Tag Archives: accenture

Do You Need a ‘Digital Twin’?

It’s become fashionable to talk about how companies need to build a “digital twin” — essentially, an incredibly detailed digital model of the business so they can simulate a range of possible moves and see the results before deciding what to implement in the physical world.

Should you go along with the fashion?

The simple answer is: Yes. And no.

Accenture recently made the case for using digital twins in insurance. The blog notes that digital twins are being deployed effectively in many industries:

“Outside of the insurance realm, digital twins are being linked together to create living models of whole factories, product lifecycles, supply chains, ports and cities. Companies are using them to understand supply chain predictability, worker safety, maintenance and repair costs, and as a risk-free playground for innovation. For example, Unilever is working with Microsoft to develop intelligent twins of its factories so it can test potential operational changes and improve production efficiency and flexibility.”

IBM makes a compelling argument about, for instance, outfitting a wind turbine with sensors producing data about key aspects of the physical object’s performance, such as energy output, temperature and weather conditions. The data can then be relayed to a processing system and applied to the digital copy. 

“Once informed with such data,” IBM writes, “the virtual model can be used to run simulations, study performance issues and generate possible improvements, all with the goal of generating valuable insights — which can then be applied back to the original physical object.”

Kevin Kelly, a co-founder of Wired, paints an even grander version, as usual. In early 2019, he laid out an almost poetic vision of what he calls a “mirrorworld,” which is based on an exact, digital representation of everything in the real world.

“The mirrorworld doesn’t yet fully exist,” he writes, “but it is coming. Someday soon, every place and thing in the real world—every street, lamppost, building and room—will have its full-size digital twin in the mirrorworld.” 

All those possibilities sound great, right? So, what’s the problem with digital twins?

The problem is that no model is a perfect representation of its physical counterpart. It’s easy to think otherwise, especially once you’ve become accustomed to using a model for a time, and confusing a model with reality can be disastrous.

Look at Zillow, which developed a sort of digital twin of the housing market and which bought billions of dollars of houses, expecting to be able to flip them quickly — only to find that its model didn’t quite match reality. Zillow lost $380 million in its latest quarter and said it will take a writedown of half a billion dollars on its remaining inventory of homes. The Wall Street Journal says, “Zillow ran into some of the limits of technology in a business still informed by emotional attachments, personal tastes and other intangible factors.”

Or, look at the models that led to the Great Recession in 2007-09. Financial services giants, including AIG, created derivatives based on incredibly precise models — that ignored the possibility that housing prices could drop. Long-Term Capital Management likewise relied on incredibly elaborate models of financial markets — and needed a $3.6 billion bailout in 1998.

A friend and colleague, Vince Barabba, taught me long ago: “Never say, ‘The model says.'”

A model is simply not adequate justification for any decision that matters. You have to always be able to justify a claim or a decision based on actual evidence and logic, not just on a model that was likely developed long ago, based on assumptions that have become obscured.

Vince’s track record gives him plenty of credibility on models. He held any number of senior corporate positions, including as SVP of strategy at General Motors, where he gave the world OnStar, and was twice the director of the Census Bureau. He has written numerous books on strategic decision-making.

I’ve also seen up close and personal, based on some consulting work we’ve done together, how he uses models but doesn’t entirely trust them. A key tool is what he calls “decision records.” Any time you are making an important decision, including those that go into elaborate models like digital twins, you record the assumptions you’re making. You then revisit those assumptions from time to time to see how they’ve changed and to see if you need to adjust or even throw out your decision — as Long-Term Capital Management, AIG, Zillow and many others should have done.

My recommendation on digital twins: Be like Vince.

Take advantage of the increased digitization of the world to build the best models you can and use them to simulate decisions as much as possible. But don’t trust them too far and regularly revisit the assumptions that went into building them.

Cheers,

Paul

3 Must-Haves for a Self-Service Portal

Today, human support is steadily losing ground to self-service in the insurance industry. For one thing, clients have grown tech-savvy and self-reliant and are willing to solve issues on their own, without waiting to reach a live agent. What is more, as the pandemic interrupted the conventional face-to-face service and support delivery, even the most reluctant customers became favorable toward online channels. Against this backdrop, insurers are implementing out-of-the-box self-service portals or developing custom insurance software

Companies should prioritize the particular needs and expectations of their customer base rather than follow the examples of other self-service portals. Insurance customers, as shown by Accenture in its 2019 Global FS Consumer Study, do not feel comfortable resorting to self-service in every case. The majority would rely on digital channels for tasks like looking up information or submitting personal data. Yet, when it comes to complex financial decisions — purchasing a policy or changing the terms of a contract — over half of the respondents admitted they can’t do without human assistance. 

Given these customer behavior patterns, insurers need to invest in providing exhaustive information, features for handling non-critical issues and account management as self-service options, but refrain from trying to automate all customer interactions. Below, we explore the self-service features that suit the set tasks most.  

A knowledge base 

The idea of customer education meets skeptical attitudes from the majority of insurers. According to Deloitte, 33% of surveyed executives believe that clear product information is a decisive factor for new customers, yet only 16% see it helping retain customers. 

In fact, a detailed and consistent knowledge base is not only an essential self-service channel but also a powerful driver of customer satisfaction. Building a centralized repository of relevant insights, like policy comparisons, legal terms glossary, claims application guides and so on, you give customers an opportunity to find answers and solutions quickly and at any time. 

Through relevant and innovative content, a company can also reach a wider audience and build a reputation as a niche expert. What is more, by analyzing the knowledge base activity, insurers can discern customers’ common needs and challenges and come up with solutions.  

For such a knowledge base to prove authoritative and helpful, the content needs to be of high quality but clear and comprehensible to an average customer, free of complicated terms and industry jargon. What is more, the materials need to be reviewed and updated regularly to remain relevant in the face of your evolving service offer and changes in the insurance industry. Therefore, when choosing your knowledge base format, make certain you have sufficient resources to maintain it at a proper level. 

See also: Self-Service Portals Improve CX

AI chatbots

Conversational AI has taken the business world by storm, becoming a staple of customer relations strategy. What is more, customers have come to appreciate chatbots for their efficiency and increasingly prefer to seek their assistance first. These facts, coupled with the opportunity to cut customer service costs, make AI chatbots a self-servicing option worthy of adoption.  

Implemented in your insurance portal, chatbots can tirelessly handle numerous customer queries and come up with relevant advice in each case. Through simple message commands, users can ask the bot to describe or compare insurance plans, find policies matching certain criteria or help address any current insurance policy concern. Unlike human agents, the technology can provide answers and take actions in real time, driving customer satisfaction up. 

Beyond this, chatbots can be programmed to analyze a customer’s profile information and engagement history and supply personalized product and service recommendations or even craft bespoke insurance policies and quotes. 

Yet chatbots are not without limitations. They are not geared toward making independent decisions and can only perform actions defined by the algorithm. This means that complex issues and requests need to be escalated to human service representatives. Moreover, chatbots are still bad at gauging human emotions and expressing sentiment appropriate to the situation, which can unnerve an already distressed customer. 

Claims management

Traditionally, claims management is one of the most cumbersome and confusing journeys for the insured. The customer fills out forms, gathers a lot of paperwork and photo evidence and submits it all in person for the company to process and reach a conclusion. 

But the digital age has altered customers’ expectations in this regard. They want a simple, speedy and transparent process that can be handled remotely in real time. By integrating a claims management engine into your self-service portal, you can meet this demand. 

The solution should allow a customer to make the first notice of loss to the insurer and then fill out and submit the official claim together with all the necessary photo or video evidence. As the information is processed and checked for fraud, the damage is appraised and the settlement is offered, the policyholder has full visibility into the claim status without the need to contact company representatives.     

Inevitably, there can be complex claims that require the agent’s on-site damage assessment or the personal presence of the insured. But for many other cases where fully digital handling is possible, self-servicing offers customers the freedom to manage their claims anywhere, anytime and allows them to control the process. The solution proves beneficial to insurance companies, as well, as it frees agents’ time spent on customer communication and paperwork in favor of other tasks, while minimizing human errors in the submitted claims.   

See also: Time to Try Being an Entrepreneur?

Summing up: The balance is vital

Despite the extensive reliance on self-service, insurance customers are not yet ready to accept it as the only alternative. As long as there are people who appreciate human touch over convenience and speed, traditional customer support will remain in demand.

Therefore, a hybrid approach to customer service appears to be the most appropriate strategy for insurers. Smartly balancing self-service and human support features and ensuring intuitive access to them all, an insurance company can meet the shifting customer needs and offer an outstandingly rich and dynamic support experience.

4 Trends in Insurance in the New Year

The pace of technical innovation continues to be top of mind in the insurance industry. About 96% of insurance executives say innovation at their companies has increased over the past three years. And global investment in insurtechs hit a record $3.26 billion through the first three quarters of 2019, according to Deloitte.

It’s clear 2020 will see a continuation of technology advancement within the industry. Following are four trends we are seeing on the horizon:

1. User Experience — Carriers, agents and consumers all want the same thing: for the insurance buying process to be fast and easy. Consumers want to research plans, compare options and buy insurance products when they need them on the device(s) they choose, often on their mobile phone (more than half of all search queries in 2019 came from mobile, Google says). And consumers prefer a tailored experience.

According to Accenture, 90% of insurance executives say that integration of customization and real-time delivery is the next big wave and competitive advantage. Additionally, nine out of 10 insurance executives believe a tailored approach will give companies a competitive edge. The firm says the ability to fulfill consumers’ needs at the “speed of now” will be the way to stay competitive, with the world available at consumers’ fingertips via smartphones.

Digital expectations have evolved, and there’s an opportunity to deliver a much better customer experience in the insurance industry. Technology has enabled a world of extreme customized and on-demand experiences. The insurance industry must harness this technology to deliver the superior customer experience that consumers are quickly coming to expect, to stay competitive.

This mobile-first, real-time delivery approach has influenced our marketing, design and development teams to focus on a highly mobile-optimized user experience in every aspect of our operation. We expect a mobile-focused push for the insurance industry in 2020, from both the carrier and broker/agent sides.

See also: Insurance Innovation’s Growth Challenge  

2. Analytics — Data analytics is growing across industries, given its potential to help businesses get ahead. Data-driven organizations are 23 times more likely to acquire customers, six times more likely to retain them and 19 times more likely to be profitable, McKinsey Global Institute says. The insurance industry is no different.

The one constant across all our largest and most successful partners is their obsession with data and reliance on specialized technology. One such example is with customer relationship management (CRM) companies. CRM companies (Salesforce, and others) are developing industry-specific integrations, such as conversion endpoints, to track performance metrics, allowing for more real-time recording of important metrics. Insurance companies that take advantage of these tools have a major competitive advantage over those that do not, due to their ability to accurately measure and track important metrics like customer long-term-value (LTV), conversion rates of lead data and marketing return on investment (ROI).

3. Sales Enablement — Increasingly, carriers and agents are seeking more information, content and tools to engage buyers and help them to move to purchase, as well as address future needs post-purchase. Use of sales-enablement tools is on the rise, with only 20% of organizations reporting using them in 2013 and over 60% using them in 2019, according to CSO Insights. Agents want to understand who the lead is, what the person needs and how agents can best help drive more effective communications and fuel analytics and future programs. Agents also need these systems to work with other technologies—from mobile app, to CRM—to enable access to real-time information and a more seamless process.

4. Compliance — Compliance will and should remain a top priority for the industry. As consumer data protection becomes more of a focus in the media, we can expect to see more states moving toward a more European GDPR type data protection policy. California is one of the first states to adopt such a policy with the recently adopted California Consumer Privacy Act (CCPA), which came into effect Jan. 1, 2020. With more legislation focused on protecting consumers, we expect a stronger push toward industry-standard software to verify a company’s right to contact consumers.

See also: Blurring Boundaries Drive Innovation  

In a world that is moving toward better technology solutions daily, it is important for carriers, brokers and agents to keep up with these changes and constantly look for ways to interact the way that digitally savvy consumers want to interact.

Insurers’ Imperative to Modernize

McKinsey recently published a paper titled IT Modernization in insurance: Three paths to transformation, in which the report authors say: “Insurers too often treat systems transformations as IT projects rather than acknowledging them for what they are: overall business transformations.”

For insurance, the transformation at hand is moving from a disconnected, product-centric sale to a hyper-connected, consumer-centric buying experience. The challenges are well-known and include analog processes, siloed data and a distribution strategy — consumer-adviser-insurer — that has traditionally left carriers one step removed from their own customers.

As McKinsey said, overcoming these challenges takes more than an IT project or two. Insurers need a framework for evaluating opportunities to modernize, and the best place to start is by taking a deep dive into the market drivers: customer acquisition and retention, as well as operational effectiveness and cost reduction.

Consumers Are the Key

This observation comes as a surprise to no one, yet a survey of insurance customers by Accenture found that declining loyalty and poor customer service has resulted in $470 billion in insurance premiums “up for grabs.” Clearly, our ability to meet modern consumer expectations is a business imperative.

There are two sets of consumers to keep top of mind as the insurance industry takes steps to modernize: the customers you already have and the consumers you are trying to convert. Both types are online (90% of adults in the U.S. use the internet, according to The Pew Research Center), so leveraging digital channels in our efforts to acquire and retain customers is a classic no-brainer.

Customer acquisition in the digital age presents an unprecedented opportunity to deliver an online, consumer-centric buying experience no matter what channel the sale converts through. In fact, agents continue to have a very important role to play in the insurance buying journey, so the more we can arm them with consumer data, collected from online interactions, the better. Moreover, by tracking client behavior and measuring conversion, companies are also learning about what works, and what doesn’t, which is increasingly imperative to maintaining competitiveness.

Likewise, digital channels and data are critical to retaining customers and building brand relationships. For example, car insurance companies track driver behavior, and health insurance companies are providing fitness trackers BECAUSE THEY WANT THE DATA to help manage and reduce risk. At the same time, these trackers are also enhancing customer relationships with the brand and potentially benefiting the customer by reducing rates based on behavior – a classic win win.

See also: Thinking Big for True Transformation  

When it comes to acquiring and retaining customers in the digital age, building relationships is critical, and data is how it’s done. Today’s consumers have different expectations, and there are typically many more touch points, resulting in more data that can be put to work in service of these relationships.

Operations: Managing Risk and Reducing Costs

Cost reduction and operational effectiveness are, for many businesses, the main driver for modernization, and the insurance industry is no different. When evaluating opportunities to modernize operations, consider where you are likely to get the biggest return.

Insurance professionals are in the business of reducing risk, so it stands to reason that risk management is an integral part of the business of insurance as well as a great example of where modern technology can deliver meaningful ROI. Data analytics makes it easier to identify riskier populations and customers, improve product development, targeting and underwriting and ultimately share risk more effectively. Data that isn’t available and actionable slows the pace of business, increases the chance of human error and limits the ability to make data-driven decisions.

Other opportunities to modernize and deliver savings include tackling distribution challenges, specifically reducing the cost of customer acquisition and improving agent efficiency. Another McKinsey report noted that the individual insurance companies that will outperform competitors over the next decade will do so, in part, by “using analytics to build competitive advantages in distribution.” Superior distribution networks enable insurers to reach new customers while keeping costs low to ensure profitability.

Next Steps

Perhaps you are on one (or more) of the three paths McKinsey describes: modernizing the legacy platform, building a proprietary platform or buying a standard software package. When the question is build vs. buy, conducting a thorough build-vs.-buy analysis is a great way to compare costs, timing, flexibility and user experience. It’s an effort, but worth it when you consider the cost of missed opportunities.

For example, insurtech disruptor Lemonade wrote $57 million in premiums in 2018 thanks to its consumer-centric buying experience — a $57 million missed opportunities for carriers that sell renters and homeowners insurance. Another much larger example is the middle market opportunity, which Accenture estimates to be around $12 trillion in missing coverage potential and $12 billion in revenue to be gained by serving it.

See also: How to Evolve the Business Model  

For some companies, the build-vs.-buy choice is easy. Partnering with an insurtech to address critical opportunities is typically much faster and less risky than other approaches. Regardless of the modernization path you choose, start with your top business challenges and identify opportunities for quick wins. Remember, modernization isn’t an IT project. Meeting modern consumer expectations is a business imperative; exceeding them is how insurers can stay relevant and competitive.

Do Consumers Trust Their Agents?

I just read this article, which includes this:

“According to an Accenture study, only 27% of consumers consider insurers to be trustworthy. And Deloitte found that only 11% of people have strong trust in insurance agents and brokers.”

I’ve seen studies like this over the years. What is usually missing from these statistics is the Q&A related to the insurer or agent OF the consumer. If you ask consumers if THEIR insurance agent is trustworthy, the numbers are almost always WAY higher than those above.

The same is often true of politicians…when the question just refers to “politicians,” polls imply that they are universally despised, But ask people what they think of a politician they voted for and the statistics are completely different.

As has been said, “Torture numbers, and they’ll confess to anything.”

The driving force behind insurance policy evolution is litigation and regulation where the difference in coverage, according to the courts, can be the tense of a verb or a punctuation mark.

See also: Insurtech and the Law of Large Numbers  

Berkshire just came out with a policy called “THREE” that combines property, business income, general liability, auto, professional liability, workers’ compensation and cyber liability (I’m probably forgetting something) insurance…IN THREE PAGES. And it’s going to be clear to business owners what is or isn’t covered?

Inarguably, the most important “customer experience” is the one that takes place at claim time. Insurance policies are complex, legal contracts whose terms and conditions have often been interpreted over decades. And the reality is that virtually no consumers read them…. Far too many insurance practitioners don’t even read them. I doubt that reducing dozens of pages to two to three pages will change that metric. When it comes to making contracts understandable, less is not necessarily more.

By the way, there is no such thing as “fine print” in regulated insurance policies.