Tag Archives: automation

Insurers Turn to Automation

Insurers that are heavily dependent on traditional business models have struggled over the past year with financial strain. But automation presents an opportunity to establish short-term successes to speed up recovery and long-term results that can stimulate growth by accelerating digital transformation.

Here are the ways automation can help create resiliency in insurance organizations, ensuring that operations run smoothly and effectively:

Improving Customer Service and Employee Experience

Customer expectations are at an all-time high as digital-native brands like Amazon continue to dominate and set standards that are difficult for other companies to copy. These standards don’t only appear in business-to-consumer transactions but also in business-to-business transactions that include promoting product innovation and mix. Insurers strive to deliver high-quality customer experience, but there is still a gap between what customers expect and what insurers are delivering – especially when it comes to being available at all hours and on all channels. 

See also: New Tool: Cognitive Process Automation

Typically, at an insurance enterprise, when a customer calls into the support line with a question about billing, the inquiry goes straight to a call center agent. The agent must spend time asking a myriad of repetitive follow-up questions to confirm a customer’s identity and understand the situation, then spend more time searching for a customer’s account information across multiple systems just to identify the issue. With automation, as soon as the call comes in, a software robot begins aggregating the relevant customer data for the agent. Through a combination of customer sentiment and behavior analytics, the robot then pulls actionable information into a streamlined application with quick access to next steps for the agent.

This seamless interaction means a customer has a much quicker, more personalized, positive experience, and the agent is ready with the right information to do the job efficiently and bring to the customer request to an appropriate resolution. 

It is essential that insurers invest in technology that drives a seamless digital experience at every communication channel – whether it be a chatbot, a mobile app or an interaction by phone. When an insurer is available in this capacity, it can provide customers with an easier experience and provide servicing or resolve claims at a lower operational cost. Intelligent automation links the ecosystem of traditional insurance systems with technology capabilities.

Streamlining Business Operations

In addition to the front-end benefits to the customer, automation is key to optimizing internal, time-consuming manual processes. Automation means insurance organizations can react more quickly to increasing demands from policyholders, agents and partners with innovative, customized and transparent products and pricing.

Insurance is a long-established business with tons of existing systems, including spreadsheets, PDFs, scanned documents, applications like Duck Creek and Guidewire and data from third parties such as LexisNexis. According to Celent in 2018, 45% of insurance CIOs identified heavy, disconnected and duplicative legacy systems as a key inhibitor to digital transformation. And this reality hasn’t drastically changed. According to KPMG’s 2020 CIO Survey, insurance CIOs have “improving operational efficiency” as their #1 business issue that needs to be addressed. The primary reason for lagging operational efficiency is being disconnected and multi-tech systems with non-standardized data.

See also: Keys to ‘Intelligent Automation’

Automation can be created on top of existing systems, meaning these systems can be integrated so that data and underlying processes can be much more streamlined, enabling an easier digital transformation. Once the legacy systems are integrated with automation, it’s easy to create hands-on and hands-off robots that automate repetitive tasks, reduce process costs and cycle times and free time to focus on higher-value work like pursuing new business.

Processing claims end-to-end is one high-value example of how automation can streamline operations. To begin processing a claim, an agent must collect customer information from a variety of sources, including policy administration systems, documents, third-party systems and claims processing systems. Manually looking for the right information across multiple locations – virtual or not – can be time-consuming. Once the information is collected, entering it manually into the system is a frequent source of mistakes. 

The consequences of redundant and incorrect data entry range from delays and harming the customer experience, to errors and omissions in claims information, to potential fraud and leakages – all of which are damaging to the business. Hybrid automation – the process of using a combination of unattended robots, which send cases to humans for decision making, and attended robots that sit on an employee’s workstation and trigger the employee to take a specific action to start a workflow – can take care of the entire process start to finish, eliminating many of the unnecessary mistakes while saving time and resources.

Navigating Future Disruption

This past year of unprecedented changes and hardships has CIOs and CEOs preparing for expanded digital change. Some insurers are already using automation to accelerate digital transformation and see results in their core operations, including claims, customer service and new business intake. 

The typical response to new customer needs are large, long-term investments, ranging from core system modernization to multi-channel integration, that are slow to get off the ground and drag on the time-to-value. When automation is a core technology, digital transformation can be delivered at speed, meaning faster service and faster return on investment. Modernized, automated solutions mean CIOs and senior business leaders can build the flexibility to adapt to market demands more quickly, deliver improved customer experiences and advance the business digitally transforming the legacy environment.

11 Insurtech Predictions for 2021

Despite what we all feared in March, insurtech has continued to flourish, with lots of capital supporting the sector in public and private markets, closer integration between incumbents and startups and promising solutions for longtime needs in SME and cyber. Keeping up the annual tradition, here are my 11 predictions for the insurtech market in 2021.

1. Do you want insurance with that? Insurance will be embedded in every financial and retail transaction

Because no one loves shopping for it, we will see more insurance being sold as part of another transaction, where the user has a high intention to buy. “Embedded” has been a buzzword in fintech for several years, best illustrated by Buy Now Pay Later (BNPL) players like Affirm and Klarna. Embedded insurance started with travel insurance and extended warranties sold at point of sale, like Square Trade and Assurion. Branch Insurance now sells home and auto as part of the mortgage process, and Matic is embedding with mortgage servicers. 2021 will bring opportunities to embed insurance into transactions, with the goal being delivering a seamless experience of product plus protection.

2. 2021 will be the year for Plaid for Insurance

The original Plaid provides infrastructure to connect banks to financial apps like Venmo, which need access to a consumer’s bank account, so the user can take money from a bank and send it via Venmo, to the recipient’s bank. The explosion of financial apps drove dramatic growth at Plaid. Yes, the Department of Justice has sued to block the acquisition of Plaid by Visa. Worst case: Plaid is forced to go public at a valuation way above the $5.3 billion offered by Visa. In 2020, at least seven “Plaid for Human Resources” were funded. Data connections and enablement are critical across life, health and P&C insurance. In 2021, we will only see more pitches for Plaid for Insurance, and some of those pitches will be winners.

3. The robotic uprising: Automation will take over routine processes and improve customer experience

Automation will be used to support and empower the humans who are still in the process, starting with claims. Startups will accelerate the sale of automation to incumbent insurers, leading to improved customer satisfaction. Who wants to call an insurer to check whether the policy includes glass coverage? Consumers prefer to use their cell phones to text or speak, submit the claim and schedule the windshield replacement service. To show how quickly this change is happening: In 2019, State Farm ran ads mocking Lemonade’s bot; in 2020, State Farm led a venture investment in Replicant, which provides Voice AI to support human call centers. Faster, better customer service, which is cheaper for the carrier: Automation is a win-win with unstoppable momentum.

4. Playing for keeps: Deeper partnerships between incumbents and startups, accelerated by the pandemic

At the beginning of the insurtech phenomenon, way back in 2015, insurers responded by creating innovation groups and adding innovation KPIs to employee reviews. Following the law of unintended consequences, the result was incumbents starting a lot of experiments and proofs of concept with startups. It was frustrating all around, and many of those experiments failed. Now, insurers have moved the decision making back to the operating teams, and those teams are choosing partners to last. The pandemic has focused the efforts of incumbents. That focus will only get stronger going forward, as incumbents understand that they depend on startups to deliver the organization’s goals.

5. More startups will go full stack

Insurtechs will continue to take off their MGA training wheels. Following the high-profile IPOs of Lemonade and Root, 2021 will see full-stack carriers multiply. While the managing general agent model has the advantage of being capital-light and enables a startup to get to market quickly, structuring as full stack gives the startup maximum control over its product and customer experience. Capital is available to build a carrier, coming from multiple sources, as evidenced by sizeable fundraises by Pie, Kin, Hippo and several life insurance startups.

6. SME market will finally get the solutions it needs

At the end of 2019, I swore it was the last time I would predict the success of insurance solutions for SME. But there are finally some serious signs of success and traction in this market. Embroker, Vouch and Next Insurance continue to grow. And Bold Penguin has integrated with the flow of existing insurers, delivering value where incumbents could not. Finally, SME will have some good choices in protecting their businesses, thanks to persistent insurtechs!

See also: Has Pandemic Shifted Arc of Insurtech?

7. Achieving scale with coretech

Incumbents are yearning for alternatives to existing core systems, with an average age over 15 years, antiquated programming languages and vendor implementations measured in years. Two trends are providing hope here: no code/low code and coretech, delivering cloud-native core capabilities. The challenges of 2020 encouraged more incumbents and insurers to start limited implementations of no code and coretech. In 2021, we will start seeing a few insurers adopt these new approaches at scale.

8. Cyber insurance will lead the market in delivering dynamic risk protection

There have been many startups in cyber insurance, covering one of the existential threats for companies. Some startups have struggled by aiming at companies that are too small to afford the premium; others have chosen the wrong threat assessment partner and taken unwarranted risk. The whole market continues innovating and growing, which is good news, because cyber threats are also increasing. By combining real-time threat assessment with insurance, startup cyber insurers will deliver dynamic risk protection, enabling their customers to reduce risks as soon as they are identified. That may be a model for future real-time risk coverage in other business lines.

9. Parametric coverage will surge

Insurtechs will tackle claims costs and delays by eliminating the claims process, via parametric solutions. Defining a loss by reference to a standard objective index like rainfall in a specific geography is no longer reserved for markets like drought risk in developing countries. Now, insurtechs are delivering parametric cover for a range of risks, including earthquake, wind and cyber outages in developed countries. One driver is the user experience, where the insured no longer needs to trust the insurer to pay an indemnity claim promptly. Look for more kinds of risks to be covered by parametric solutions in 2021.

10. Record support for insurtechs at all stages

The pace of both early- and later-stage investments in insurtechs proves that investors remain enthusiastic about the market. Valuable business models built in fintech will serve as examples to its younger sibling, insurtech. There is still plenty of insurtech innovation to go around, and abundant capital to support it. We will see new launches and a record amount of capital raised across insurtech in 2021.

11. More big exits

The public market in 2020 has been the story of hot money looking for a home, and eager to pay up for future growth. Insurtech carriers Lemonade and Root went public via IPO, and Hippo is expected to become public either via initial public offering (IPO) or special purpose acquisition company (SPAC). Metromile became the first insurtech carrier to be acquired by an SPAC. These successful exits will drive continued investment in insurtechs that are taking big swings, and we will see more public exits. We can also expect more insurtechs buying insurtechs, like Bold Penguin’s acquisition of Risk Genius and Next Insurance’s purchase of Juniper Labs. The target will be filling a specific strategic need for the acquirer, and buying is faster than building.

In addition to going public, insurtechs will find other options, including strategic exits. Prudential’s 2019 acquisition of Assurance IQ created a lot of hope, but insurers have not yet shown a broad willingness to pay startup valuations. Brokers, always ready to spot the main chance, have made a couple of acquisitions and can be counted on to find deals that deliver focused value to their existing clients. Verisk, Duck Creek, Guidewire all have public currency, and at least the latter two have created long lists of partnerships with startups. There will be multiple insurtech exits in 2021, ranging from additive deals between insurtechs all the way to more IPOs.

New Analytics for Small Commercial

Analytics can be a great equalizer in every industry. It’s why 90% of respondents to a McKinsey survey call their analytics investment “medium to high” and another 30% referred to the investment as “very significant” proof that the surveyed understand the value that analytics possesses.

Those investors—especially the commercial insurers—understand the value of analytics and get their money’s worth. In addition to improving sales targets and reducing churn, analytics can increase profitability when it comes to underwriting and selecting risk.

Still, the full potential of analytics goes beyond the insights it provides insurers. When merged with modern technology, data and analytics can fuel efficiency, accuracy and productivity. When used within the decision engine to drive automation, for example, data and analytics can help insurers expedite processes and improve customer experiences, even without human intervention.

Automated reports and actions provide insurers new ways to optimize their day-to-day operations. However, the marriage of automation and analytics is especially vital for the small commercial market as they contend with higher volumes of policy quoting and writing. Using predictive models, automation can reduce the amount of human effort it takes to sell and service policies for small businesses.

Analytics and automation present opportunities to optimize every facet of growing market share for small commercial insurers if properly applied. The sooner that insurers embrace the two, the better off they—and their customers—will be.

Analytics and Automation Can Deliver

When it comes to risk assessment for small businesses, insurers are usually hampered with limited or even misleading information. Unfortunately, this can result in a gap between a risk-appropriate rate and the quoted premium. Thanks to automation and analytics, however, that sort of disparity can be a thing of the past.

See also: What Predictive Analytics Is Reshaping  

While there are many ways analytics and automation can be used to improve the small commercial insurance industry, there are three particular areas where major improvements have been demonstrated. For insurers that are on the fence about committing to analytics and automation, here’s where their influences will likely be most visible:

1. Simplified Applications

By automating customer quoting and underwriting, insurers can phase out the process of collecting troves of information on an application. With reliable third-party data sources, automation can fill in many of the blanks present on typical applications. Insurers will then only need to ask for what’s relevant for the predictive model to assess the risk and provide direction on pricing.

In the same vein, the automation of processes and decisions empowers insurers to use straight-through processing for new applications—quoting and binding policies entirely through an e-commerce experience, without involving staff or consuming staff time. Typically, this is a far more streamlined process for both the insured and insurer, and delivers improved customer experiences.

2. Expedited Claims Processing

Small businesses are acutely sensitive to how long it takes insurers to pay claims and how good (or bad) their experiences are. Analytics helps insurers triage claims while suggesting different processing options.

According to a LexisNexis study, the availability of this data helps shorten processing cycle times by up to 15%. For example, through IoT (internet of things) devices, an insurer can detect water heater leaks and other high-risk problems in real time, enabling the insurer to anticipate potential claims and possibly even prevent them.

Of course, being fast is only part of the equation—the process must also be accurate. Thankfully, automation and analytics improve processes by catching overlooked data points. When sophisticated analytics are applied against a large sample of detailed claims data, the resulting insights can, for example, highlight the best way to get an injured employee back on his or her feet and offer a customized plan to do so.

See also: What’s Beyond Robotic Process Automation  

3. Improved Risk Identification

By using reliable third-party data, such as information available through a data consortium, insurers can more quickly and accurately identify risk—even if it’s in a sector where they have little or no experience—and ensure that risk-appropriate pricing is quoted. Analytics thus becomes a valuable growth engine for insurers to confidently expand into different business lines and regions.  In an environment where 40% of the smallest organizations have no business insurance whatsoever, insurers that embrace modern technology could reap significant rewards. By combining analytics with automation, the small business insurance market could be transformed—which would be welcome news for both insurers and their customers.

The Future of Work: Collaborative Robots

Recent developments in robotics and artificial intelligence have changed the playing field for automated technologies. (Here is an earlier blog on the topic.) Historically, automation was beyond the reach of small and medium-sized companies. Robotics were costly, required highly sophisticated programming expertise, took months to integrate and could only perform single, discrete tasks.

In 2012, the advent of artificial intelligence (AI) was a game changer. AI brought collaborative robots to the market — robots that see and feel like humans, learn (including integrating new data sets and information) and perform multiple tasks. These collaborative robots are also more cost-effective and easier to integrate, making them available and attractive to small and medium-sized businesses.

AI and robotics are now transforming many traditional labor-intensive industries, such as farming, construction, factories and fast food. While Amazon continues to be a global leader in leveraging AI and smart robots, there are plenty of examples of smaller businesses across the country embracing these new automated technologies.

Agricultural farms are using automated tractors and drones to help with growing their crops. Construction firms are purchasing automated brick-laying machines (to lay 3,500 bricks per day). Restaurant owners are investing in new automated machines that can store, prep and cook fast food in a highly controlled environment without any human intervention.

If the adoption of these new automated machines continues, there will be fewer jobs and payrolls in these industries. Over time, the job and payroll loss will affect insurance carriers that specialize in writing workers compensation insurance for these industries.

Historically, technology’s disruption was limited to blue-collar workers; however, AI technology now has its sights set on white-collar workers, including insurance underwriters, claims executives and legal professionals. The insurance industry, which has not been easy to disrupt, is primed for transformations due to developments in AI and automation.

Two years ago, Cambridge University predicted that insurance underwriters were vulnerable to automation. Since that time, we have seen a greater demand among U.S. carriers to invest in new AI technologies that allow them to automate the underwriting and settlement of claims for small commercial insureds. Given the shortage of new talent available to fill expected insurance and claims executives retirements, coupled with new AI technologies, we expect this trend to accelerate.

See also: Measuring Success in Workers’ Comp  

Developments in AI and automation are already changing the U.S. legal profession, one of the most regulated and specialized professions in the U.S. — McKinsey estimates that 22% of lawyers’ and 35% of paralegal tasks can be automated today. A recent HBO documentary, “The Future of Work,” supports this prediction. It highlighted how LawGeex, a new AI-driven computer software, performed against skilled corporate lawyers on a common task — analyzing complex legal documents. LawGeex proved its ability to review and interpret the documents, identify potential legal issues and provide substantive advice to a client in half the time — and with much greater accuracy — than the corporate lawyer.

While LawGeex and other AI technologies will not displace lawyers in the short term, it will exert pressure on lawyers to shift their time to more highly skilled work – such as negotiating and deal structuring – and away from research, writing and reviewing documents. The result could significantly change law firm practices and economics.

Have you considered how robots, AI and automation will change the workplaces of your insureds – and your own company? Stay tuned for my next blog, “Navigating the Fourth Industrial Revolution,” for ideas on how to navigate AI and developing technologies.

Automation Lets Compassion Scale

The modern workers’ compensation system was devised to provide a guarantee of care and medical treatment to injured workers from their employers. Organizations also are expected to offer guidance on the resources available to injured workers as well as how to navigate issues such as finding the right doctor and taking time off work. In short, organizations are expected to be compassionate toward their injured workers and get them back to a productive and motivated state as soon as possible. The reality, however, is that we’ve shifted very far away from these principles.

Today, claims teams are overwhelmed by the number of cases they are expected to handle, which often hamstrings their ability to service injured workers the way they would like. Additionally, skepticism has crept into the claims process, establishing a more adversarial relationship between organizations and injured workers. Feeling neglected or disrespected, many injured workers then turn to litigation for a remedy. According to a report by the Workers Compensation Research Institute (WCRI), some states now see attorney involvement in more than 50% of workers’ comp claims, which can add significant costs and duration to claims. This is a broken system for everyone — workers, organizations and the claims agents caught in between.

So, how do we get out of the present situation?

The Human Element

The claims process has eroded because of a lack of compassion and awareness. Claims are filed by real human beings — often at their most vulnerable. These are people who are physically hurt, so they are already in pain. They also face the prospect of being away from a job they need to pay their bills and are uncertain of when or how much they will be paid while out of work. Tack on the fear, whether warranted or not, that someone will replace them if they are gone from their position too long, as well as the complications of the claims process. If they don’t hear back from the claims agent handling their case or if bills are taking too long to process, injured workers will turn elsewhere.

At the same time, no one goes into claims adjustment (or at least they shouldn’t) thinking, “I want to make this person’s life as difficult as I can. I want to prove they are trying to milk the system and, therefore, will hold up their claim as long as possible.” Absolutely not. The average claims adjuster likely is dealing with a massive caseload as well as imposed processes and questions that are not geared toward moving claims forward.

That is not to say that corporations are evil. They want their workers back on the job as quickly and safely as possible.

See also: Untapped Potential of Artificial Intelligence  

To remove the distrust and frustration experienced by each constituent in the claims process, recognition of humanity must be present, and compassion needs to be injected. You may be thinking something along the lines of: It’s easy to handle a claim with compassion on an isolated basis. A handful of claims in an agent’s caseload may capture more personal attention, but there is no way to address every claim with such care. I would argue that, even as the number of claims rise, with the next generation of tools it is now possible to provide compassionate care at scale.

The Role of Artificial Intelligence

As odd as it may sound, the way to insert more humanity into claims is by using machines. New technologies, such as machine learning and artificial intelligence (AI), can transform the system.

The end goal of AI is to create the best experience, efficiently and at scale. To do so, AI must be given a precise purpose. In the case of claims, AI can be charged with removing very specific hurdles that get in the way of care.

AI is not about replacing humans with robots. In this case, it is about removing the robot from humans. By automating the mundane pieces of claims management, AI frees agents to address emotional needs. In doing so, AI opens the door for a new model of “scalable compassion.”

Scalable Compassion

Until now, it’s been impossible for teams to deliver compassion at scale without breaking the bank. If AI automates significant portions of claims processing — whether it’s finding the right physician, helping to calculate an MSA, or signaling claims that raise red flags — adjustors can dive much deeper into the details that matter. They can weigh various factors based on data and predictive models to provide better answers to questions and make more informed decisions on a case-by-case basis. This results in a much smoother, happier experience for both injured workers and claims representatives who can spend time engaging with people and using their minds in positive ways.

The scalable compassion model works for businesses, too. If you provide the right experience to claimants, the economics will follow. With strategic use of AI-based technology, claims representatives can help get injured workers to the best doctors right from the beginning. When injured workers get in to see a doctor ranked in the top 50%, companies see a 26% reduction in the overall cost of the claim, even if the upfront costs appear higher. This is because the best doctors expedite recovery. Getting it right from the beginning limits the need for additional procedures and continuing doctor or physical therapy appointments.

Employees who receive the right care early in the life of their claim also return to work faster, minimizing problems for both the organization and the worker. And the increased personal attention and seamless delivery of care dramatically reduce litigation costs — which can account for $35,000 to $50,000 per claim if an attorney gets involved. Scalable compassion ultimately may save companies thousands to millions of dollars each year, while improving relations with and loyalty from workers who feel cared for in their time of need.

See also: The Best Workers’ Comp Claims Teams  

Today, workers’ comp sits at a critical junction. Something must be done to reform the system before it collapses. By implementing new intelligent technologies while embracing the role of advocate instead of adversary, a model of “scalable compassion” makes it possible to finally deliver on the intent and vision for workers’ comp. It represents a bold step forward but one well worth taking.

As first published in Claims Journal.