The accessibility of sophisticated artificial intelligence (AI) and machine learning (ML) algorithms, enabled by the high-performance capabilities of cloud-based data centres, mean insurers can more readily embrace a culture of innovation when it comes to their traditional approaches to business processes.

Of course, the rising number of insurtechs, and evolving customer demands, have contributed to the creation of a disruptive environment that can capitalise on digitally-driven solutions. Whether through partnering with insurtechs or looking at more effective ways of modernising their existing processes and systems, insurers are well-positioned to capitalise on global changes in the industry that have been accelerated with the onset of the COVID-19 pandemic.

AI and ML introduce a level of automation in data analysis and the decision process that was not possible before. It is especially in underwriting, claim decisioning, and product development that these technologies prove to be invaluable. Consider the potential of underwriting or making claims decisions by machine thanks to injecting AI into processes that can now learn from and replicate decisions from experienced consultants. This sees machines capable of making decisions just as their human counterparts would have done but at a faster rate with absolute consistency and 24/7 availability. And then there are the opportunities for developing products based on changes in risk and customer life stages at an individual level to provide dynamic pricing. No longer does insurance simply have to be an off the shelf solution but one that reflects the unique risks and preferences of individuals.

Confluence of technology and partnerships

With numerous insurtechs providing specialised data, service, or product offerings, it becomes increasingly important for insurers to look outward to these new providers for integrated solutions. These solutions should combine credit, health, and fraud risk views on business decisions, overlaid with AI and ML capabilities to minimise manual, inefficient interventions.

To scale and remain relevant, insurers need to embrace these new technologies and partnerships. Their policy holders demand modern user interfaces with real-time decisioning and service and the only way to achieve this is through automation, driven by intelligent risk processes.

Managing change

There are two ways that technologies like AI and ML can be integrated into the insurance process. Firstly, there is the outside-in approach. This focuses on strategy development that reads and responds to market dynamics, customer insights, and emerging technologies to create differentiated value. Secondly, is inside-out. This is an approach to strategy development that is internally-focused, leveraging the insurer’s capabilities and strengths as a primary point of departure to create differentiated value.

Both these strategies account for how technology use within insurers is evolving and how the insurer can potentially future-proof themselves against ongoing external market changes. Even so, risk managers must embrace the implications that innovation can unlock inside the insurer. To do so requires a mindset shift towards one that actively seeks AI, ML, and insurtech partnerships as enablers for growth. Once this is done, one of the biggest obstacles to providing agility within traditional processes is removed.

About SilverBridge

With extensive experience in designing and implementing solutions for retail and corporate long-term insurers, including pensions and employee benefits, SilverBridge is one of the largest providers of specialised technology solutions to emerging markets. Its experience also includes the development of artificial intelligence and robotic process automation solutions not only for insurance, but also in the banking industry.

Today, incumbents have two key areas of focus – modernisation and digitalisation – as they look to respond to the enhanced expectations from their customers. But beyond the technology side of things, trust and relevance will be deciding-factors on whether customers stay with their current insurers or look elsewhere. These are two sides of the same coin. If an insurer does not deliver solutions tailored to the unique needs of an individual customer, then that person is likely to lose trust in how the organisation is using the data it has compiled of them.

Different views

This could result in insurers partnering with fintechs to deliver a more comprehensive offering that blur the lines between traditional products and more agile, future-forward ones. Critical to this partnership-driven approach is having the understanding that customers are integrated ‘entities’ and not siloed. They require insurers to have an overall view of all their needs and not just fragments of them.

Whether it is in partnership with one another or individually, insurers and fintechs must start treating customers holistically covering their physical, emotional, and financial wellbeing. Data analysis through modern, digitally-driven solutions leveraging the high-performance computing capabilities of the cloud become one of the keys to this success.

Doing so will see the service provider expand the value proposition. It is not a case of reinventing the wheel but identifying ways to enhance what is already in place. Rewarding ‘positive’ customer behaviour through discounts on premiums or other value-added services can also show them that the insurer is considering them more holistically than in the past.

Identifying growth

Of course, the focus must expand to include identifying opportunities for growth. Simply catering for existing customer needs limits the business when it comes to potential to differentiate amongst its competitors.

Expanding its strategy to deliver more innovative solutions that cater for a younger customer base that is more focused on digitalised solutions can position the insurer for more robust (and long-term) growth. Along with this can come things like subscription or consumption pricing models for customers, leveraging mobile payments as a more effective way of collecting premiums especially in Africa with its large unbanked population, and even considering cryptocurrencies as payment methods.

The takeaway is that insurers must not limit their thinking to what has worked in the past. It is about identifying the modern innovations that are gaining traction with today’s customers that bring with it the agility needed to adopt to future trends more effectively.

Of course, the risk of having sight of the ‘big picture’ view of what the company is working towards can result in the temptation of trying to do everything all at once. This is not only a costly exercise, but the complexity involved in doing so makes it an incredibly risky proposition. Instead, decision-makers at the insurer must break down the components into smaller steps. By doing so, they can implement faster and derive value from the digital transformation roadmap sooner.

Even with the best planning in place, digitalisation can mean one thing today and something else in the future. Just consider the technologies shaping business in the current environment. The digital landscape could (and most likely will) look significantly different in two years’ time. Therefore, it becomes paramount to embed a degree of flexibility into any plan. By taking a step-by-step approach, the insurer can re-evaluate often and ensure future steps are still relevant when the time comes.

One vision

Decision-makers must also communicate with employees across the value chain so that they can understand the ultimate goals the insurer will be working towards. This could entail a continuous process of alignment from all the stakeholders. Again, it shows the value of taking smaller, iterative steps as opposed to just having a single, long-term plan that is cast in stone.

The COVID-19 pandemic has certainly helped in this regard. Insurers understand the need to be more agile. The cycles of technology advancement are accelerating all the time. And with this comes the need to embrace more digital channels than before.

Balancing the past with the future

In South Africa, this does require a more nuanced approach given the digital divide that exists between early adopters and those still struggling with even basic internet connectivity. However, if an insurer uses technology in the right way, it can cater for both segments.

For instance, the more affluent market wants to have self-service channels to manage their policies without having to deal with a broker. They want a direct channel with the insurer providing a click-through on its Web site for more information, link to a customer portal, or to apply for a policy. This type of customer might even want to make changes to his already existing policy portfolio through some sort of direct digital engagement with his insurer.

The less connected customers, some who are even unbanked, require a different approach. In this instance, an insurer can equip its brokers with tablets or mobile phones to facilitate an onboarding process when they travel to informal settlements. This also gives the broker the opportunity to educate potential customers around the importance of insurance, resulting in an improved and more personal service experience.

Furthermore, the way insurers collect and pay out premiums to the unbanked can take the form of mobile wallets or other mobile-friendly transactions. This also ensures that people have cover and that claims can be processed as efficiently as possible.

Join me next month as I discuss some of the key considerations when it comes to digital transformation in insurance and how that influences the roadmap planning.

“In recent years, SilverBridge has made tremendous progress working with Microsoft on our solutions for modernisation, digitalisation, and intelligently automation for the long-term insurance market. We are a proud Microsoft partner and have built a world-class suite of insurance and financial services solutions on the Microsoft Azure cloud platform. Furthermore, SilverBridge has successfully implemented these solutions for several local insurers,” says Lee Kuyper, Deputy Chief Executive Officer at SilverBridge.

“The pandemic has made the need for modernisation, digitalisation, and intelligent automation a business imperative for the financial services industry. SilverBridge has seen a significant increase in demand for its solutions because of this which has coincided well with the shift to the cloud which we have undertaken with Microsoft,” says Kuyper.

Kuyper says the work done last year to get customers onboard with this approach, for which they were recognised by Microsoft, is just the beginning and provides the organisation with enormous scope for growth across existing and new customer segments and markets.

“Many companies have focused on short-term effectiveness in 2020, really just to ensure that business could continue to operate. Now that decision-makers are realising this cloud-centric, digital approach will be part of the business landscape for good, they are looking to leverage what SilverBridge offers for more long-term gain and optimisation. The partnership between SilverBridge and Microsoft enables us to assist customers to do this as we take them into the future of where technology is going,” concludes Kuyper.”

According to research, insurers can capture three primary areas of value by transforming their business model and modernising their core IT systems. The first is increased gross written premiums and reduced churn. According to McKinsey, flexible, digitised product systems enable insurers to revamp their product innovation process, translating to faster time to market. Secondly, increased operations productivity. By overhauling legacy environments, insurers can improve processes and enable employees to become more effective at doing their jobs. And finally, reducing IT cost. Modern IT systems can reduce the cost of infrastructure reliant on a commodity hardware approach versus one more adaptive to a cloud business model.

Changing focus

Up to now, legacy infrastructure has proven to be relatively stable, reliable, and able to handle large amounts of data. Furthermore, these systems permeate virtually every aspect of the insurer’s business. However, the limitations of a legacy approach means that the time has come for insurers to reinvent themselves and embrace a more modern and agile way of meeting evolving customer demand. It is no longer a question of if change must occur. Instead, it is a priority to modernise and digitalise as quickly and effectively as possible.

But beyond addressing customer needs, insurers must also mitigate the risk of the rising number of insurtechs bringing meaningful change in the competitive landscape. With this comes the potential to enhance existing capabilities by partnering with them to leverage each other’s strengths. This does require a willingness to change and embrace collaborating with partners the insurer ordinarily would not have considered previously.

Another consideration is mergers and acquisitions. Insurers need to preserve value for investors. Adopting more sustainable and agile digital infrastructure ensure this can happen. It also equips the insurer with the ability to respond to emerging challenges especially given the continued lockdown conditions in South Africa

Legacy shift

The success of insurance is built on security, trust, and the ability to deliver solutions that meet customer needs especially during these critical times. As part of this, self-service becomes an important consideration especially when moving away from legacy systems. Empowering customers to manage more themselves gives them a sense of control over their policies and other products. Simply put, legacy environments do not offer that degree of flexibility.

These usability elements include enhancing the customer experience when using digital channels, making claims processes clearer, or providing additional customer service channels through more contemporary routes, like social media – all of which can be enabled by technology.

Ultimately, modern insurers require modern systems that are digitally-driven. So, while legacy fulfilled a critical role in the past, the time has come to change and become more agile for the connected world today.

“As a Microsoft Managed Partner, SilverBridge remains at the cutting-edge of technology innovation and focuses on ways to modernise and digitalise Exergy to reflect the digital transformation needs of our customers. Using machine learning technology to identify and extract text and structure from your documents, will significantly increase the customer experience and result in accelerated business processes,” says Annalie Terblanche, Head of Product at SilverBridge.

Even though key insurance processes such as client onboarding and claims management have already been automated in Exergy, they still required human intervention to verify the quality and correctness of the documents received. Incorporating text extraction (OCR) into the Exergy product suite, enables SilverBridge to drive straight through processing and move even further away from manual processes. You can focus more time acting on the information rather than compiling it, resulting in reduced turnaround times with new client applications, amendments or claims assessments.

“Supporting documents submitted during onboarding, amendments and claims processes can now be automatically verified using this OCR functionality integrated into Exergy to automate underwriting and other administrative requirements. Our clients are excited about the potential of this enhancement and are looking forward to efficiencies it will introduce in their digital processes,” says Terblanche.

Azure Form Recognizer applies advanced machine learning to accurately extract text, key-value pairs, tables, and structures from documents. Users can quickly get accurate results that are tailored to their specific content without heavy manual intervention or extensive data science expertise.

“We are in a time where technology is one of the core ways that our partner ecosystem can better serve its customers. It brings with it an opportunity for innovation, and partners like SilverBridge, continue to look for ways to help their customers realise true digital transformation through solutions like Exergy,” says Lionel Moyal, Commercial Partner Director at Microsoft South Africa.

Its intermediary channel was reliant on a manual process of completing policy application forms. From a call centre perspective, Hollard agents used spreadsheets to complete new applications and then subsequently captured those on the Exergy policy administration system.

“Having had a long-standing relationship with Hollard, we proposed digitally enabling both these critical channels to link the various stakeholders to a centralised solution and automate the process. This digitally-driven environment would link directly to the Hollard Policy Administration system and Exergy,” says Leonel da Silva, Portfolio Manager at SilverBridge.

This would be done through the SilverBridge Intermediary and Call Centre Web portals. Both these are accessible from the Web requiring only a stable internet connection. By digitalising these channels, Hollard intermediaries would be able to track the performance of their books in real-time and identify trends related to policy cancellations, lapses, and other relevant areas.

Through enabling Hollard to digitally onboard new customers and proactively manage retentions in real-time, the insurer would speed up the end-to-end onboarding process and positively influence the conversion rate and efficiently drive growth within the business.

“SilverBridge’s digital platform and support throughout Hollard\’s digital transformation has successfully put us in a position where we reached our internal digitalisation goals and are now geared towards our ethos of excellent client service,” says Charlton Cloete, Head of IT at Hollard Namibia.

A distributed workforce has become part of the new operating standard. This is not to say the transition has not been without its challenges. Financial services providers like insurers who used to rely on meaningful in-person engagement with customers on a broker level, have needed to rethink how to effectively harness technology to still provide a quality experience. And with the enforcement of the Protection of Personal Information Act (POPIA), this must be done in such a way that personally identifiable information is kept as secure as possible.

McKinsey examines the importance of a ‘survive and then thrive’ strategy that balances digitisation, improving operational efficiency, improving cybersecurity defences, and enhancing the customer experience. Within all these elements lies an opportunity for insurers to reskill teams, identify new capabilities, and rethink the nature of jobs in the sector.

Thanks to the likes of robotic process automation, machine learning, and artificial intelligence, an increasing higher level of automation can be introduced in traditional administrative-heavy job functions. In turn, this frees up those vital human resources to deliver on more strategic requirements that can help the insurer enhance the customer experience and differentiate itself from agile insurtechs.

Refocus

One of the most significant things that have emerged from the pandemic has been the opportunity to reaffirm the purpose of insurance. It comes down to protecting people, communities, and business from unexpected risk while embracing rising societal concerns around sustainability and fairness.

Workforce agility, capacity, and scalability will be instrumental to drive this in the new normal. Insurers must be able to adjust to shifts in claim volumes and customer service inquiries, or even demands for new products more reflective of modern end user requirements. This means that an insurer must be able to reallocate resources quickly and think differently about the strategic (company culture) and tactical (employee skills development) functions.

Business leaders now need to embrace different ways for employees across job functions to reach their objectives. It is no longer about the hours worked but rather the deliverables achieved. Nine-to-five work is no longer a reality. An insurer is therefore reliant on putting key performance indicators in place and measuring the success of the workers in achieving those.

Pivot

Adaptability and collaboration will be the cornerstones of this digital-centric workplace. This talks as much about the insurer’s ability to work with trusted partners as it does with employees that are based in any geographic location. In fact, collaboration will be geared towards finding the right expertise for specific job functions. This gives the insurer the ability to create a highly connected network of specialists that can build on the wealth of data it has in place.

Insurers must pivot from predominantly responding to customer and broker queries, to helping them through challenging times. By focusing on the social context of the situation and customer needs, an insurer can imbed non-traditional advice and support for customers that differentiates them from competitors. As such, creating an employee experience that promotes engagement, motivation, and wellbeing will be as important to rejuvenating the business as modernising and digitalising operational processes.

In fact, managing fraud remains one of the most significant challenges that insurers are faced with today. In South Africa, the latest figures show that commercial crime, of which fraud is a contributor, is the fastest-growing segment in the country, increasing by more than 14% year-on-year. Given the difficult economic conditions resulting from the lockdown, the expectation is that instances of fraud will likely increase this year. Meanwhile in the US, the total cost of insurance fraud, not including health insurance, is estimated to be more than $40 billion per year. This is such a universal industry problem, that the global insurance fraud detection market size is forecast to reach more than $7.9 billion by 2024, growing 26% annually from 2019 to 2024. Hardly surprising then that digital advances to curb this have been welcomed.

Combating fraud

IA combines robotic process automation (RPA) and artificial intelligence (AI) technologies to facilitate rapid end-to-end business process automation and accelerate digital transformation. For its part, AI has become sufficiently proficient at processing unstructured data using complex algorithms. The amount of historical data available at an insurer means that they can improve processes, enhance the customer experience, monetise data, and detect fraud in more innovative ways.

By using the advanced data and natural language processing (NLP) capabilities of AI to mine data from claim forms, fraudulent claims and patterns of fraud can be flagged. Furthermore, AI can identify patterns through the syntax of the descriptions of incidents from several different claimants to detect organised fraud. When combined with RPA, insurers can benefit from the automation and simplification of complex business processes to help virtualise human decision-making.

By continually analysing internal and external data in real-time, IA creates an environment that continually learns and evolves from the data available to it. This can cross-reference and analyse any number of internal and external databases, detecting potential patterns of abuse. Linked with the replication and automation of decision making, IA creates a scenario of increased efficiencies, consistency, and accuracy.

A famous example of this is the sudden increase in broken or stolen TV claims that appeared simultaneously with the introduction of new technology and prior to major sporting events, in this instance the 2016 FIFA World Cup.

In another example, one of the largest insurers in Turkey used to employ a team of 50 people to manually check each claim for fraud based on loose rules and the team’s personal experiences. But considering that there could be up to 30 000 claims a month, this was becoming increasingly impractical. Using IA, the insurer was able to save almost $6 million in fraud detection and prevention costs and significantly improve the customer experience in the process.

Driving down claims costs

As far back as 2017, IA has been found to deliver cost savings of up to 75% with the payback ranging from several months to a few years. With insurers continually examining ways to optimise cost efficiencies, the savings available from IA could mean being able to invest in growing other business opportunities.

Take for instance how NLP can rapidly mine information contained in handwritten notes that go with either claim or insurance-related forms. In healthcare, these could be relevant to standard procedures and diagnostic terms, including abbreviations and diagnostic terms used in writing test results. Once this information is extracted, IA can automatically identify what is missing, classify it, and route it for the best action to be taken.

On the commercial insurance side, the ability to search through enormous quantities of data to detect a variety of fraud methodologies can result in decreased premiums as any objectionable claims are identified before being processed and paid out.

IA will continue to evolve as technology improves, making it even more accurate. By improving its ability to deliver better analysis using faster data, processing capabilities will assist the insurance industry in positioning itself for growth in more exciting ways while being less concerned about managing the challenge of fraud.

Fundamentally, POPIA provides guidelines for organisations around the collection, processing, storing, and sharing of any personal information collected by them and holds them accountable for any loss or abuse of information they have. Robust systems need to be in place that can scale as data warehouses grow while safeguarding the integrity of stored information. POPIA has created a springboard for insurers to clean up outdated legacy systems and has enabled the move towards a single, consolidated view of their policyholders, premium payers, and beneficiaries. Insurers can better position themselves in the delivery of customised and richer end user experiences reducing churn while driving business growth.

Insurers will also have to be more transparent in terms of the purpose of why personal information is collected and how it is used, what is stored, and where and who has access to this information in particular identity numbers and bank details. Customer consent becomes imperative in this environment especially when it comes to protecting the right to privacy in terms of gaining access to insights that can help shape individualised service offerings.

Embracing disruption

In addition to cleaning up both historical and current data, insurers can use the cloud to safely store information aligned to their own data governance and data protection policies and procedures. The high-performance computing capabilities available through the cloud in terms of processing big data enables the use of disruptive technologies such as artificial intelligence, intelligent process automation, machine learning, and the like.

Adopting these agile technology solutions and combining them with human experience, the insurer and its consultants will become more adept at delivering customised offerings better suited to the immediate needs of their customers.

Overcoming obstacles

Ensuring compliance, factored with the need to grow can be challenging, POPIA brings with it an opportunity for organisations to implement better technology solutions, rework existing information processing practices, upskill staff, and review internal policies to ensure they are compliant and align to what and how data is collected, processed, stored, communicated, and destroyed.

No insurer wants to fall foul of POPIA best practice. Now is the time to gain a better understanding of the advantages of implementing cloud-based solutions to unlock the full value and benefits of being compliant and simultaneously growing your business.

The rapid push towards digitalisation over the past 12 months has certainly helped in this regard as there is an increased awareness on the benefits of adopting a modernised approach to data and its analytics. All told, POPIA is a business imperative to kickstart data transformation and is most certainly a pillar in terms of how organisations reinvent and innovate regardless of industry sector in terms of the protection of personal information and the use thereof.