While every carrier manages claims operations in a slightly different way, there are three consistent technology setups currently in practice: Green Screen, Home-Grown and Modern. The back-end operational workflows for each of these practices are generally the same: The adjuster manually enters notes, manually sends emails or makes calls and manually ties documents from the document management systems to the claim systems. The challenge here is that the adjuster is the centrally intelligent component. Relying on an adjuster to connect various systems mires the adjuster in overly manual steps, leaving claims processing vulnerable to reduced speed, mistakes and inefficiencies – all of which lessen customer satisfaction.
While more common overseas and in smaller markets, green screen systems are still found in many claims operations today. The green screen is a simple claim database that only accepts user inputs from a text-based screen with minimal capabilities to integrate into any other systems. Adjusters are forced to use a separate document management system to store files and photos and use a separate email system for outward communications.
Carriers relying on green screen systems see inefficiency with data transfer. Adjusters have to hunt for documents that are not tied to a claim number, annotate the decisions they have made in the green screen system and communicate in a separate system to the customer. Most of the mindshare of the organization is spent on teaching the humans the rules of the claim and how to document their thoughts in the system.
Some organizations have managed to build their own systems internally over the years. In these systems, various IT projects over the years have been spliced together with complicated business rules that aim to reduce the human error and ensure legal compliance. Carriers with a home-grown system face significant IT spending to maintain their complex infrastructure. Even with a large IT staff, it is nearly impossible to launch new technology initiatives because change affects rules buried deep in the system. The result is a system that is expensive, inflexible, complex and generally oblivious to the customer experience.
Recently, carriers have consolidated their legacy systems into one modern platform. These setups require a large engagement with a third-party system integrator and many years of thoughtful planning and data migration. However, the output is rarely a truly consolidated system. Carriers with modern systems are bound to long-term, third-party support contracts and face many of the issues that home-grown carriers face. Complicated business logic is embedded in the software to try to avoid human errors, but it leads to complexity and rigidity that ensure internal compliance while ignoring the customer experience.
Carriers and Customers
As customer needs are changing, carriers’ technology should be changing, too. Today’s customers expect a seamless tech experience with clear communication, automation and the ability to input via apps, photos, phones and inboxes. There are several new tech solutions that aim to ease a challenge of current carrier tech configurations. At Snapsheet, we have already built software that eases nearly all of these customer expectations.
Here are the capabilities that are critical to advanced claims technology – all of which will help meet customer needs:
Cloud-Based Architecture: This feature is important for a flexible design, which eases the implementation. There is no data migration, no system integration and no multi-year project plan. Claims software is launched stand-alone around existing systems or as a full-on replacement. It enables carriers to track, with real-time precision, all of the customer interactions, how the customer engages with the claims process and how the adjuster is engaging with the customer. Immediate insights are gained and can be operationalized.
Intelligent Claims Files: Instead of relying on the adjuster to tie systems together and shepherd the customer through the claims process, the Snapsheet platform has advanced capabilities that understand the expectations of each step in the claims process and guide the customer through the appropriate actions. An intelligent engine coordinates the communications and documentation needs for each file and advises the adjuster when to take action. If all of the requested information is provided, the engine may choose to automatically move the work to the next stage.
Real-time metrics and operational transparency: It enables the carriers to track, with real-time precision, all of the customer interactions, how the customer engages with the claims process, and how the adjuster is engaging with the customer. Immediate insights are gained and can be operationalized. The result is an enhanced customer claims experience, led by automation and real-time customer engagement to provide a tailored journey through any claim in any language in any country.
Customized roll-out: Customization is key. Even with a single consistent platform, such as Snapsheet’s, it is important to customize implementation for whatever legacy IT configuration exists. This adds flexibility and ease-of-use to each project. Snapsheet’s recent strategic collaboration with Zurich is an example of taking a new software approach by putting the customer experience first. Various county entities in Zurich use each of the three software setups mentioned above. Snapsheet software can be leveraged across any configuration, activating software modules that smooth or plug efficiency gaps in the current process, or completely replace existing claims systems.
As we kick off 2019 and insurtech continues to expand, the industry will see even greater advancement in the technology space for carriers and claims processes. Automated systems are important to guide the customer through the correct claims journey and ultimately allow carriers more time to innovate.
P&C insurance carriers have witnessed a lot of changes in the past decade, but few have been as surprising as the shift of power currently taking place across the industry.
According to Dennis Chookaszian, the former CEO and chair of CNA, carriers maintain only 40% of profits today, representing a drop of 20 to 25 points from the 1960s. An equal share now goes to the distribution system, as carriers line up to acquire and maintain more customers.
What’s behind this shift in profitability can’t be summed up in a single word, but increasing competition, new market entrants, improving technology, changing customer expectations and continued consumer price sensitivity all play a role.
To remain competitive, carriers will need to gain more control over distribution, a goal that even Chookaszian admits will not be easy to achieve.
Why the Power-Shift Toward Distribution
In the mid-part of the last decade, insurance carriers required two primary competencies to operate: data and capital. Because neither was easy to acquire, competition was less robust, and incumbent carriers found greater profitability, taking in roughly two-thirds of insurance transaction profits.
Today, data is everywhere, and through the use of analytics, simpler than ever to understand and use. Capital is also easier to acquire, as is evidenced by the growing number of insurtech players in the industry. According to Willis Towers Watson, $2.3 billion was invested in new insurance tech companies in 2017.
According to Chookaszian, the core competency for insurers now lies in distribution and control of the customer.
“It’s become so competitive that the carriers basically are always out looking for new accounts,” Chookaszian says.
That means higher commissions are paid to agents as carriers battle it out for market share, resulting in shrinking margins.
“Given the shift in profitability to distribution, the carriers that will be better off will try to regain some control over distribution,” Chookaszian says.
Admittedly, that is not an easy thing to do. The agent enterprise is part and parcel of most insurance operations. Directly selling insurance to consumers will require insurers to set up their own distribution systems, while still supporting their vast networks of independent or captive agent forces.
When Benjamin Franklin started the first successful U.S.-based insurance company in 1752, he was dealing with a localized Philadelphia population, but, by the end of the 18th century, citizens were moving westward, making it necessary for insurers to expand their distribution networks.
The Hartford made the first foray into direct distribution by offering insurance through the mail, but few consumers of the time were willing to give up the personal services of an agent when it came to purchasing something as critical as insurance. Carriers of the time faced a similar dilemma as carriers do today: how to acquire customers in a changing marketplace.
According to the J.D. Power 2018 US. Insurance Shopping Study, insurers are aggressively courting customers with new options and amenities as auto insurance rates remain stagnant and the number of consumers seeking coverage declines.
“We’re entering an era of consumer-centric insurance that will likely be marked by a surge in new digital offerings and serious efforts by insurers to improve the auto insurance shopping experience,” says Tom Super, director of the property and casualty insurance practice at J.D. Power.
This shift is happening across all lines of coverage, even small commercial.
While citizens on the new 17th-century frontier may have been hesitant to buy coverage without the guidance of an agent, many 21st-century buyers have no such qualms. Nearly half of consumers responding to a survey conducted by Clearsurance said that they would purchase an insurance policy online, while 65% believe this will be the primary channel for purchasing coverage within the next five years.
According to research conducted by Accenture, consumers are open to a number of new possibilities when it comes to buying the policies they need:
Power in the form of profits may have shifted to distribution, but consumers are making a power play of their own, demanding greater service and amenities and taking their business to the carrier most capable of meeting preferences and price points. In a world of shifting power, creating an active, online distribution channel puts more of the profit back into the carrier’s bottom line and allows it to attract more customers in three distinct ways.
Cutting Transaction Costs
According to a report from the Geneva Association, the leading international insurance think tank for strategically important insurance and risk management issues, 40% of P&C premiums are absorbed by transaction costs, leading to inflated policy pricing that drives away potential customers. PwC pegs distribution as a heavy culprit, reporting that 30% of the cost of an insurance product is eaten up in distribution.
On the other hand, Bain predicts that insurers could cut the cost of acquisition by as much as 43% through digitalization. Underwriting expenses could drop as much as 53%.
Reducing these costs allows insurers to present a more attractively priced product to consumers, an important consideration given that 50% of customers base their loyalty with an insurer on price.
To understand how costs are reduced through digital distribution, it helps to understand how a leading digital distribution platform works to raise efficiency. According to PwC, up to 80% of the underwriting process can be consumed by administrative tasks that require manual workarounds, such as re-entering information into multiple systems.
Much of this re-inputting of data is due to the siloed nature of insurers’ administration systems. Digital distribution platforms create a layer between the front-end online storefront, where customers enter application data, and the back-end systems used to store information.
As consumers enter their personal details into the online application, all back-end systems are populated automatically, eliminating the need for manual work-arounds. Everyone across the organization has the same view of the customer and access to any information that has been provided.
Digital platforms are also masters of straight-through processing, automating the quote-to-issue lifecycle and reducing the need for manual underwriting. By automatically quoting, binding and issuing routine policies, insurers reduce costs and also provide a more “informed basis for pricing and loss evaluation,” according to PwC.
As costs drop, insurers are also able to more competitively price insurance coverage. Lower prices win more customers allowing insurers to take back some of the profitability of distribution.
Improving Customer Experiences
When it comes to insurer-insured relationships, there is a gap between what consumers want and what insurers provide. Consumers rate the following points as very important aspects of the insurance buying experience:
Clear and easy information on policies
Access to information whenever it is needed
Ability to compare rates and switch plans
A wide range of services
But few consumers agree their insurer is meeting these expectations:
27% see clear and easy information on policies
29% report access to information whenever they need it
21% say there is the ability to compare rates and switch plans
24% see a wide range of services
The customer experience is becoming a key differentiator across the insurance industry. McKinsey reports two to four times higher growth and 30% higher profitability for insurers that provide best-in-class customer service, but here’s the rub. Only the top quartile of carriers fall into this category.
Becoming a customer experience leader requires insurers to understand that the separate functions associated with policy sales and distribution appear as a single journey to consumers. They expect to quote, bind and issue multiple policies through a single application, using as many channels as they feel necessary to get the job done.
While 80% of consumers touch a digital channel at least once during an insurance transaction, 45% of auto insurance shoppers use multiple channels when making a purchase. They expect to be recognized across these channels, picking up in one where they left off in another.
The multiple back-end systems employed by most insurers present a strategic dilemma here, as well as in the area of cost containment. Without transparency between channels, consumers are forced to restart a transaction every time they change their engagement method.
“It amounts to a great deal of frustration for the consumer,” says Tom Hammond, president U.S. operations, BOLT. “You start an application online and then call the customer-facing call center, and they can’t see what you did through the online storefront.”
Hammond explains that digital distribution needs to be omni-channel distribution, seamlessly integrated with a single view of the customer. It’s the only way to meet consumer experience expectations now and into the future.
Thanks to advances in analytics and artificial intelligence, the amount of data that is available to carriers has grown significantly, and consumers expect that information to be leveraged for their benefit. Eighty percent of consumers want personalized offers and pricing from their insurers.
Progressive is one of the 22% of carriers currently making strides to offer personalized, real-time digital services, having recently released HomeQuote Explorer. From an app or computer, consumers can enter information once and receive side-by-side comparisons from multiple homeowners insurance providers. According to the company, they leverage a network of home insurers to make sure customers can find the coverage they need at a comfortable price.
Oliver Lauer, head of architecture/head of IT innovation at Zurich, believes these collaborative networks are an integral part of the digital future of insurance.
“Digital innovation means you have to develop your insurance company to an open and digitally enabled platform that can interface with everybody every time in real time – from customers to brokers, to other insurers, but also to fintechs and insurtechs,” Lauer says.
Using a digitally enabled market network, insurers can fill product gaps and even meet customer needs when they don’t have an appetite for the risk. The premise is simple. By offering coverage from other insurers, they maintain the customer relationship and reap the rewards of loyalty.
As society changes and consumer needs evolve, the ability to personalize bundled coverage to the needs of the individual will become increasingly important. Consumers are now looking for coverage to mitigate risk in previously unheard-of areas, such as cyber security, identity theft and even activities related to legalized marijuana.
When an insurer is unable to provide the coverage a customer needs, it risks forfeiting that relationship, and any other policies bundled with it, to another carrier. But when the carrier takes part in a market network, it can bundle the appropriate coverage from another insurer with its own products, personalizing the coverage to better fit the needs of the customer.
Digital platforms offering market networks also set the stage for insurers to offer ancillary services, such as roadside assistance, that make their insurance products more attractive to consumers. We see this happening with increasing frequency as carriers seek to improve the customer experience and lift their acquisition efforts.
DMC Insurance, a provider of commercial transportation insurance solutions, recently announced a partnership with BlackBerry Radar. The venture would provide transportation companies with real-time data on vehicle location, as well as cargo-related information, such as temperature, humidity, door status and load state. Information like this will help companies better manage risk.
In the personal lines market, insurers are partnering to offer services that enhance the life of their customers. Allstate’s partnership with OpenBay allows consumers to review repair shops and schedule an appointment from an app. Allianz is helping home owners safeguard properties by partnering with Panasonic on sensors that monitor home functions and report issues. Customers can even schedule repairs through the service.
Digital Distribution Benefits All
J.D. Power reveals that digital insurers are winning the intense battle for market share in the insurance industry, starting a shift that could help level the profitability field between distributors and carriers. In a recent insurance shopper survey, overall satisfaction was six points higher for digital insurers over those that sell through independent agents. This lead grows to 12 points when compared with carriers with exclusive agents.
According to research by IDC, digital succeeds on the strength of its data. The ability to collect and analyze the vast stores of data available through these interactions, including such variables as the time of day the consumer shopped for coverage, the channel the consumer used, and stores of information collected from third-parties as part of the automated application process, provides the key to improved customer service.
“By analyzing this data, insurers can understand each customer’s lifestyle, behaviors and preferences in order to engage with them at the right time and place, offer personalized service and offers and more,” says Andy Hirst, vice president of banking solutions, SAP Banking Industry Business Unit.
As insurers create omni-channel engagement, they’re strengthening distribution from every angle, giving consumers the option to quote coverage online when it’s most convenient for them, and then buy it right then and there or to seamlessly call an agent to discuss their options and their risk.
Customer experience is rapidly becoming the foundation of success in the industry, and digital distribution provides the first link in building that base of core customer satisfaction. By providing consumers with multiple channels of engagement and the ability to meet more of their needs at any time, day or night, carriers are taking back the lead on profitability.
As web-first rapidly becomes the norm for today’s businesses, a new bogeyman is lurking: cybersecurity. With IT systems no longer an adjunct but the central pillar of most organizations, cyberattacks have come to represent an existential threat. No less serious is the risk to the vast repositories of customer data that today’s businesses sit on top of, which have grown far faster than security architectures can keep pace with.
According to PwC’s 19th annual CEO survey, 61% of CEOs are concerned about cybersecurity, with everything from phishing to denial- of- service attacks on the rise.
For the insurance industry, cybersecurity represents both an opportunity and a threat: an opportunity in that enterprises are crying out for coverage against the cyber risks they face, a threat because carriers, of course, hold large amounts of customer data and are hence targets for cyber-attacks and hacks themselves.
A theme across this content series, and one we explored specifically in our feature on marketing and customer-centricity, has been the imperative for insurers to better engage with customers’ needs – before customers start taking those needs elsewhere. On the commercial side, cyber risk is therefore an enticing opportunity for insurers, as their clients’ businesses are only going to get more online, not less, and security risks abound (especially with anything IoT-related).
However, cyber events are particularly challenging to insure against due firstly to their manifold knock-on effects, which range from barely quantifiable reputational damage to share-price collapse, and secondly to the lack of historical data. Substantial focus will therefore be required for insurers to fully realize the cyber-coverage opportunity.
“Insurers just don’t have the capability or the skillset to produce things that customers want to buy, particularly with so-called cyber products that mostly don’t cover the specific risks that the clients are concerned about. There’s a total disconnect there between the reality of business for all the Fortune 500 companies in the world and what insurers think they’re going to provide them by way of services and products.” — Steve Tunstall, CEO and co-founder at Inzsure.com
Cybersecurity is a sprawling area, so this part of our series is primarily aimed at cybersecurity as threat, as opposed to cybersecurity as opportunity: What are carriers doing to protect their customers’ data and to mitigate against the threat of data breaches?
We start with a look at carriers’ attitudes to cyber threats like data breach, followed by a look at how – and how confidently – they are addressing these. To finish off, we cast an eye over the longer-term evolution of cybersecurity as carriers pressing forward with digital transformation seek, at the same time, to future-proof their systems.
The following stats and perspectives are drawn from our Global Trend Map; a breakdown of all respondents, and details of our methodology, are included in the full report, which you can download for free at any time.
1) Assessing the Scale of the Cyber Threat
69% of carriers are “very concerned” about information security breaches.
While (re)insurers are open to the same sorts of attack as other large enterprises, the event we choose to focus on here is data breach. There is nothing that strikes so much at the core of the insurance business, which has been a data business since the very beginning; at the same time, (re)insurers – as professional data stewards – ought to be relatively well-placed to defend themselves. The harm that could come from a cyber breach at a carrier is multifaceted: Stolen data could cause customers direct commercial damage, whereas tampered-with data could render carriers’ risk models worthless, affecting both them and their customers further down the line. It is no surprise then to see the overwhelming majority of (re)insurers registering concern with information security breaches (94%).
Cyber-attacks affect other players in the insurance ecosystem, too, and there are plenty of weak points in the “water cycle” of customer and company data; so we also encounter a majority concern among the other ecosystem players that contributed to our survey.
Our broader research suggests that data breaches are particularly high up the agenda in Asia-Pacific. We reached out to David Piesse, chairman of IIS Ambassadors and ambassador Asia Pacific at the International Insurance Society (IIS), based in Hong Kong, to understand more about what is happening in the region:
“Digitization is leapfrogging in Asia, and so are industrial parks with smart devices and machine learning running the processing. Because of global supply-chain issues, this makes the need to mitigate and protect data integrity an urgency even without regulation where best-practice risk management must be implemented.”
Piesse continues: “Asia Pacific is only starting to look at regulations for data breach as opposed to data privacy laws, which have been around for some time. This leads us into the debate of the difference between privacy (encryption) and data integrity, which are two different arms of the cybersecurity triangle that must be embedded in all cyber risk management approaches.
“The time from compromise to discovery in Asia is now on average 580 days, according to statistics. Therefore, we must assume compromise of data across time, as there have been no notification laws and hence no catalyst to mitigate. This is why there is concern in Asia Pacific. The take-up of cyber insurance in Asia is fairly low as compared with the U.S. and U.K. for this reason.”
Our respondents’ data-breach concerns are matched by high confidence that data security is adequate, and this probably has a lot to do with mitigation planning across their organizations.
As we see from our graphic, three-quarters of carriers are confident in their security, and we find a similar level of confidence among respondents from the broader ecosystem. While these figures are encouraging, a quarter of respondents lacking confidence on this important measure is still cause for concern when we consider the number of customers that any one company can have. Even just a few percentage points of the ecosystem still represents rich pickings for online criminals and massive disruption for thousands, and potentially millions, of customers.
“Insurers have been very early adapters of computer technology. Given this maturity, one might think they should be able to control technology security on all layers, but the opposite is usually the case.” — Oliver Lauer, head of architecture/head of IT innovation at Zurich
When we turn to look at concrete mitigation plans, we observe that these are relatively commonplace.
However, 11% of carriers having no plan is concerning, given the absolute amount of business interruption this potentially represents (6% answered “don’t know”). Another factor to bear in mind is the potential fallibility of mitigation plans, so the proportion of carriers that are actually safe from security breaches will certainly be less than the 83% quoted above. We should also remember that data breach is just one type of cyber-attack and consequently just one aspect of (re)insurers’ overall cybersecurity strategy, which needs to be comprehensive.
“Insurers are very late in the game of opening their systems for the digital age, and most of their software systems are 25 years old and older, and are “secure by nature” due to their legacy walled garden architectures. And now they are modernizing their systems at the speed of light, and their security architectures and capabilities can hardly follow.” — Oliver Lauer
We expect carriers – and all businesses for that matter – to continue ramping up their cyber defenses over the coming months and years, especially given recent high-profile incidents like the Wanna Decryptor attack in May 2017, which hit nearly 100 countries around the world.
When assessing the full spectrum of cybersecurity risks, it can be difficult to know where to start and what to prioritize, so we asked financial services influencer Michael Quindazzi, business development leader and management consultant at PwC, for five key questions every insurer should be asking itself, from the board down:
— Who are our adversaries, what are their targets and what would be the impact of an attack?
— What are the most important assets we need to protect?
— How effective are our processes, assignment of responsibilities and systems safeguards?
— Are we integrating threat intelligence and assessments into cyber-defense programs?
— Are we assessing vulnerabilities against emerging threat vectors?
As with building on unstable foundations, the risks from getting one’s approach to security wrong at the outset only get bigger the further down the road you go. We spoke to Oliver Lauer, head of architecture/head of IT innovation at Zurich, who frames the security conundrum in the following terms:
“Insurers are implementing digital cores with full connectivity to everything, omni- and multi-channel and open API architectures, and usually they have no real idea what these new implementations mean for their security systems – they are still handling security like they did in the past with their ‘closed shop’ approaches.
“This will lead – in my eyes – to very dangerous threats in the future. And even if they have recognized these risks and have the money to invest, it’s very difficult to hire the necessary resources. Everybody is looking for security experts at the moment.…”
What is clear is that today’s digital platforms introduce a fundamentally new security dynamic requiring a different way of thinking from security professionals at carriers.
3) Longer-Term Evolution
58% of carriers have updated their security strategies to reflect the rise of new digital platforms.
As we can see from the chart below, the majority of insurers and reinsurers have made adjustments to their security strategy to reflect the rise of digital platforms, and we get a similar figure when we consider our other ecosystem players.
For now, though, this is a small majority (58%), less than the 83% who had mitigation plans for data breaches. As the industry gets savvier about cybersecurity as a whole, we expect this figure to rise sharply.
“With customer data-protection and privacy rules becoming more scrutinized across Europe and the globe, it is not a surprise that the chief information security officer is taking such a prevalent position within enterprises. The role will need to ensure appropriate usage of customer data and overcome digital privacy and security issues.” — Sabine VanderLinden, managing director at Startupbootcamp
When it comes to the list of disruptive technologies, are we giving chatbots enough credit?
Chatbots are only beginning to show their potential, garnering initial headlines primarily due to Lemonade and its chatbot called Maya. That is interesting, considering that chatbots and AI will likely have a greater overall impact than many of the up-and-coming technologies we have grown to accept, such as autonomous vehicles. How is it possible that chatbots are silently sitting on the sidelines?
It’s simple. They aren’t sitting silently. Chatbot development and use is in full swing. The headlines are picking up. Research organizations are putting forward more predictions about chatbots than ever. Chatbots are easier to implement than many technologies and, operationally, they will provide real value. Text-based or voice-carried artificial intelligence and service-focused functions can readily swap with current human-based adviser/service functions. As complex as they are on the back end, chatbots don’t require major hardware investment, such as sensors, and they don’t require an inordinate amount of coding. So, for all of their disruptive potential to the way we do business, they may be far less disruptive to operations and IT, though operations and IT (and customers) stand to benefit from chatbots.
In an era where impatience is growing and speed is rewarded, chatbots can dramatically improve service levels and meet or exceed expectations. They can also make the economics work for providing service and executing transactions for the growing ranks of high-volume, on-demand, low-premium risk products coming to the market. They are the future of nearly all personal business transactions. For insurers, chatbots can be their own distinct channel as well as augmenting existing channels, supporting a multi-channel world.
Chatbots are growing in use and importance
In Majesco’s Future Trends 2017 Report, we discussed the impact and potential of chatbot growth. Chatbots aren’t growing merely because they have service potential — they are growing because automated non-human service is gaining acceptance among the Gen X, Millennial (Gen Y) and Gen Z cohorts.
Chatbots’ appeal and growth will likely make them one of the technologies to break out of age-based stereotypes. WeChat, China’s most popular chat app, is a great example. With nearly 1 billion users (889 million people), its impact is felt across generations and is even spurring older generations to adopt mobile technology. WeChat is popular — its users interact for an average of 90 minutes per day. Because it uses voice commands, it is also learning from conversations, illustrating the potential of chatbots to gain something from each interaction.
Business Insider said that 80% of businesses will be using chatbots by 2020, with 42% believing that chatbots will improve the customer experience. In addition, 29% of customer service positions in the U.S. could be automated with chatbots or other technology.
Chatbots offer immense potential for customers to interact with an insurer, through direct interactions within messaging or other social media apps.
Other technologies and their impact on chatbots
The “automated home” race between Amazon’s Alexa, Google’s Home, Apple’s HomePod/Siri and many other technology providers will enhance chatbot adoption and use. The more people become comfortable with interactions that are non-human, the easier it will be for people to feel comfortable in a chatbot purchase and service environment. Insurance is already adopting chatbot use and ramping up chatbot availability.
In the past year, for example, insurtech saw a rapid rise in the use of chatbots within startups ranging from Elafris, which enables customers to download auto ID cards and pay bills, to Denim, which markets to consumers and links them with insurers or agents for renter or homeowners insurance.
Robo-advisers represent a chatbot with real AI integration and rules management that can go beyond outside customer service and well into day-to-day executive assistance.
In July 2015, Zurich shared how it was using robo-advisers in two ways: First to accelerate and improve policy processing and issuance that improved quality and accuracy for international casualty programs. Second, Zurich used them in the U.K. to conduct routine diary reviews for open claims that traditionally required attention by human operators.
In the quest for improved customer service, quality, accuracy, speed and efficiencies, robots and robotics have significant opportunity for insurers. From automating processes to interacting with customers, the potential seems limitless, as well as creating a starting point for cognitive applications.
A natural link: AI and Chatbots
Cognitive systems help visualize, use and operationalize structured and unstructured data, pose hypotheses based on data patterns and probability and understand, reason, learn and interact with humans naturally. As a result, the systems help organizations create knowledge from data to expand nearly everyone’s expertise, providing continuous learning and adapting to the environment to out-think the competition and the market.
AI and cognitive computing technologies like IBM’s Watson have been touted as the link between data and human-like analysis. Because insurance requires so much human interaction and analysis regarding everything from underwriting through claims, cognitive computing may be insurance’s next solution to better analyze and price risks using new data sources, while adding an engaging and personalized advisory interface to their services.
A savvy insurance technologist can easily begin to draw the lines between that kind of intelligence management and its potential when linked to chatbot advisory and directive services. Just as many of today’s advisors and agents have experience in underwriting, tomorrow’s chatbot may carry with it the ability to market, gather data, quote, underwrite, issue policies and settle claims without human intervention. Putting one face on an insurance company probably couldn’t get more complete than that.
For now, we can see the seeds of this complete chatbot value chain in its beginnings. At the recent SVIA InsurTech Bootcamp in August that we were involved in, we saw and discussed the array of opportunities to leverage chatbots, AI and cognitive … highlighting the opportunities unfolding.
In June of this year, PolicyPal, a Singaporean startup, announced the launch of its AI-enabled mobile app, which includes a chatbot supported by IBM Watson Conversation technology. The app not only helps prospects through the insurance selection process, it explains complex insurance concepts to consumers to enhance their overall insurance knowledge. The AI, having educated itself, is in effect giving back through chatbot interactions. That is the future of insurance interaction, a market where both parties have something to learn and gain from the insurance relationship.
When Gartner asserts that, “Chatbots will power 85% of all customer service interactions by the year 2020,” that may be enough to drive some business leaders to look into all that chatbots have to offer.
Our previous blogpost introduced the Top 10 insurtech trends for 2017. We received a lot of requests to share more of our view with regard to the last trend we mentioned: symbiotic relationships with insurtechs. Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they are investing in and partnering with. This is indeed a critical issue to accelerate innovation in banking and insurance.
In our new book “Reinventing Customer Engagement: The next level of digital transformation for banks and insurers,” we actually included seven best practices — seven examples of banks and insurers that created very different ways of working with fintechs and insurtechs. (The book will be available Feb. 23, but you can already pre-order at Amazon).
Virtually every bank and insurer is organizing competitions and hackathons or supports one or more accelerator programs. Some have started their own corporate venture arm. Obviously, corporate venturing should not be the main way for financial institutions to reinvent themselves. It is a means but not an end in itself. The challenge of the digital transformation is essentially a cultural one that involves the whole company, not just the technology. Working with fintechs and insurtechs offers the opportunity to rethink and accelerate innovation. Innovation is not about asking customers in focus groups what they want. It is about understanding new technologies and how they will interact with consumer behavior. And that is one of the things fintechs and insurtechs are much better at than incumbents. Therefore, financial institutions need to really immerse in the fintech community to stay on pace or maybe even a step ahead in a rapidly changing technology environment, or, better still, to shake up the status quo and accelerate change in the stagnant financial industry.
Minh Q. Tran (AXA Strategic Ventures). Key note address at DIA Barcelona in 2016
Banks and insurers are looking for ways to learn much more from the fintechs and insurtechs they are investing in and partnering with — whether it is about specific capabilities or concrete instruments they can use in the incumbent organization, or whether it is about the culture and the way of working. (At last year’s edition of our Digital Insurance Agenda, Minh Q. Tran, general partner at AXA Strategic Partners, and Moshe Tamir, global head of digital transformation at Generali, shared their view. Check here for the interview with Tamir. Obviously, expect more such keynotes addressing this critical issue at DIA Amsterdam, which will take place May 10-11, 2017.)
We have come across quite a few different models in which relationships between financial institutions and fintechs/insurtechs seem to flourish. In this blogpost, we included seven examples. This is not meant to be exhaustive. New kinds of symbiotic relationships evolve every day, and of course they can be combined.
1. DBS Bank: Fintech Injections
Neal Cross, chief innovation officer at DBS Bank, involves fintechs in his own distinctive way: “I don’t do innovation, I do sales. I sell programs that solve business problems inside the bank. We always start with their problems, around business model innovation or around KPIs. The start-up community plays a key role in our programs. I often tell our business units: ‘Give us 20 of your staff, we will split them into teams and pair them with startups.’ By embedding our staff in this agile, lean mean way of working, everyone benefits. We make sure our teams work within structured processes that include research, experimentation and prototyping, followed by implementation. Everything we do is focused, and we get senior sponsorship before embarking on a project, so we don’t have problems with innovations that end up not being implemented.”
2. Aviva: Icons
This is the best practice that we included in our previous blogpost. Andrew Brem, chief digital officer at Aviva: ‘In our view, ‘icons’ are needed to spearhead the digital transformation process. Our digital garages in London and Singapore are such icons. They are a very concrete and visual manifestation of our digital journey – for everyone across Aviva. The garages are not just idea labs to house ‘skunk works’ teams. They are real places, where we make and break things. We run digital businesses from the Garages, and we design and build our digital ecosystems such as MyAviva. Anyone from Aviva is welcome to come and hold workshops and meetings there, to see and feel our digital capabilities at first hand. The garages also help us engage with insurtechs and inject their culture into our organization; by launching startups ourselves, but also by partnering, mentoring and investing. Aviva Ventures, with a fund of £100 million, is also housed in the garage, and so are some of the startups they invest in, such as the IoT home security startup Cocoon.”
Aviva Garage, Shoreditch, London
3. Deutsche Bank: Digital Factory
In the summer of 2016, Deutsche Bank started its “digital factory.” More than 400 IT specialists and banking experts from the private, wealth and commercial clients division are working on a specific site in Frankfurt to develop new digital products and services for the bank’s customers. In addition, there are 50 places for external partners from the fintech community. The digital factory is obviously also connected with the Deutsche Bank’s innovation labs in Berlin, London and Palo Alto CA.
4. Munich Re: Interfaces
Andrew Rear, CEO of Munich Re Digital Partners: “To avoid a culture clash, we have set up a separate Digital Partners unit in 2016. To make the interface between the two worlds work, two things are vital: The first is speed. Startups move fast and don’t accept the limitations of a corporate diary: ‘Time is money’ is literally true for them. We therefore need to move with the same sense of pace. The second is decision-making: Start-ups make decisions; they don’t arrange committees. Therefore, we don’t do that, either. All the key decisions from Munich Re’s side are in our hands. In our model we do the things startups don’t need to control, to make their proposition live. That can include policy administration, compliance, reporting and product pricing; the ‘boring insurance’ stuff. We have stakes in our start-up partners but we don’t interfere in the way they engage their customers. The positive effects on our ‘regular’ organization are noticeable. For example, people in compliance and risk management were not used to these new speeds but are already adapting and finding new ways to fulfill their responsibilities in a way that is manageable for the start-up.”
Example of an interface between Munich Re and startups at regional level is Mundi Lab. Mundi Lab is an accelerator partnership between Munich Re Iberia & Latin America and Alma Mundi Ventures. Augusto Diaz-Leante, senior vice president of Munich Re Life, Spain, Portugal and Latin America, explains how the cross-fertilization with startups works: “We select startups from all over the world, such as RiskApp from Italy and Netbee from Brazil. Twenty Munich Re executives mentor these startups one-on-one. The best-performing companies with the highest potential to disrupt the insurance industry have the opportunity to work on a pilot program in one of the Munich Re Iberia or Latin America markets. In this way, the sharing of knowledge, experience and expertise is made very concrete.”
The Munich Re Mundi Lab team
5. Zurich: Open Innovation
Zurich created a platform to bring together the innovation initiatives and projects in the group. Xavier Tuduri, CEO of ServiZurich Technology Delivery Center: “In the Zurich Innovation Lab, we generate disruptive ideas and strategic R&D projects for the global Zurich group. We believe in open innovation, a collaborative model that means combining the internal knowledge, for example regarding markets with external talent and disruptive technologies. In this way we are always at the forefront of the latest disruptive fintech and insurtech developments, while being able to quickly develop tangible prototypes that fit and inspire our businesses. These are prototypes, without risky high investments, for example regarding using drones for risk assessment. Each prototype project is led by an employee of ServiZurich who works together in a team with several start-ups, universities and institutions. In this way, our people and organization get injected with new ways of working and thinking.”
6. Chebanica!: Co-Opetition
If a financial institution wants to behave like a fintech, it needs to open up, think of what the ecosystem could look like, be at the forefront to see what is happening and partner with fintechs to accelerate innovation, to learn or to advance the sector as a whole. Roberto Ferrari (CheBanca!) is a protagonist of this mindset: “We believe in a ‘co-opetition’ model. There will be things in which we will be competing with fintechs and other banks, and areas where we will be cooperating with the same parties. Therefore, we try to make the Italian fintech community grow. Building a larger cake will be for the good of the whole financial ecosystem, innovation is key and startups will always be the lifeblood of any sector. We among others launched the Italian fintech awards and the Smartmoney blog, which is now the most important vertical innovation in banking blogs in Italy. We now have a very strong presence in the Italian fintech community, and we are close to all developments and connections. I and other C-level executives at our bank speak to at least five to six fintechs each week, and we have already launched two new services – award-winning Mobile Wallet and Robo Adviser — thanks to our partnership with some specialized Italian fintech startups. We help them by partnering, but also we want to help them to go abroad as scale is key to succeed.”
Roberto Ferrari (right) with Matteo Rizzi (left, one of the most influential fintech experts)
7. Metlife: Capability Building
Lee Ng, vice president and COO of LumenLab, MetLife’s innovation center in Singapore: “LumenLab and our new businesses are distinct from MetLife’s core business. Our mission is to create a growth engine that launches disruptive new revenue-generating businesses for MetLife, targeting the needs of Asian consumers across health, aging and wealth. But we do work with in-country experts to develop plans for testing the new business ideas and assess market potential. In our first year we, for instance, launched BerryQ, a quiz app that rewards users for their health knowledge; Rememory Stories, a platform to capture intergenerational stories; and developed CONVRSE, virtual reality experiences around service and sales for financial services. We notice a real mindset shift within MetLife because of this cooperation. The people we work with develop skills about new ways of testing new ideas, new toolkits and new ways of thinking. Our core insurance business thus improves their performance, through adopting new behaviors like curiosity, velocity, experimentalism and bravery. In others words, we are lighting a path for innovation at MetLife.”
MetLife’s LumenLab, Singapore
We believe that it will be increasingly important to adopt a culture of constant innovation, to stay in sync with all that is going on out there. Rather than trying to change their DNA, which is quite impossible, banks and insurers should think that constant innovation is the only way to adapt the DNA to the change that is taking place. You can, for example, buy great algorithms, but if you are not able to transform your culture, the implementation of these algorithms will fail. A banker shared with us: “I see working with fintechs like vaccinations in biology: these injections in our cytoplasm help us prepare ourselves for new attacks and adapt to changing environments. If you acquire new fintech companies, you could destroy them if you don’t adapt to them as an organization. You have to adapt the mindset of your own people. It is like playing a piano. Some people sit down on their piano chair and move their chair to the piano. Other people don’t want to change their position and try to pull the piano to their chair. We should therefore teach people to move their chair after sitting down. How to move the chair will depend upon the situation, but should always deliver value to our customers.”
Working With Fintechs and Insurtechs at DIA Amsterdam
Maximizing the results from working with insurtechs is an essential subject on the Digital Insurance Agenda. So definitely expect us to pay ample attention to this at DIA Amsterdam: our two-day conference connecting insurance executives with insurtech leaders. Check out www.digitalinsuranceagenda.com for more information.