Tag Archives: digital transformation

Tipping Point for Claims Automation

This year, we have witnessed explosive growth in technology adoption. Zoom video conferencing has risen 574%, Instacart grocery delivery has jumped 450% and Google Classroom usage has increased 580%—all due to COVID-19. The pandemic has truly altered how we think about and use technology. For businesses, it has introduced opportunities for digital transformation. Case in point: the automotive insurance industry.

While some may say insurers are slower to embrace change, the sector has moved at lightning speed to maintain business continuity since the start of COVID-19. The first step was what seemed like an overnight transition to a fully remote workforce. After setting up the required technology to support their employees, carriers then shifted focus to refining the digital solutions that would allow them to better manage the claims process and serve their customers virtually.

Automotive insurers have long relied on staff appraisers and collision repairers to assess vehicle damage after an accident. While virtual estimating—or using photos in place of a physical inspection—is not new, the pandemic has made it the preferred method of inspection.  

Prior to COVID-19, use of virtual estimating was limited and focused almost exclusively on low-severity claims. This was due, in part, to concerns about the ability to produce an accurate estimate. In fact, when compared with other methods of inspection, virtual estimating accounted for just 2% of all estimates written in the United States and Canada just a year ago. 

However, with an increase in our need to socially distance and a decrease in miles driven, the conditions were right for widespread adoption of claims virtualization. In just the first two months of the pandemic, virtual estimating usage jumped to 13%—all while growth in other methods of inspection has decreased or remained stagnant. In addition, some carriers announced early in the outbreak that they were moving almost all of their claims handling to a virtual model, and dozens more reached out to Mitchell to get started. Collision repair shops have also followed suit, providing customers with new tools for collecting and submitting damage photos.

See also: Future of Claims: Automation, Empathy

For insurers, the benefits of virtual estimating include increased efficiency and customer satisfaction. Field appraisers typically complete three to four estimates a day when factoring in administrative tasks and drive time. However, with virtual estimating, that number increases to 15 to 20. By eliminating travel and tasks like appointment setting, employees can focus their efforts on the actual appraisal. Consumers, on the other hand, benefit from the speed, ease and convenience that comes from a digital self-service solution—at a time when technology adoption has never been higher. 

So what impact does this have on claims automation? The first step toward automating the claims workflow was increasing insurers’ comfort level with using photos, instead of a physical inspection, to assess vehicle damage. With COVID-19 accelerating their adoption of virtual or photo-based estimating, we have now reached a tipping point. Insurers have validated the feasibility of using photos in the estimating process. They have seen virtual estimating used successfully for both low- and high-severity claims. And they can no longer dispute the efficiency gains and consumer benefits it provides. These factors combined may make them willing, and ready, to begin automating the complex, labor-intensive claims process. 

The natural next step is to use artificial intelligence (AI) to further streamline and improve estimating. With the photos—and eventually videos—submitted digitally, insurers can rely on an AI engine to identify component-level vehicle damage. From there, the data can be combined with other inputs to return a recommendation of either repair or replace. If repairable, the computer can then populate individual estimate lines with recommended parts and labor costs. Once the data is submitted, carriers can even incorporate automation in the auditing process. Instead of reviewing just a handful of estimates each day, auditors can let the computer review all of the estimates submitted. This will allow them to focus their energy on the claims that need attention. It will also give them the opportunity to rapidly uncover and address any issues.

Leveraging automation in the claims process has many benefits, as noted by McKinsey. First, it improves accuracy. Next, it increases efficiency, reducing expenses by 25% to 30%. Finally, it raises customer satisfaction by as much as 20%.

See also: Keys to ‘Intelligent Automation’

Over the last three months, insurers have taken an incremental step—or leap—closer to claims automation. However, the transition from virtual estimating to touchless claims will not happen overnight. It is an evolution that will require us to re-think how and where we use technology versus how and where humans apply their expertise. In the end, though, automating more of the claims process will allow us to better serve consumers and support the proper, safe repair of their vehicles.

Good, Bad and Ugly of Going Digital

Having spent seven years helping major insurers with digital transformation, I’ve seen the good, the bad and sometimes the downright ugly in practice.

The bad and the ugly include:

  • Digital “strategies” disconnected from the priorities of the business;
  • Inconsistent approaches across different parts of the insurer, confusing customers;
  • Gaps and overlaps in delivery, wasting both opportunities and resources;
  • Digital approached as a project rather than as a root-and-branch transformation; and
  • Lots of activity but little practical achievement.

All of these issues, and more, can be avoided by implementing a model for sustainable digital transformation.

I offer you my version of such a model, below.

A Model for Sustainable Digital Transformation

1. The Customer

Ultimately, all premiums and other revenues flow from the customer, hence placing the customer at the center of the model. Without strong focus on the customer, the digital transformation won’t be sustainable.

For any digital initiative, the insurer therefore needs to ask what the impact will be on the customer and design or re-design accordingly.

That doesn’t mean that the customer should the only focus. There’s still scope for using digital to reduce costs, increase efficiency and generate new revenue streams – just not at the expense of the customer.

2. Business Strategy

How the insurer seeks to serve the customer will be set out in the business strategy. This should therefore be the starting point for the insurer’s digital transformation.

To be sustainable, any digital strategy has to be rooted in the business strategy. To give but one example, digital claims would look very different in an insurer competing primarily on price than in an insurer competing primarily on personal service.

3. Digital Vision

The digital vision expresses how digital will help deliver the business strategy.

The vision can take many forms, such as narrative statements, depictions of the future state and key re-imagined customer journeys. But much more important than the format is that all key stakeholders must understand, buy into and be able to expound the digital vision.

The digital vision provides the glue for everything that follows.

See also: 3 Phases to Digital Transformation  

4. Digital Design

Once all key stakeholders are aligned behind the vision, the next step is to drill it down to a level of detail that is deliverable. Again, the precise methods and tools for doing so can vary according to the particular needs of the insurer. But in my experience a focus on customer journeys or user stories is almost always a powerful component.

What is critical is to ensure that all key stakeholders, across the insurer, are aligned behind this more detailed digital design as well as the higher-level vision – not least because trade-offs between different functions and business units are likely to be required.

If key stakeholder alignment isn’t achieved at this relatively early stage, the digital transformation is unlikely to be sustainable.

5. Digital Capabilities

Only now should the insurer ask what it needs to put in place to deliver its digital transformation – the digital capabilities required.

These can, and should, be wide-ranging, encompassing culture, people and processes as well as the requirements for new and improved technology.

The digital capabilities provide the bedrock for the digital transformation, and are likely to be fairly stable over time.

6. Road Map

Once the insurer knows What capabilities are required, the next step is to establish the How and the When. How will any required culture changes be made sustainable? Should new people be brought in, or can existing staff be re-trained? For technology capabilities, should the insurer buy on the open market, build unique capabilities in-house or rent from others in the increasingly abundant insurtech ecosystem?

More controversial is likely to be the When. By now, everyone should be excited about the digital transformation and be keen to get on with it. Unfortunately, not everyone can be first – so compromises and trade-offs will again be required. Otherwise, the digital transformation is liable to collapse in acrimony in its early stages – and never deliver in the first place, let alone be sustainable.

This is also the point at which the digital transformation’s relative priority against other strategic initiatives comes into play. Reaching alignment on the trade-offs between digital transformation and other critical programs will be essential to the sustainability of the digital transformation.

7. Delivery

And now the insurer merely(!) needs to deliver to the road map. As with any transformation program, this won’t be simple – but the same sorts of approaches, tools and techniques apply, so I won’t go into that further here.

8. Review

Many digital transformations end with delivery. But that’s a mistake. Because the world moves on, and the digital transformation of an insurer is rarely complete.

To ensure sustainability, it is also critical to implement a process of continuing review – seeking feedback from customers, assessing financial and other outcomes, considering potential improvements and translating what is learned into updated visions, designs, capabilities and road maps as appropriate.

Without this step, both the digital transformation and the insurer itself will stagnate – losing the benefit of all the hard work done to that point.

See also: Culture Side of Digital Transformation  

9. Change Management

Surrounding steps two to eight in the model, you’ll see a ring titled “change management.”

A Model for Sustainable Digital Transformation

Having now read through those steps above, you’ll see why.

Multiple times I’ve used terms such as alignmentunderstanding and buy-in. And no digital transformation program will be sustainable without its key stakeholders acting in harmony to achieve common goals.

Key to sustainability, therefore, is the establishment and use of a high quality change management capability within the digital transformation program.

I won’t go into that more in this article, but you can see some of my thoughts on change management, within the context of digital transformation, here: Digital Change Management and Adapting OCM for an Increasingly Digital World.

10. Governance

Finally, no insurer’s digital transformation program is likely to be sustainable without the underpinnings of good governance.

This includes multiple elements, but experience shows that the most important to get right are:

  • The RACI Matrix for Digital, showing exactly who is responsible and accountable for what, across the insurer’s functions, lines of business and transformation capabilities;
  • An accompanying target operating model; and
  • The processes and cadences for managing the digital transformation, at both the strategic (vision, capabilities, design, road map and review) and tactical (continuing program delivery) levels – including financial management.

* * *

None of the above is rocket science, yet to this day few insurers, globally, have implemented a truly sustainable digital transformation.

I hope that, by publishing this simple model, I am providing some help to those who find themselves struggling.

Most insurers won’t, of course, be starting from a blank sheet of paper, so the model will need refining to meet the particular needs of each insurer.

The Rules of Digital Transformation

Insurance systems need to talk to each other. They must be able to store, share, retrieve and use the same data. Data should flow unimpeded from the first collection of information, from a prospect or census, through underwriting to policy administration to claims. Failure to integrate data adds cost and complexity and introduces errors. These errors can slow everything down, potentially leading to loss of business in an increasingly competitive environment for employee and voluntary benefits.

Integration with many other systems is a must. Insurers often have a variety of best-of-breed systems: sales/underwriting, CRM, policy administration, claims, enrollment systems, risk and lead scores and self-built software. No one wants to re-enter data. Everyone requires an automated streamlined solution.

Systems today often still can’t use the same data for a variety of reasons.

Legacy systems for employee benefits may still be great workhorses, but they are less flexible. It takes extra work to get them to communicate with other systems. Insurers that have gone through a merger may have two sets of systems and often find their systems are incompatible. This means data must be re-entered multiple times.

Even if carriers decide to implement their own integration, the dynamic nature of the group insurance market can quickly make a recent system integration obsolete. For example, carriers may be forced to consider a new insurance product or to retrofit old ones to meet the market demands. Usually, such changes will trigger a cascade of updates for many, or sometimes all, integrated endpoints. Micro-services can alleviate this kind of problem. Breaking down software into smaller components can lead to better modularity, which in turn may reduce the implementation effort because smaller portions of the system have to be changed.

Sometimes even micro-services are not enough – many carriers have implemented complicated data pipelines with complex business logic. Changing or updating a single stage in this pipeline can thus have dramatic consequences on any downstream endpoint.

This is where an exchanger platform can be really helpful: Instead of software updates and changes in micro-service application programming interface (API), exchanger software lets carriers easily change or update the data structure that flows through the pipeline.

See also: 3 Phases to Digital Transformation  

Exchanger software must be designed with compatibility in mind: both backward compatibility (compatible with data structures produced by any older version) as well as external compatibility.

Managing data flow is a growing priority for both IT and business users. And each of those groups of users has specific requirements and constraints. IT users are focused on data formats, data security and system performance, while business users are more focused on business rules and data validation.

Each of these aspects must be configurable in the exchanger platform. One particular characteristic of integration systems for group insurance systems is the size of data that often flows between endpoints. For very large groups with a complex insurance product structure, the amount of exchanged data is very large. For this reason, the exchanger software can operate in both synchronous and asynchronous mode with built-in protection against system overload. Data flowing through the transformation pipe can be formatted in either XML or JSON and can be restricted to certain users, based on their authorization level.

The exchanger platform offers a powerful tool to build more specialized applications that fit more specific needs. Many carriers are now embracing cloud solutions like Salesforce or Amazon Web Services (AWS). Although in the long run this reduces IT operating costs, it still requires integrations with existing systems that are not yet deployed in cloud-like policy administration, claims, payroll and archive.

For all these endpoints, insurance carriers should now be able to use one of the many connectors built on top of the exchanger platform. Connectors are specialized applications ready to be deployed and integrated with a specific endpoint. For example, the Salesforce connector allows bi-directional communications with Salesforce cloud applications. Salesforce users can leverage a Salesforce connector to initiate “ratable quotes” and receive final rates whenever these are made available by the carrier rating system.

Data-exchange standards should encompass data aggregation, format and translation and frequency of delivery.

Without standards, chaos can develop, and costs can ratchet up. Unfortunately, data-exchange standards have not become universal. Industry groups such as LIMRA, CLIEDIS and ACORD are trying.

See also: Beyond the Digital Transformation Hype

One encouraging sign of progress: In 2019, LIMRA launched the prototype of the LIMRA Workplace Benefits Electronic Data Exchange Standards. This is something we look forward to seeing develop as we enter the next decade.

Reprinted with permission from the Jan. 16, 2020, issue of www.propertycasualty360.com ©2020 ALM Media Properties, LLC.  All rights reserved. 

Is Your Education Strategy Effective?

Independent insurance agencies (along with carriers, brokers and other insurance firms) are going through digital transformations. They’re moving from (or trying to move from) a paper-based, process-focused insurance experience to a technology-driven, customer-facing insurance experience.

We know the reasons:

  • Demands by customers for a digital insurance experience.
  • Agency need for greater ease of doing business.
  • Competitive pressure to increase speed and accuracy.
  • Carrier demands for greater productivity.
  • Massive insurtech investments targeted to reinvent distribution, underwriting or claims.
  • An emerging workforce that was raised on digital (not paper) experiences.

You could add to this list. But the key question is: Can there be a lasting digital transformation without an education strategy to support it?

We hear discussions about digital transformation around water coolers and from convention stages. A digital transformation of customer experience and financial performance can make or break agencies, brokers and carriers alike.

I’d like to take on several questions related to learning and digital transformations. I am passionate about education and firmly believe it will be the differentiator among insurance firms navigating a massive wave of technological change:

Is it possible to create a learning culture while in the throes of transforming the operations and workflows of an agency to a digital platform?

To be effective in the long term, insurance leaders must create a culture of learning. Education is the most effective tool to help a firm and its people adapt and improve.

In fact, a transformation is the perfect time to commit to a learning culture. Creating an environment in which learning is valued and individuals are supported as they master new skills is a sure-fire route to success, both for the organization and the employees. Leaders must commit to helping their teams learn new skills to succeed. In my experience working for a national member organization of technology users, I see, time and again, successful change happening when learning and developing new skills are the standard.

See also: 3 Phases to Digital Transformation  

How can leaders empower their employees in the midst of a digital transformation?

Employees must first be included in the transformation process —starting at conception and continuing to completion. Successful organizational leadership involves key team members in every step of decision-making.

Gone are the days when the boss buys software, then presents the office manager with the manual and the command to make it work. Instead, when leaders partner with key employees early in the process, the team can look for roadblocks and challenges — and minimize their impact.

No change comes without conflict. But waiting to confront challenges doesn’t make them easier to overcome: Instead of saving time by involving staff early, you’ve guaranteed chaos when the time comes to introduce the concept. That chaos saps the excitement and energy that should surround a new opportunity and replaces them with angst.

Leaders need to clearly communicate the rationale for the change — to help everyone understand why, for example, the new software is needed, how it can improve daily workflows and how it can create a better customer experience. Then, it’s vital to find out what is most important to each team member affected and give him or her information to understand and embrace the solution.

And while there might be doubters, naturally, there also will be raving fans among staff. These individuals can rally others to put forth the needed effort. Often, the biggest critic at the outset — if engaged in the process — turns out to be the most enthusiastic cheerleader. And finally, leaders must acknowledge that change takes time.

The “factory” can’t be shut down while a process is retooled. The learning, adopting and adapting must take place simultaneously with delivering on the agency’s promise to its clients.

Can a more digital work environment (in terms of workflows) actually create opportunities for greater education and knowledge?

Having a digital work environment means that barriers disappear or are minimized. The cloud is a great equalizer. No longer is information accessible only to those who know what file drawer it’s in. It’s out there ready to be consumed by anyone who needs it and has the authority to access it.

A huge benefit of a digital work environment is the ability to create a knowledge base of agency best practices and workflows — a learning tool that can be a big asset. With such a knowledge base, no matter where or when a firm’s employees work, they have access to the information they need to do their job for the agency and client.

This just-in-time knowledge for the task at hand is invaluable not only for learning but for customer experience. What’s more, the inevitable updates are simple — changing a shared resource means the organization is always working from the most up-to-date version of training and reference resources.

Also valuable is third-party information such as online help from technology and service providers, often via keyword search.

When so many insurance firms are going through transformations, does the firm with a learning culture have a competitive advantage?

We cannot expect changes in technology to slow, so it’s imperative to have an information-sharing practice that works across systems, divisions and roles.

Yes, there’s a competitive advantage to having a learning culture in an insurance firm, especially when so many insurance firms are going through transformations. A workplace that is easy — and even fun — and that lets workers give input and take risks surely holds more appeal for job seekers.

It’s not just hiring, though, that’s affected by a learning culture. Being agile and informed is a competitive advantage for any insurance organization — not only for leveraging technology but also for having the freedom and confidence to habitually peer over the horizon for what’s next. By being able to spin up a new software or business process quickly, your firm is already way ahead of a competitor that takes a wait-and-see approach. Being first isn’t easy. But it does create a window where the competition isn’t. If your staff is already looking for the next big challenge and has confidence in their ability to adopt without sacrificing legacy promises, you’re light years ahead of everyone else.

Many people in the insurance industry take pride in their credentials — and they might perceive that those credentials (and their experience) aren’t as relevant in a digital environment, where technology skills might be more front-of-mind. How can an insurance leader deal with how this might affect morale?

A successfully implemented digital environment creates space in which work happens effectively. Without the knowledge gained through our industry credential programs, all you have is a technology shell. Without the knowledge of insurance pros defined by the credentials, the digital resource is useless.

As an aside: Our industry’s credential process needs an overhaul, too. The industry platforms on which most learning is built are anything but leading-edge, and they’re due for a digital transformation. Too many don’t require continuing education, and those that do — with few exceptions — are lax in assessing whether the individual is maintaining current knowledge.

Predict the insurance curriculum of the future. How will it be different?

In my view, successful insurance learning experiences will be:

  • Easy to access.
  • Delivered just in time.
  • Taken in small bites.
  • Interactive and collaborative.
  • Leading to innovation.
  • Platform-agnostic.
  • Built for an adult learner.

On the other hand, we’ll see fewer:

  • Feature-based presentations.
  • Long webinars or recordings.
  • Topics that aren’t tied to business outcomes.
  • Programs designed to check a box rather than advance real learning.

What insurance skills might need to be created or developed for a digital transformation?

Insurance professionals with tech savvy will be in high demand. Their skills will enhance workplace efficiency, for sure. But these individuals also will play a key role in developing consultative sales and service approaches as clients and prospects face similar transformations in their business and personal environments.

As businesses retool their approach to technology and work to gain the competitive advantage that leading-edge implementation will afford, it’s likely new employees will already have exposure to those emerging technologies. But to help them start their insurance knowledge journey, training and development professionals will be in high demand,

What management or leadership skills will be needed for a digital transformation?

Business operations, human resources and training are all affected by the speed of adoption required for digital transformation. The ability to develop a strategy that aligns with business goals for growth and efficiency will be essential.

Gone are the days of incremental software updates and break-fix approaches to technology and processes. A leader who can see over the horizon and inspire the commitment needed to tackle sweeping change will be a game changer. Hiring individuals already experienced in a digital environment is key to growth.

See also: Culture Side of Digital Transformation  

Training is the passport for insurance firm leadership and the workforce. Having a plan and good people is only part of the equation. We must be able to guide employees through a learning journey that is formed by just the right amount of support, flexibility and challenge to keep everyone engaged and convicted about the bright future.

No matter how important technology is, people are still the center of our industry. As we continue to experience unprecedented attrition of veteran insurance professionals, we must find a way to engage with those just beginning their careers. We must be willing to embrace our differences and give folks the freedom to do more of what they are good at. And we must let go of what worked in the past.

The independent agent channel can surge ahead through the effective use of new technologies. We just have to get out of our own way. The future is bright, although a little scary. But what we can’t see or understand today should not stand in the way of marching ahead.

3 Phases to Digital Transformation

If you Google the phrase “digital transformation,” you’d get more than 450 million search results, including educational pieces, research reports and information on technologies. Yet many organizations still face major challenges.

Often, these obstacles aren’t even related to technology. According to a recent study from Novarica, the biggest challenges come from not knowing where to initiate a digital transformation journey, how to minimize disruption to business, how to accelerate time to value and how to ensure stability and agility throughout the process.

We often discuss three paths, or phases, to digital transformation to clarify how insurers can achieve their goals. The paths also take some stress off organizations that see the goal but get lost in the haze of how to get there.

The process starts with digital enablement.

Digital enablement

Prior to the digital enablement stage, many organizations feel like they are drowning and in need of change. Processes take too long and often rely on paper; customer experience is poor; and employees feel stuck. The problems push organizations to enter phase one of their digital transformation journey: preparing an outline of a digitization strategy with a clear mission and goal.

In this phase, there may still be multiple digital “silos” where information is stored, often in legacy systems. Unconnected, insurers cannot get a complete view of business processes and customer information. To overcome this, IT departments should take time to understand and evaluate the organization’s full technology ecosystem and all the required systems that a new solution would either replace or integrate with.

Once the ecosystem assessment is complete, the organization can evaluate the best solutions and partner with vendors and system integrators (SI) to help map out the scope of the project, keeping realistic expectations and goals in mind.

One of the last steps within the digital enablement phase is putting the right team together to put the strategy in place. By starting with a critical department, like claims, insurers can gain quick momentum and showcase success before expanding the solution as needed.

Digital Optimization

Gartner defines digital optimization as “the process of using digital technology to improve existing operating processes or business models.”

In this phase, insurers are often enacting the same business processes – but using technology to optimize the procedures and experiences for end users and customers. For example, take the typical claims process. Once the claim is filed, an insurer receives, investigates and acts on the claim. Using the digital optimization model, the insurer would receive the claim in a digital format, and digital workflows would route the right information to the right adjuster at the right time, who could then review the claim and come to a resolution faster. By expediting the process, insurers decrease time to decision while increasing customer satisfaction.

“A large incumbent could more than double profits over five years by digitizing existing business,” McKinsey reports in its Digital Disruption in Insurance report.

Digital transformation

Many insurers find that achieving digital transformation is much harder than they originally thought, not understanding that it is a continuing process and never really quite finalized.

Insurers create revenue streams not possible in earlier stages of the transformation journey. The enterprise-wide, digital-first strategy ensures that digital information and data stays digital, available from anywhere at any time.

Many insurers are still in the initial phases of digital transformation – sorting through goals and assessing needs within the digital enablement phase. The good news is that they are taking the time to evaluate needs and how they hope to achieve their goals. Some are even are starting technology evaluation processes, looking at content services platforms to help them modernize and digitize.

By defining problems from both a business and technology viewpoint, insurers can gain approval from all stakeholders and buy-in from the beginning for a more successful transformation journey.

It’s clear that insurers that embrace digitization will continue to thrive within the industry’s digital future. By selecting technology that will both uncover insight in data and provide the ability to quickly develop and support new products, insurers will attract new customers while continuing to provide exceptional service to current customers.