• Vivek Agarwal, President at BFSI, HLS and Corporate Development, Tech Mahindra


• 18.02.2023 05:15 am
#insurance

Insurers were forced to take the pandemic in their stride. Whether it was enabling their vast workforces to be productive from home, or ensuring clients and employees felt supported, many, through sheer grit and determination, have emerged stronger on the other side.

The key to success was the rapid deployment of digital tools to address virtual sales, drive greater collaboration, and upgrade networks and enterprise security - in short, keep their businesses operating as usual in remarkable and unknown circumstances. The pandemic catalysed the need for CEOs and boards to invest in new technology right across their organisation. While many had been on the digital transformation pathway for years, the pandemic served as a vital wake-up call that they needed to move faster.

According to KPMG, 85% of insurance company CEOs say COVID-19 accelerated the digitisation of operations, while almost four in five believe the pandemic brought a new sense of urgency to create new business models and revenue streams. As per McKinsey Global Insurance Pool Statistics, within the last two years, digital sales have outpaced telephonic sales across the life and property & casualty (P&C) businesses.

Historically, the insurance industry has been slow to embrace change, so acknowledging the necessity of digital transformation is a step in the right direction. Embracing change will allow insurers to keep pace with their customers, who have already moved forward and are becoming increasingly comfortable with buying policies online.      Recent industry reports indicate that millennials want personalised insurance policies. High-quality digital experiences should be standard. 

Acknowledging the need for digital transformation, however, is just one small part of the journey. Knowing how to select the right technologies to spearhead the revolution is a different story altogether. While a handful of businesses have succeeded, many lack a coherent view of the key technologies to focus on implementing, while almost a third struggle with quick decision-making. 

For the organisations who are yet to initiate full-scale digital transformation, here are three of the biggest technology trends disrupting the insurance sector.

Cloudification

An increasing number of insurance providers are harnessing cloud capabilities for both their core and noncore workloads. Hybrid and multi-cloud approaches are becoming prevalent. This shift, along with legacy decommissioning, helps businesses to reduce both capital expenditure and operational expenses and allows them to be agile and responsive enough to keep pace with the rapidly changing marketplace. 

In our personal experience with large-scale cloud migration and infrastructure consolidation, insurers can expect to benefit up to 25% of the total cost of ownership (TCO). In many cases, these savings are imperative to justify the business case and fund further transformation. 

Cloud technologies can aid and improve governance and compliance, minimising risk for businesses in a changing regulatory landscape. The solutions are now so sophisticated that they are more reliable than traditional, manual solutions, offering the flexibility, agility, and scalability required to meet changing customer expectations. Cloud platforms also offer secure data storage which can be accessed from anywhere, enabling businesses to harness intelligent automation and advanced data and analytics - two trends we discuss below.

Intelligent automation

In a year likely to be defined by fine margins, intelligent automation can boost business efficiency and create smart processes. For insurance businesses, intelligent automation can significantly save time, thus creating operational cost efficiencies - for example, automation can reduce the cost of a claim journey by 30%. Generating sales leads and processing high-frequency low cost claims are two areas ripe for automation. Staff can spend less time analysing data, and reallocate their time to more meaningful, higher-order work. 

Subsectors such as the global reinsurance market are under increasing pressure due to factors like everchanging capital adequacy requirements, frequent weather events leading to higher claims, and the changing business environment due to geopolitical and economic issues. Intelligent automation solutions can enable reinsurers to improve their profit margins and offer value-added services such as improved underwriting margins, lower expense ratios to customers.

However, achieving a high degree of automation requires profound changes to IT architecture, as every layer of operations is affected. For example, policy administration and claims systems must be overhauled in response to a higher overall level of IT intensity, the introduction of new robotics and script systems, or updated workflow engines. 

Data & analytics

In-house and third-party data has become insurers’ most valuable asset. A rapidly digitising society is ramping up the number of touchpoints that generate data - be it government, environmental, individual, or even location data. This can be used to enhance the capabilities of big data, artificial intelligence, machine learning, deep learning, and other complementary technologies like robotic process automation (RPA).

Best-in-class insurance companies are already developing and deploying these intelligent decision support mechanisms to augment and transform customer service, underwriting, pricing, claims, and many other ancillary functions. It’s reported by McKinsey that, with advanced data and analytics capabilities, the leading insurers saw loss ratios improve three to five points, new business premiums increase 10 to 15%, and retention in profitable segments jump 5 to 10%, thanks to digitised underwriting.

The use cases can be as diverse as life & annuity (L&A) insurers predicting customer behaviour, identifying lapse patterns, and improving cross-selling capabilities; P&C insurers focusing on fraud analytics and reinsurers focusing on claims automation; and insurance firms focusing on increasing profitability. As such, taking the steps to build new infrastructure and invest in new models will add a competitive edge for insurance companies. 

The rewards of a digitised insurance sector are numerous. Intelligent automation, improved data analytics and cloudification will help companies not only grow and become more resilient but meet rapidly changing market demands with secure and scalable infrastructure. A sustainable transformation approach tying together initiatives will go a long way to achieve these outcomes. The onus is now on insurance companies to establish this, move swiftly and unlock the benefits that will undoubtedly shape the defining businesses of the future.