Insurance risk managers must embrace technology disruption

by Patrick Ashton at SilverBridge Holdings

The accessibility of sophisticated artificial intelligence (AI) and machine learning (ML) algorithms, enabled by the high-performance capabilities of cloud-based data centres, mean insurers can more readily embrace a culture of innovation when it comes to their traditional approaches to business processes.

Of course, the rising number of insurtechs, and evolving customer demands, have contributed to the creation of a disruptive environment that can capitalise on digitally-driven solutions. Whether through partnering with insurtechs or looking at more effective ways of modernising their existing processes and systems, insurers are well-positioned to capitalise on global changes in the industry that have been accelerated with the onset of the COVID-19 pandemic.

AI and ML introduce a level of automation in data analysis and the decision process that was not possible before. It is especially in underwriting, claim decisioning, and product development that these technologies prove to be invaluable. Consider the potential of underwriting or making claims decisions by machine thanks to injecting AI into processes that can now learn from and replicate decisions from experienced consultants. This sees machines capable of making decisions just as their human counterparts would have done but at a faster rate with absolute consistency and 24/7 availability. And then there are the opportunities for developing products based on changes in risk and customer life stages at an individual level to provide dynamic pricing. No longer does insurance simply have to be an off the shelf solution but one that reflects the unique risks and preferences of individuals.

Confluence of technology and partnerships

With numerous insurtechs providing specialised data, service, or product offerings, it becomes increasingly important for insurers to look outward to these new providers for integrated solutions. These solutions should combine credit, health, and fraud risk views on business decisions, overlaid with AI and ML capabilities to minimise manual, inefficient interventions.

To scale and remain relevant, insurers need to embrace these new technologies and partnerships. Their policy holders demand modern user interfaces with real-time decisioning and service and the only way to achieve this is through automation, driven by intelligent risk processes.

Managing change

There are two ways that technologies like AI and ML can be integrated into the insurance process. Firstly, there is the outside-in approach. This focuses on strategy development that reads and responds to market dynamics, customer insights, and emerging technologies to create differentiated value. Secondly, is inside-out. This is an approach to strategy development that is internally-focused, leveraging the insurer’s capabilities and strengths as a primary point of departure to create differentiated value.

Both these strategies account for how technology use within insurers is evolving and how the insurer can potentially future-proof themselves against ongoing external market changes. Even so, risk managers must embrace the implications that innovation can unlock inside the insurer. To do so requires a mindset shift towards one that actively seeks AI, ML, and insurtech partnerships as enablers for growth. Once this is done, one of the biggest obstacles to providing agility within traditional processes is removed.

About SilverBridge

With extensive experience in designing and implementing solutions for retail and corporate long-term insurers, including pensions and employee benefits, SilverBridge is one of the largest providers of specialised technology solutions to emerging markets. Its experience also includes the development of artificial intelligence and robotic process automation solutions not only for insurance, but also in the banking industry.


Reimagining the customer experience

Even though the value proposition behind insurance has not fundamentally changed over hundreds of years, advancements in technology and the rapid digital transformation brought about by the COVID-19 pandemic have contributed to an increasingly sophisticated customer base that is demanding more from service providers. Machine learning, the Internet of Things, artificial intelligence, and other shifts are challenging traditional insurance products and engagement models.

Today, incumbents have two key areas of focus – modernisation and digitalisation – as they look to respond to the enhanced expectations from their customers. But beyond the technology side of things, trust and relevance will be deciding-factors on whether customers stay with their current insurers or look elsewhere. These are two sides of the same coin. If an insurer does not deliver solutions tailored to the unique needs of an individual customer, then that person is likely to lose trust in how the organisation is using the data it has compiled of them.

Different views

This could result in insurers partnering with fintechs to deliver a more comprehensive offering that blur the lines between traditional products and more agile, future-forward ones. Critical to this partnership-driven approach is having the understanding that customers are integrated ‘entities’ and not siloed. They require insurers to have an overall view of all their needs and not just fragments of them.

Whether it is in partnership with one another or individually, insurers and fintechs must start treating customers holistically covering their physical, emotional, and financial wellbeing. Data analysis through modern, digitally-driven solutions leveraging the high-performance computing capabilities of the cloud become one of the keys to this success.

Doing so will see the service provider expand the value proposition. It is not a case of reinventing the wheel but identifying ways to enhance what is already in place. Rewarding ‘positive’ customer behaviour through discounts on premiums or other value-added services can also show them that the insurer is considering them more holistically than in the past.

Identifying growth

Of course, the focus must expand to include identifying opportunities for growth. Simply catering for existing customer needs limits the business when it comes to potential to differentiate amongst its competitors.

Expanding its strategy to deliver more innovative solutions that cater for a younger customer base that is more focused on digitalised solutions can position the insurer for more robust (and long-term) growth. Along with this can come things like subscription or consumption pricing models for customers, leveraging mobile payments as a more effective way of collecting premiums especially in Africa with its large unbanked population, and even considering cryptocurrencies as payment methods.

The takeaway is that insurers must not limit their thinking to what has worked in the past. It is about identifying the modern innovations that are gaining traction with today’s customers that bring with it the agility needed to adopt to future trends more effectively.

Developing digital transformation roadmaps

Insurers would do well to avoid getting caught up in all the hype surrounding digitalisation. There really is no one size fits all approach to embrace this. Much of the process when it comes to developing an effective digital transformation roadmap comes down to strategically aligning the insurer with its business goals. Once that is done, the practical elements of how it could technically work, will help guide the steps to take.

Of course, the risk of having sight of the ‘big picture’ view of what the company is working towards can result in the temptation of trying to do everything all at once. This is not only a costly exercise, but the complexity involved in doing so makes it an incredibly risky proposition. Instead, decision-makers at the insurer must break down the components into smaller steps. By doing so, they can implement faster and derive value from the digital transformation roadmap sooner.

Even with the best planning in place, digitalisation can mean one thing today and something else in the future. Just consider the technologies shaping business in the current environment. The digital landscape could (and most likely will) look significantly different in two years’ time. Therefore, it becomes paramount to embed a degree of flexibility into any plan. By taking a step-by-step approach, the insurer can re-evaluate often and ensure future steps are still relevant when the time comes.

One vision

Decision-makers must also communicate with employees across the value chain so that they can understand the ultimate goals the insurer will be working towards. This could entail a continuous process of alignment from all the stakeholders. Again, it shows the value of taking smaller, iterative steps as opposed to just having a single, long-term plan that is cast in stone.

The COVID-19 pandemic has certainly helped in this regard. Insurers understand the need to be more agile. The cycles of technology advancement are accelerating all the time. And with this comes the need to embrace more digital channels than before.

Balancing the past with the future

In South Africa, this does require a more nuanced approach given the digital divide that exists between early adopters and those still struggling with even basic internet connectivity. However, if an insurer uses technology in the right way, it can cater for both segments.

For instance, the more affluent market wants to have self-service channels to manage their policies without having to deal with a broker. They want a direct channel with the insurer providing a click-through on its Web site for more information, link to a customer portal, or to apply for a policy. This type of customer might even want to make changes to his already existing policy portfolio through some sort of direct digital engagement with his insurer.

The less connected customers, some who are even unbanked, require a different approach. In this instance, an insurer can equip its brokers with tablets or mobile phones to facilitate an onboarding process when they travel to informal settlements. This also gives the broker the opportunity to educate potential customers around the importance of insurance, resulting in an improved and more personal service experience.

Furthermore, the way insurers collect and pay out premiums to the unbanked can take the form of mobile wallets or other mobile-friendly transactions. This also ensures that people have cover and that claims can be processed as efficiently as possible.

Join me next month as I discuss some of the key considerations when it comes to digital transformation in insurance and how that influences the roadmap planning.

Microsoft recognises SilverBridge as leading software vendor in financial services

As testament to its drive to modernise and digitalise the insurance industry, SilverBridge was one of three finalists in the Industry Solution FSI Partner of the Year category at the recent 2021 Microsoft South Africa Partner Awards.

“In recent years, SilverBridge has made tremendous progress working with Microsoft on our solutions for modernisation, digitalisation, and intelligently automation for the long-term insurance market. We are a proud Microsoft partner and have built a world-class suite of insurance and financial services solutions on the Microsoft Azure cloud platform. Furthermore, SilverBridge has successfully implemented these solutions for several local insurers,” says Lee Kuyper, Deputy Chief Executive Officer at SilverBridge.

“The pandemic has made the need for modernisation, digitalisation, and intelligent automation a business imperative for the financial services industry. SilverBridge has seen a significant increase in demand for its solutions because of this which has coincided well with the shift to the cloud which we have undertaken with Microsoft,” says Kuyper.

Kuyper says the work done last year to get customers onboard with this approach, for which they were recognised by Microsoft, is just the beginning and provides the organisation with enormous scope for growth across existing and new customer segments and markets.

“Many companies have focused on short-term effectiveness in 2020, really just to ensure that business could continue to operate. Now that decision-makers are realising this cloud-centric, digital approach will be part of the business landscape for good, they are looking to leverage what SilverBridge offers for more long-term gain and optimisation. The partnership between SilverBridge and Microsoft enables us to assist customers to do this as we take them into the future of where technology is going,” concludes Kuyper.”