INSURTECH: Top 10 Digital Business Transformation opportunities in Property and Casualty Insurance

The business of property and casualty insurance—assessing risk, collecting premiums and paying claims—hasn’t changed much since 1861, when a group of underwriters sold the first policies to protect London homeowners against losses from fire. Recently, though, the insurance industry is now being challenged by technological and behavioral change and has embarked on a radical transformation, one spurred by a series of digital innovations whose widespread adoption is just a few years away.

Seven key technologies have already begun to disrupt the industry—infrastructure and productivity, online sales applications, advanced analytics, machine learning, the Internet of Things, distributed ledger and virtual reality—and their impact will accelerate in the next three to five years.

These new technologies will be a boon for consumers, bringing more choice, better service, and lower prices. Companies stand to benefit too, especially those that use the digitalization as an opportunity to rethink all their operations, from underwriting to customer service to claims management.

Customers now expect their insurers to offer simple, transparent and flexible products and services—all online.

In Australia, for example, you can use your smartphone to snap a photo of something you want to insure, such as a bicycle; upload the picture into an app called Trov, and then request a policy for a specific period—say, a month. Trov uses available data about you and your bicycle and, within seconds, comes back with an offer. If you like the terms, you press the “I accept” button, and you’re covered. Claims are also handled online, with a rapid exchange of photos and texts.

In the future, insurers won’t need to dispatch human adjusters to gather facts and evaluate accident damage. Using machine learning, automated advisers will draw on virtual reconstructions of the accident and a wealth of background data. They’ll enter into a digital dialogue with customers and immediately inform them where any damage can best be repaired.

Insurance firms are disrupted; disrupting and going through important digital transformation projects, which de factor often revolve around the need to optimize the end-to-end customer experience. Insurers can improve their policy, distribution and claims functions, and benefit from analytics, mobility, digital marketing, cloud and social media.

1.Customer Experience (CX) on top priority - The customer experience challenge starts with the way policyholders communicate. They are used to communicate via email, text and a whole range of new channels and formats. Furthermore, if they’re not satisfied they use social media to tell the world. This challenge affects many industries, also in other financial services industry areas. However, in the insurance industry, dissatisfaction is easily voiced, as customers expect almost immediate accuracy and responsiveness. This is a huge challenge, especially as 84% of customers trust other consumer’s experiences.

On top of that, there is the very nature of the insurance business whereby incidents can cause a sudden rise in claims with even more customer expectations. When such incidents happen on a larger scale, they can also be closely monitored by the media and regulators, adding more pressure to the equation.

Customer experience expectations, customer service demands, and customer behavior have of course changed in virtual industries as consumers expect the same levels of quality and speed as they are used to in various markets. This behavior is traditionally attributed to Generation Y but is showing across segments of more digital-savvy consumers.

Insurers deciding which digital technologies to pursue should ask themselves a simple, and fundamental, question: Will it enhance the customer’s experience? Putting the customer first is more than a platitude. An improved customer journey—one built on ultra-precise information, greater transparency, more flexibility and simplified interactions—is good for business.

Growth in a digital world requires P&C executives to continually think from the customer’s perspective—that is, outside-in rather than from the company outward. With the help of Digitalization, P&C industry can benefit in Claims, Product, Policy & Underwriting and Distribution & Marketing of Insurance. Insurers have to transition from product-centricity to customer-centricity.

Take the typical experience of a customer calling an insurer today. It’s likely an automated answering service will tell the customer to press buttons 1, 2 or 3 for various options. With machine learning, though, insurers will be able to serve a customer much faster and effectively, without all the button-pushing. The system will instantly analyze the customer’s flow of communications across all channels, including past phone calls, letters, emails and even public social media postings. When the customer starts speaking, the computer can analyze the tone of voice, determining whether the caller is confused or angry or both. Armed with all this information, a virtual agent can assess the customer’s needs and suggest a solution.

2.Direct link between claims processing and customer retention - Today when we focus on how digital technology can transform claims, the driver for transformation is clearly how to deliver compelling customer experience. Claims transformation has often been driven by a need to improve efficiency or productivity and claims leaders clearly understand the link between claims and direct impact on their customers.

Many insurance carriers struggle to efficiently handle a request that includes inputs from different communication channels and provide this instant response their customers expect.

As customer expectations continue to change, insurers must reimagine the role of claims. This requires an end-to-end design thinking approach and embracing digital. Customers expect more efficiency and transparency with claims, and they expect to have several channels for submitting and settling claims. Insurers can use automation, artificial intelligence, and advanced analytics to transform the claims process and identify trends and potential problems.

3.Claims Prevention - The claims process within property and casualty insurance is on the cusp of benefiting from digital transformation. Digital technologies will also help with claims prevention, thanks to the Internet of Things. In the future, for example, a sensor will be able to monitor a household’s water consumption patterns, detecting potential leaks and interrupting the flow before the basement is flooded, thus preventing major damage and a costly claim.

For Fraudulent Claim reduction, several technologies can be leveraged to improve insurance claims fraud detection. These include more traditional information management approaches but also more advanced claims fraud detection systems like Predictive Analytics, Social or sentiment analysis tools and data visualization tools.

4.Automation, Machine Learning, and AI - Insurers are adopting the technologies for better outcomes. Today, digital technology has become top of mind for claims leaders and the potential of artificial intelligence and machine learning to transform claims has become unnoticed. The industry is moving past simple automation and starting to have use cases of more advanced technology.

5.Robotic Process Automation (RPA) for Information management - In the highly competitive insurance environment, there is an enormous pressure to increase efficiency and streamline operations. Most carriers struggle with manual process steps – including many repetitive tasks, such as checking a claim input for completeness and requesting missing information like an auto accident police report.

The handling of an underwriting request or claim requires matching the request with customer information that in most cases resides in legacy systems. Finding this data, such as customer status and associated entitlement to reimbursement, is often a bottleneck but with the use of RPA process can be automated to deliver a seamless claims process.

6.RPA to cut compliance costs - The pressure is rising for leaders to find new ways of cutting costs in compliance, which can be huge. Strategic CXOs are using robotics as a solution to this issue. Automating rote, rule-based compliance tasks allows them to reduce costs and reinvest in other digitization efforts. Robotic process automation (RPA) is a natural fit in this new InsurTech environment because change can be delivered with speed and agility to realize benefits quickly. Further, RPA can automate the end to end lifecycle by integrating new front end digital technologies with back-office environments.

7.Internet of Things & Big Data - By 2020, an estimated 50 billion devices will connect the 8 billion people on our planet to their cars, homes, communities, medical information, and work. This will generate a huge amount of data to be analyzed and monetized. Insurers that make use of better data and embrace digital transformation will become leaders in the industry. The Internet of Things will provide immense amounts of data that can inform new ways of assessing risk and tailoring pricing. Insurers will be able to obtain better data for claims settlements and develop new, personalized risk protection services. They can also offer safe driving and home incentives.

8.Overcoming Data silos - Digital transformation requires breaking down the classic silos of front, middle and back offices to transform each into a unified, seamless customer experience. That means leaders must go from running the back office to using digital to integrate the front, middle and back offices. It’s more than just a customer-facing app or even fully automated back-office processes. Digital transformation requires contextual data and a middle office that can move from explaining the past to predicting the future. Claims executives will need to focus on this area to fully leverage the opportunities of digital. Data exists everywhere, and visualization tools let critical information and insights be presented in a clear, understandable manner. This not only provides more data visibility but also the ability to look for historical patterns and trends. Better data visualization improves the leader’s abilities to communicate their strategies and make better decisions. Using more transactional data enables the advisors to continue to leveraging analytics and business insights to drive increased performance.

9.Data Extraction through Automation - Data collection has been at the heart of insurance business processes since the birth of the industry. As insurers advance into the digital age and tackle the vagaries of reshaping business processes to increase success, they need to re-evaluate how they access their data. The new technologies combine advanced machine computing and analytics with the contextual recognition powers of the human brain to accurately recognize printed and handwritten text and transform it to structured digital data. By embracing these offerings, digital insurers can eliminate the complexity and inefficiency associated with the process of creating a structured, digital data set.

10.Commoditization in the Insurance Industry - Consumers generally don’t want a relationship with their insurance company. Many insurance offerings in the P&C (Property and Casualty) area are seen as commodities, something consumers need to pay for – and would even prefer to avoid. Cost is the differentiating factor in this regard for many consumers but it’s also a dangerous one for insurance companies.

The narrative and messaging regarding such insurance products regularly revolve around the pricing aspect. When typing in the term “car insurance” in Google at the time of writing this, the first organic (not paid for) result I get is a web page that allows me to compare cheap car insurance quotes.

The paid results use terms such as “cheap”, “pay less”, “cheapest rates” and “40% less”. The cost aspect is not just key in the messaging of usual suspects such as insurance comparison websites, of which many effectively allow to also “buy” the insurance as they team up with various insurance providers. Some insurance companies have responded by launching online platforms – often as separate brands – themselves. Others have taken over the same narrative of the price.

Wrap Up

Tackling the challenges: Focus on the end-to-end customer experience

Consumers don’t want relationships with insurance companies for commoditized products but they do want to protect what is dear to them and when push comes to shovel the claim in case of an incident is an important moment of truth. It’s then that consumers think about their insurance provider: when the unforeseen happens.

InsurTech is not a silver bullet—the real challenge for insurers is to become more innovative in their everyday business.

Gradually, there has been a shift to look at the overall customer lifecycle and be more customer-centric in order to reduce costs and increase revenue. The general change potential of digitalization is subject to intense market discussions. For P&C insurers battling in a fiercely competitive marketplace, digitalization is a multibillion-dollar opportunity. Using digital tools, insurers can lift profits, while delivering new services, lower premiums and an all-around better experience to their customers.

ABOUT THE AUTHOR

Vartul Mittal is an Independent Director — Technology & Innovation and a Global Business Transformation & Automation leader. He has 11+ years of strong Global Business Transformation experience in Management Consulting and with GICs with a remit to drive understanding and deliver Business & Operations Strategy solutions globally. He is always looking for new ideas and ways that can make things simpler.

A Mechanical Engineer and MBA by education, a Digital Business Transformation & Automation Consultant by profession, he is essentially a Technology Evangelist by passion. He lives his life around technology and is particularly keen to explore the intersection of technology and human behavior. The ease with he can explain the most complex stuff impresses people around him.

Vartul is a notable keynote speaker on Digital Automation and Innovation among Top Universities and International Conferences.