Modernizing the insurance business: Key enablers to invest in
According to the Connect Claims Report 2019, “Bringing about transformation in Connected Claims is not simply a case of refreshing or reorganizing a single department.” While transformation is well underway, large carriers are still in the process of getting their foundational processes automated. With changing technological landscapes and evolving business models, traditional businesses are on the lookout our for options to modernize their businesses.
Changing market scenarios
As an industry, insurance has been highly irrepressible to change. With time-consuming manual operations, and product complexities, customer satisfaction was always a worry. The customers did not have too many choices either. It’s only now that digital disruptors in insurance are changing the game.
As a result, the incumbent players are losing their customers, who now have several go-to options. It’s a wake-up call for the traditionalists. In order to stay relevant, they not only have to compete with the startups but also constantly innovate.
Evolving business models
Insurance product design is typically based on several data sources on how various market categories behave. Like financial models, which used to rely on data sampling from past performance to forecast future outcomes, the insurance industry is also moving data analysis from proxy to source data. In this model, automation and modernization are the key areas that will gain traction in the insurance industry in the near to mid-term.
Already, traditional insurers have started partnering with digital innovators and investing in startups to provide their customers a novel and seamless digital experience where processes are simplified, operations are disrupted, and costs are reduced. Today, data science enables predictions based on real events, in real time, using large datasets rather than samples to make the best guess. Large, real-time data brings in a paradigm shift in the way insurance products are created. For example, AIG has strategically partnered with IBM to make advances in risk analytics and invested in Human Condition Safety, wearables for workplace safety.
Top technology enablers
Technology is the key to transforming the business. Data remains at the center of the insurance business. Therefore, insurers mainly look for processes to manage their data. In this context, the key enablers that influence the future of Insurance are RPA and app modernization.
RPA for automating workflows
Making use of bots to do repetitive tasks like data entry to perform it faster and without human intervention is the future, which is now. Any task that is deterministic in nature is suitable for RPA adoption. Almost all phases of insurance, right from underwriting to pricing and claims processing, involves a good mix of data, in paper and electronic formats. How can RPA help here? Take claims processing, which is highly time consuming and involves repetitive processes like document processing where data from multiple formats is merely copied from one location to another. Human errors are high. In this scenario, RPA can help increase process efficiency and accuracy by streamlining processes, and also scale at ease with an increase/ decrease of deployed bots. By adopting RPA, there will be a significant reduction in costs due to standardization.
Modernizing apps for business agility
To manage their business functions, many insurers still use multiple disconnected systems. Modernizing these applications is a big challenge in existing IT setups, in terms of time and dollars. Traditional insurance companies with legacy applications, physical servers, and manual operations are ill-equipped to make the transformation.
App modernization is all about aligning technology with evolving business needs by:
- Renewing: to give a facelift to the existing applications using new user interfaces and experiences
- Rebuilding: to wrap and extend existing applications with newer functionalities
- Replatforming: to move apps to newer platforms for easier maintenance and scaling
This requires investing in transformative technologies like APIs, cloud, microservices, etc.. Instead of implementing these technologies directly, making use of a platform-centric approach can accelerate the modernization process. With such platforms, functions and processes turn agile with reusable components and businesses can constantly modernize applications at significantly lower costs. In other words, each process of the insurance business can be re-programmed to stay ‘modern’ and adapt to changing market needs. What emerges is a flexible business that stays relevant and results in customer delight.
RPA and app modernization as enablers are on course to becoming the largest investment for traditional insurers. A large incumbent could more than double profits over five years by digitizing existing business — and doing it at scale. Sure, there will be barriers like stricter regulations and compliance, and cybersecurity threats. According to McKinsey, the prerequisite of a sound digital strategy is to understand the threats and opportunities that digital disruption poses and act accordingly. Clearly, that’s more than a golden opportunity for insurance.