Published on in Financial ServicesDigital Transformation

Creating insurance policies has always been about data.

Say you were taking out a life insurance policy. Your insurer would collect information about you – your age, gender, illnesses, basic lifestyle – then align that with generic data on mortality and morbidity to create your policy.

But that data could be limiting. Whether you ran to work every morning, or ate fish and chips every night, your insurer might judge that you presented the same risks as others in your demographic ‘bucket’ – and charge the same premiums.

With the explosion of digital technology, however, real-time data is being generated on everything from our personal fitness to the status of machine components.

There’s now an opportunity for the insurance sector to use this data to do things very differently. However, taking advantage of these huge data volumes requires refocusing the business’ activities – and implementing automation.

Insurance leaders are aware of the potential. A quarter even say that robotic process automation (RPA) and artificial intelligence (AI) are the technologies that will most change their organisation in the next five years (26%).

But what do we really mean by automation? And how can leaders successfully implement these technologies and use them to create the insurance services of the future?

This is a practical guide to automation in the new age of insurance.

Automation, RPA or AI – what’s actually involved?

Automation can be difficult to unpick, because it’s a term that’s often used interchangeably alongside two specific technologies: robotic process automation and artificial intelligence.

A clear understanding of what the technology is – and does – is key to scoping what automation can do for each business.

RPA, as the name suggests, involves using software to complete repeatable tasks, through models like decision trees or flow charts. To put it another way, picture someone sitting inside your machine, filling in forms for you.

By contrast, AI involves learning: it’s an algorithm that uses data to get better at what it does. This is more akin to cognitive intelligence as opposed to a machine just doing what it’s told.

By accelerating data collection within the business, RPA is essentially the gateway towards intelligent automation, then AI takes things one step further.

Automation in action

One example of how the two might work together in practice is in claims processing. Think of all the emails, calls and messages an insurance organisation receives relating to claims.

Robotic process automation could be used to input and process simple or “standard” claims, while passing exceptions on to human colleagues. Building up this bank of data would help to add value to the business by informing pricing and risk profiling.

Artificial intelligence could then be added in to learn from human choices in the exceptional cases: teaching itself to handle increasingly complex enquiries over time – and further accelerating the claims process.

How automation can transform the business

Automation isn’t just about improving individual processes, but an opportunity to transform how the organisation works and the wider business model. Importantly, it’s not just about cost-saving, but delivering lasting value and change in the business.

Individualised policies for customers

Automation can enable insurance companies to transform their offering, by using data to develop more personalised policies for consumers and businesses. For example, health insurance providers could offer discounts for consumers that demonstrate healthier behaviours, through data on activity levels or health check-ups.

As customers and clients, we’re now keener than ever for products customised to us. Delivering services more tailored to individual needs will help insurance companies to differentiate themselves – but that depends on data integration and automation.

From repair and replace to predict and prevent

With a greater volume of more detailed data, insurers can move from responding to incidents to helping prevent them.

Think of a manufacturing business. By tracking the health of factory machines right down to individual components, insurers can not only create more accurate predictions about their likely operational lives, but actually recommend timely repairs to stop the machine from breaking down, saving money on both sides.

In this way, automated data collection can reduce the severity of claims or prevent them altogether. And in the future, insurance companies can work with partners to develop completely new products, but integrating with other organisations’ IT systems will be key.

A more positive company culture

Building automation into the organisation can not only deliver operational change, but also contribute to positive culture change.

Automating mundane, routine tasks like data entry can help individuals to focus on tasks like decision-making, helping customers or developing new offerings, which are higher value – and more rewarding.

Meanwhile, the focus on preventative rather than reactive activities can help to change the role of the industry as a whole. Organisations can focus on getting things right for the future, rather than addressing the mistakes of the past. That will help to create a culture based around social purpose – that is of growing importance to both employees and customers today.

Charting the right path

With the breadth of potential presented by automation, it can be difficult to know where to start. But most successful strategies follow a similar journey:

  • Understand how (and why) you want the organisation to change

While automation is applicable to many processes in the insurance business, it shouldn’t be an objective for its own sake. Without a clear sense of direction, insurance companies can end up pursuing a number of disparate pilot projects – wasting time and investment.

As a leadership team, ask yourselves what you’re trying to achieve. Is it about improving, or increasing, interactions with your customers? Do you want to differentiate yourselves by offering a unique service or to transform your partnerships with brokers and clients? Is it about becoming more agile, so that you can stay ahead of the trends you see in your data?

Once you understand why you’re changing, you can work out the best way to do it.

  • Look at your IT and data landscape

As in much of the financial services sector, insurance businesses have often pursued a “build it, don’t buy it” policy – and so will be working with a number of legacy systems. This can make the process of automation and data management as a whole much more complex.

Before undertaking automation, it’s vital to understand the limitations of the current IT landscape: what can be moved to the cloud and what will need to be phased out over time. Then you can make sure your automation strategy compliments where you are now – and where you will be.

  • Co-create your automation strategy, from A – Z

As with the wider technology landscape, automation is developing at speed. It’s better to work with an external consultant, to gain the benefit of the latest expertise, than to build something that might rapidly become obsolete.

The approach that we’ve found delivers the most value is to first use an automated discovery tool to understand where tasks are currently being completed.

Then, RPA can be implemented to automate the tasks that can be automated, while AI is built in to understand and support the tasks that can’t.

Creating a twenty-first century insurance company

Many insurance companies may not have been as fast to adopt automation as other financial services businesses (in part due to the lower frequency of interactions with customers).

But insurance leaders are well aware of the opportunity – and now have the chance to use automation to create lasting value in the business.

What’s critical is not to regard automation as a purely cost-saving measure. Instead, it’s about transforming services – and the role of insurance – to create an organisation ready to meet the needs of the twenty-first century.

By taking a structured approach, and considering the role of automation in the overall future of the business, insurance companies can take advantage of this exciting new technology and roll in the new age of insurance.

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