but also those of their competitors as a benchmark. Senior management is constantly riding the Combined Ratio Seesaw, where they need to balance the expense ratio against the loss ratio, with the goal of keeping the combined ratio under 100. When justifying projects, putting benefits in terms of the combined ratio will put things in perspective for management trying to allocate investment spend. Not all projects will move the needle but giving management insight as to how any project will support their need to improve the combined ratio will increase chances of approval. PS ADVISORY: Closing the Friction Gap 4

BRIEF: ABOUT PS ADVISORY A Four-Stage Continuous Improvement Framework As mentioned before, addressing friction is not a one-time project. Insurers must adopt a new operating philosophy, creating an environment that thrives on continuous improvement. A structured, phased approach is essential for successfully eliminating friction long term. Additionally, adopting a continuous improvement approach will also create a flexible organization that can adapt quickly to market, regulatory or business strategy changes. This framework encompasses four key stages: PS ADVISORY: Closing the Friction Gap 5

Map critical workflows: Identify bottlenecks in underwriting, claims, and customer onboarding using value-stream analysis. For instance, 26% of insurers cite process redesign as a top efficiency lever. Prioritize quick wins: Especially in the beginning of any program, quick wins energizes project and user teams. When the organizations sees improvement happening quickly, it’s easier to achieve buy-in across the organization and garner support for ongoing projects. Which areas to target will vary by insurer, market and current organizational issues. Suggested target areas with immediate ROI: Automate claims triage Automate submission intake processing and testing (In good order, appetite and clearance testing) Leverage analytics and artificial intelligence (AI) to review and stack rank submissions to prioritize underwriting appeal. Identify and implement digital technology that can speed processing, such as AI Vision to augment OCR processing of submitted PDFs. Identify transactions that can leverage straight-through processing such as commodity or clean underwriting submissions. Identify distribution management functionality that would improve agent/broker relationships Identify leakage points in both underwriting and claims. Identify new channels that would be more likely to delight third parties such as agentic processing. Stage 1 Diagnose High-Impact Friction Points PS ADVISORY: Closing the Friction Gap The initial step involves identifying and prioritizing the friction points that have the most significant impact on the combined ratio. Usually these points are well known by staff and are usually fairly easily identified, especially when an insurer is just starting to address friction within their organization, there is generally a pent up demand for improvement. What often is not known, is the impact across the organization. People will know how friction impacts their role but are unaware of the impact across the organization. This diagnosis process is often eye-opening, giving context to the impact across the insurer and fosters both collaboration and communication between internal groups. 6

Empower cross-functional teams: Equip employees with lean management tools (e.g., root-cause analysis) to solve friction points locally. McKinsey highlights that insurers fostering problem-solving cultures achieve 15–20% productivity gains. Leverage modular technology: Moving to a continuous improvement environment does not mean immediately replacing legacy systems. Full end-to-end process management can be achieved with products such as Salesforce that can bring together disparate tech environments. Wrapping legacy systems with Salesforce and leveraging integration technologies such as APIs or RPA can enable real-time data integration, reducing processing errors and improving both process and cycle times. Senior management support and messaging: Critical to buy-in across the organization is the realization that senior management supports an endeavor. This communication must be loud and often. It should include not only that senior management supports a project but why it is important to the company overall with identified tangible benefits. Embed change management into all projects: Change management is another critical component to success. Too often, the effects of change management are thought of at the end of a project, not the beginning. Good change management starts with broad communication, inclusion and identifying impacts both internally and externally. Stage 2 Build a Culture of Incremental Change PS ADVISORY: Closing the Friction Gap It’s not enough to say that an organization is going to commit to continual improvement. In order to successfully adopt this approach insurers must put in place structural components to support this shift. 7

Process Automation and workflow efficiency: This may require the continued evolution of the internal system architecture and solution map. Some legacy systems may never be replaced but can be tied into a modern end-to-end process in multiple ways. In this stage the insurer will tackle the more difficult issues they may be facing with the goal of leveraging agile implementation process to achieve long term sustainable results. As always, implementation targets should be stack ranked based upon both need and benefit. Data Analytics Enhancement: Develop more sophisticated data models and predictive analytics capabilities to improve decision- making in risk assessment and pricing. Embed AI and AI-assisted tools in all aspects of process and workflow, both internally and externally. Customer Experience Optimization: Redesign customer-facing processes to reduce friction points and improve overall experience. This would include whatever the insurers definition of “customer” is, the insured, agent/broker, plan member, claimant etc. Each participant has their own needs and insurers cannot afford to ignore any over time without a negative impact. Workflow Efficiency: Too often, workflow runs into issues with silo based processing or organization. Implement workflow management systems to streamline operations across departments. Stage 3 Optimize and Automate Core Processes PS ADVISORY: Closing the Friction Gap In the beginning, the focus is on finding quick wins and improvements that add visible value that users (both internal and external) and management find useful. Besides improving the environment, earlier projects are also targeted at creating buy in and addressing major change management hurdles. As progress is made, attention must shift to more advanced solutions to improve core business processes that may take additional time and effort: 8

Start Small, Think Big: Begin with pilot projects in specific areas to demonstrate the value of the continuous improvement framework. Measure Relentlessly: Implement robust dashboards to track key metrics related to friction reduction and the combined ratio. Communicate Wins: Share success stories and quantifiable results to build momentum and foster a culture of continuous improvement. Invest in Talent: Provide employees with the training and resources they need to effectively identify and address friction points. Champion the Journey: Senior management must actively champion the continuous improvement initiative, providing the necessary resources, support, and leadership to ensure its success. Stage 4 Ongoing Leadership Action Plan PS ADVISORY: Closing the Friction Gap To drive successful friction reduction, senior management must take a proactive and engaged approach: 9

A Winning Combination: Salesforce and PS Advisory Successfully implementing a continuous improvement framework requires the right technology platform and implementation partner. Salesforce, as the world's #1 AI, CRM, and insurance solution provider provides a a powerful, unified platform that enables insurers to invest for the future. PS Advisory is a leading system integrator specializing in Salesforce solutions for the insurance industry with a proven track record of success. Together, Salesforce and PS Advisory offer a powerful combination to address the friction gap and drive transformative change. The PS Advisory Advantage PS Advisory is a leading system integrator with a laser focus on delivering Salesforce solutions to the insurance industry. Their expertise spans insurance companies, agents/brokers, and reinsurers, making them the ideal partner to implement this framework: Industry Expertise: PS Advisory's deep understanding of the insurance industry ensures that solutions are tailored to the specific needs and challenges of insurers. Proven Track Record: PS Advisory has a proven track record of success, with clients winning two Celent Model Insurer Awards for digital transformation (LWCC and N2G). This demonstrates their ability to deliver tangible results and drive innovation. Salesforce Transformation Partner of the Year: PS Advisory has been recognized as the Salesforce Transformation Partner of the Year for Financial Services, highlighting their expertise in implementing Salesforce solutions for the insurance industry. Focus on Insurance: They have a strong, strategic focus on Insurance and are not distracted by other industries. Salesforce-Certified Experts: They have invested significantly in their people by having many Salesforce-certified consultants on staff. LWCC and N2G Celent Wins: Their clients have realized true digital transformations. PS ADVISORY: Closing the Friction Gap 10

Solution: Implementation of an advanced Salesforce underwriting desktop, integrated broker portal, and distribution management platform empowering field managers. Impact: Submission processing time reduced dramatically from 30 minutes to 90 seconds. Enhanced straight-through processing rates of new business submissions from 40% to 71%, significantly reducing manual touchpoints. Automated endorsement processing increased from 0% to 40% and growing. Manual producer visit reports taking 2-3 hours each replaced with generated reports taking 15-20 minutes that include a shareable Report summary, on line visit documentation and follow-on task management. 11 Case Study N2G-Digital Transformation in Commercial P&C Challenge: Operational complexity arising from multiple, disconnected underwriting systems and consolidating very disparate underwriting programs into a single offering. Solution: Consolidation of seven platforms into three integrated into a Salesforce-powered, end-to-end cohesive environment. Impact: Over 1,000 hours saved annually by significantly reducing redundant data entry tasks. 25% improvement in underwriting accuracy and documentation consistency. Case Study LWCC - Enhancing Underwriting and Distribution Efficiency Challenge: Inefficient, manually intensive submission and distribution management processes. PS ADVISORY: Closing the Friction Gap

Closing the friction gap is not merely an operational imperative; it is a strategic necessity for insurers seeking to thrive in an increasingly competitive and dynamic market. By embracing a continuous improvement framework, partnering with Salesforce and PS Advisory, insurers can unlock significant gains in efficiency, profitability, and customer satisfaction. The path forward requires senior management to champion incremental change, prioritize resource allocation, and treat friction elimination as a core business discipline. Conclusion Contact PS Advisory today to explore how bridging the Friction Gap can unlock enduring competitive advantages and substantially improve your organization's operational performance and profitability. Property Casualty insurers, if you would like to have your Friction Gap mapped and analyzed based upon your market and competitor metrics. Email: [email protected] Next Steps Email: [email protected] Website: www.psadvisory.com PS ADVISORY: Closing the Friction Gap 12 LET’S TALK