An evolving retail insurance market

The disruption caused by the COVID-19 pandemic has resulted in a reimagining of the retail insurance sector. With an international survey finding that 40% of insurers expecting to increase investment in direct online sales and the related pressure of enabling a remote sales force, the industry is on the precipice of a fundamental change in business operations.

The hard lockdown conditions in many countries around the world last year meant that it was difficult to continue with the traditional broker-led insurance sales model. What was once a channel driven by face-to-face engagement suddenly had to find a different way of reaching out to prospects. Even managing existing customers became challenging as brokers had to use email, mobile, and instant messaging environments as the primary means of keeping in touch.

Going direct

From a client perspective, this more digital-led way of doing business has been welcomed as end users have been embracing digital solutions over the past several years. There is now an expectation that their service providers must deliver self-service options as well as be available on the platforms that customers use in their personal lives. Even though lockdown restrictions have eased, the increasing variety of touchpoints now mean insurers must think differently about their sales strategies.

Insurtechs have long gone a digital-only route. And while the incumbents will never be expected to completely forego broker models, they need to integrate more sophisticated options into processes to remain relevant and competitive. Using digital steps throughout the customer journey from the start of the sales process right through to its maintenance and management phase become a critical enabler to success. It is especially younger customers that are most comfortable to switch to a more direct form while the older generation will continue to be reliant on a broker-based approach.

Insurers can consider three approaches to address this multi-access customer environment. First, they can digitise the existing agent channel that includes focusing on providing advice for customers and generating leads for agents. Secondly, they can integrate agent and direct channels. This brings a new collaborative environment to play and creates uniformity of the customer experience regardless of whether they are going direct or through a broker. Finally, the insurer must consider enhancing the direct channel with human components that better explain complex products with personal advice.

A remote world

Of course, direct sales are just one part of the new environment. Remote work is quickly becoming the status quo requiring insurers to ensure employees have secure, reliable access to systems, data, and the means to effectively engage with customers.

The new normal of remote work means insurers must re-examine their own risk portfolio as well as that of their customers. If people spend less time driving and more time at home, their risk profile will change. And then there is the potential of COVID-19 related claims. From loss of income to health issues, there is a variety of claims that must now be considered many of which have not been covered by existing policies.

How insurers adapt to this new environment will become critically important to chart their path for a more digitally-driven landscape and help meet (and improve) on customer expectations and experiences.

Strategic alliances between insurers and technology companies key to modernisation and digitalisation

There is no disputing the importance of technology for an insurer. But while delivering to changing customer and channel expectations takes priority, they must accelerate modernisation and digitalisation initiatives at a pace which often surpasses what their own internal efforts can deliver. Given that technology innovation is not their core focus, insurers will increasingly partner with specialists in the field to bring value at the speed required.

Most established insurers are faced with disruptive new entrants who have designed their business for more digital-centric client requirements. Most of those new entrants are as much technology companies as they are insurers. Because the in-house technology teams of the insurance incumbents have significant legacy systems, data, and processes to worry about, they cannot compete with these types of insurtech companies on an equal footing.

Insurers are therefore turning their attention to forming alliances with technology companies capable of augmenting their own capabilities. Consumers are the main drivers behind this as they are looking for more digital engagement options and experiences especially during the initial phases of the insurance journey.

The competencies of an insurer lie in developing products, understanding actuarial models, risk and pricing, and the needs of customers. In addition, their access to customer bases and distribution channels are their true strength and what they need to continue to drive to stay ahead. In a way it comes down to leveraging this legacy as a competitive advantage. Insurtechs simply do not have the history and scale that customers often look for in an insurer. This gives larger, more established players an advantage. But this alone is not enough. It needs to be accessible in a more modern way. Partnering with a skilled technology company unlocks this potential.

Overcoming obstacles

This approach only works if the insurer identifies the technology competencies they are lacking or looking to build. An insurer needs a partner that brings this value to the business and shares similar values and understanding. While a technology company might have a strong understanding of IT and use it to develop their own offering, they might not fully understand the requirements of an insurance business.

This brings with it a risk of misalignment between the insurer and the technology partner. It is therefore critical to find a company that can bridge that gap. Furthermore, the internal team at the insurer might feel threatened by the partnership as this could potentially circumvent them. The insurer needs to integrate this partnership into their way of working and not just deal with it as a typical supplier type engagement.

Delivering agility

These partnerships empower insurers to become more digital and address more sophisticated demands of consumers, at a more rapid pace. And yet, despite this potential, many financial services companies tend to be secretive and not collaborate. Many believe that they can deliver to these requirements on their own, which may be the case, but it is all about the speed at which it can be done, and how quickly one can adapt as the world continues to change.

Events of 2020 and the pressure to digitalise have opened more insurers up to the potential of alliances. This will also assist in accelerating the digitalisation journey that includes further innovation such as intelligent automation and robotic processing. The incumbents must now equip themselves to embrace technology more readily through such partnerships so they can compete in 2021 and beyond.

Data brings competitive edge to insurance

Insurers understand all too well the value of managing data and extracting meaningful insights from it. But as the number of data points continue to grow exponentially thanks to the Internet of Things (IoT), cloud computing, and social media platforms, those who are best able to leverage a digital-centric approach to derive business insights accurately and timely while assessing risk, will be the ones strongly positioned for success in a modern business environment.

As touch points expand by the day, relying on only a contact centre, email address, and website to deal with customer engagement is no longer sufficient. Instead, attention now turns to how best to analyse unstructured data generated through social media, chat bots, mobile messaging, and the like. Whether it is a Facebook mail, a WhatsApp instant message, a Twitter direct message, or data received from an IoT device at the edge, insurers must better track, manage, and analyse data at each of these points.

This has seen the shift towards leveraging the high performance computing capabilities of the cloud to analyse data at scale. Using this environment offers an insurer the opportunity to explore emerging technologies which help to further drive real-time analysis of data beyond the capabilities provided by on-premise systems.

Making data real

Microsoft highlighted several common use cases for machine learning and predictive analytics. These include improved risk analysis and recommendations to improve processes; improved customer retention and acquisition by gaining a better understanding of their behaviour patterns; and identifying fraudulent claims through data mining.

The opportunity to derive more sophisticated insights also brings with it the potential to monetise data in ways previously unimagined. Data provides insurers with a better mechanism to develop more agile solutions enabling them to compete dynamically with technology-driven insurtechs. Having access to integrated customer data from all their engagement points and using cloud-based analytical capabilities, is introducing innovative ways of developing more bespoke solutions and even optimising existing ones to better cater for modern customer requirements.

Analytics can now span all insurance functions to deliver a more sophisticated way of valuing data that extends through marketing, underwriting, claims management, and the customer experience. Higher demands on insurers (thanks in part to more sophisticated, digital-savvy customers) and a volatile global economy conspire to force a reinvention of traditional insurance processes. Central to this is better analysing data.

Underwriting and claims enhanced

One of the ways to reduce costs and deliver better value to the customer, is to refine the underwriting and claims management process. By linking to cloud-based environments capable of delivering digital process automation, robotic process automation, and artificial intelligence, an insurer can introduce intelligent automation to process-heavy functions to significantly improve efficiencies and deliver straight through processing.

Take for example our recent partnership with HealthCloud. The two organisations are providing insurers with a solution that intelligently automates the insurance underwriting process by securely integrating health data and medical records to assess the risk of onboarding individual customers. By integrating the data and injecting it with artificial intelligence (AI) which is built by using the human insights of underwriters, we can automate the decision-making process as far as possible.

This builds on our partnership with Astute Financial Services to deliver a fully automated intelligent claims processing solution. It uses AI modelling of insurance expert decision-makers to enable claims to be processed in real-time while providing maximum risk oversight.

Ultimately AI and machine learning combine to deliver a more intelligent view of data to the insurer. But more than that, it provides the ability to further automate processes in the organisation based on insights that were previously difficult to obtain. Viewing big data in more sophisticated ways thanks to these innovations empowers insurers with real-time capabilities they would have lacked with traditional, on-premise solutions. The new digital and inter-connected world makes data an invaluable commodity for the insurer that embraces cloud solutions to inject fresh insights into traditional approaches.

Intelligent automation in financial services

A Statista study conducted last year, revealed that 39% of the organisations surveyed indicated that they have already adopted intelligent automation (IA) at a functional level. This has likely increased significantly given the developments of recent months with the pandemic pressuring organisations to embrace a more digital approach to business. In financial services, IA has the potential to transform the way organisations operate internally and enhance customer engagement

IA is the bringing together of technologies such as digital process automation (DPA), robotic process automation (RPA), and artificial intelligence (AI) to focus on improving business processes. Whilst financial services companies have been embracing elements of automation for some time now, it is AI that is really attracting significant interest as businesses explore the potential to unlock value through improved customer service, efficiency, and risk management.

Leveraging AI

The business environment is continually changing and adapting to market requirements. But the rate at which this has been happening in recent months has increased significantly. Microsoft CEO Satya Nadella recently remarked that two years’ worth of digital transformation have taken place within two months. This has resulted in organisations having to move away from their reliance on manual processes and turn their attention to how best to leverage automation. Over the years, we have seen the adoption of RPA assist organisations to better manage high volume transaction processes. But while this automation can replace certain human-driven functions, there is little to no intelligence behind the solution.

This is where IA comes in. The ability to replicate human intelligence and, more specifically expert decision-making, allows traditional automated processes, which still require human intervention, to be fully automated – whilst retaining the insight of the best human decision-makers in the business. By adopting proper intelligent automation, financial organisations will be able to handle most transactions automatically – with only the most complex queries requiring any human intervention.

AI can provide the financial services organisation the ability to automate the decision-making process. However, by combining AI with complementary technologies, IA delivers end-to-end business process automation that incorporates human decisioning. Think of it as the virtualising and scaling of human intelligence throughout the business.

Delivering value

Furthermore, the ability of machines to work through high volumes of data at speeds not possible for human operators brings a distinct competitive advantage. When this is coupled with the ability to make the same decisions as a human expert, yet more consistently and efficiently, the opportunities for, and value to, the insurer are limitless. For example, the process an advisor would have taken to assess a claim, approve, and make payment, can now be fully automated in real-time. This frees up employees to focus on other strategic deliverables or spend more time on the most complex of claims requiring forensic review.

The recent partnership with Astute Financial Services Exchange has seen SilverBridge deliver a fully automated intelligent claims processing solution to the market. The solution incorporates industry risk scoring metrics, internal business rules, and intelligent decisioning to assist insurers with straight-through-processing (STP) of claims.

When it comes to the financial services industry, of critical importance are both compliance and regulatory adherence. All decision-making steps in a virtualised intelligent process are transparent and auditable. This is where the concept of explainable AI is vital. As example, SilverBridge uses the explainability of the AI to expose the thought processes and parameters considered in any decision making process which can be audited at any point in time. This is a critical component in a highly regulated environment such as insurance and gives executives the assurance that the right decisions are being made consistently within their operations.

Ultimately, IA delivers business value to insurers through improved operational efficiency and risk management. But perhaps more critically, it also assists the insurer to deliver a far improved customer experience to their clients and provides these companies with the means to free up key people to focus on more strategic objectives. Injecting automated decisioning at speed and scale can unlock more business value while continually delivering more innovative ways of driving customer engagement.