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Insurance automation driven by customer efficiency demands

According to Gartner, increasing demand for customer efficiency in insurance is driving companies to increase their 2023 tech spends. That means stakeholders will reap the benefits of increased automation.

Insurers will shift their focus from improving revenue to bettering customer experience and efficiency over the next 12 months.

Gartner survey shows focus on CX over revenue growth, product development

For its 2023 CIO and Technology Executive Survey, Gartner received data from 2,203 CIOs, including 91 from insurance. Respondents came from 81 countries and all major industries. They represent approximately $15 trillion in revenue/public-sector budgets and $322 billion in IT spending.

“Improving the customer experience (CX) ranked higher in the survey this year than more strategic focuses, such as growing revenue or new products/services development to support transformation. The economic stressors of the coming year are making companies refocus and shift directions to fill gaps which have existed for many years,” said Kimberly Harris-Ferrante, distinguished VP analyst at Gartner.

“Insurers need more customer data, including more behavioral and preferential data, to effectively execute digital business strategies aimed at cross-sell/upsell, panoptic personalization, dynamic customer engagement and revenue growth through new products/service.”

More than half of CIOs said they are increasing technology investments this year. The most popular targets are application modernization, cybersecurity and information security and business intelligence and analytics. 

The drivers behind increased insurance automation

Back-office system limitations are driving system modernization efforts. Many insurers are also finally addressing a security deficit. Most are moving to cloud technologies as a way to reduce infrastructure investments.

Ajay Kumar said technologies like AI can help the insurance industry automate and bring benefits to the customer.

SLK Software CEO Ajay Kumar likens many insurance tech environments to wiring in a modern house. As new technologies are introduced, more wires are laid. With so many in place, and more coming with multi-cloud, Web3 and blockchain-based technologies on the way, the growing mass of wiring needs people to service it. The homeowner wants improved performance from the technology. How that happens is up to the service folks.

“At SLK we believe that as the industry is changing, there’s a lot of manual work, and we need to constantly automate,” Kumar said. “We need to constantly use disruptive technologies like AI to automate and provide the benefit to the customer. And this benefit is not just savings, but this benefit is more about getting to the outcome they want.”

Why insurance is playing automation catchup

The insurance industry is well aware of the benefits of automation, Kumar said. Automation has come more slowly to it due to several factors, beginning with the high volumes of data the industry requires. Much is paper-based and in unstructured and non-uniform formats. In the United States, insurance is also regulated by the states, meaning more complex and variable solutions are required.

SLK recently partnered with V-Labs and CNA Insurance to deploy AI as the basis for intelligent automation of insurance business processes. AI allows tech providers to reimagine insurance operations and accelerate process automation.

Also read:

Where automation best helps insurance providers

Early results are promising. Average processing times have been reduced from days or hours to minutes. Technology allows adjusters to assess photos and correlate information like weather patterns to make decisions without travelling to the claim site.

Kumar said the root of the improvements is using technology to do the tedious work previously done by people. Home or car insurance requires humans reading documents and pulling out as many as 150 fields that are sent to an underwriter. The underwriter then develops a quote.

SLK used AI and natural language processing to read documents and pull information. The technology is around 95% accurate and is doing a better and faster job than humans. Humans can focus on that five or 10% where the inaccuracies occur to further improve service.

“Every company is a software company now,” Kumar said. “This is something that they have to do. They don’t have a choice in this because this is about computers. Without this, they would not be competitive in the industry. Without this, they would not be engaging with the customers that well.”

SLK works across the insurance sector to develop effective solutions. Now is the time to bring it all together into Insure AI, which Kumar envisions providing the industry with an Amazon-level of service.

Additional considerations when delivering automation

A transformative change for sure, but it must be carefully introduced to both deliver results and minimize disruption behind the scenes, SLK VP Steven Hearn explained.

“Large technology programs very typically have a huge dependency and also create a lot of burden on the line of business or operations teams,” he said. “You have to come with the ability to enable the business to accept and adopt this technology. 

“You’ve got to create something where they see fast results. There is not an appetite to have an ROI that expands into a multi-year ROI in these types of programs.”

Several factors are driving the automation push, Kumar and Hearn said. The current soft market drives providers to deliver quality outputs at lower costs. Providers also want automation that allows people to focus on the most meaningful activities. In underwriting, technology enables faster decisions which allow staff to take on higher volumes.

Done right, it’s a clear differentiator in a competitive market.

“Brokers and agents are sending out a request for new accounts to underwrite a premium to multiple companies,” Hearn said. “In many cases, it’s the organization that gets there fastest and makes it the easiest to deal with (that earns the business). Automation is a key driver for that.

“The more they’re able to do that and the faster they’re able to do that they become more attractive.”

How automation helps the insurance industry deal with higher risk

In the last 50 years, there have only been four years where insurance companies were challenged to deliver on the claims they received, Kumar said. Two of those four have happened since 2019 as multiple weather events have collided.

“They need to start looking at technology to help them underwrite much more smartly and process data in a much better fashion,” Kumar said. “And scale the business for them because they’re also looking for growth. And they’re looking at how they can address the customers in a much more agile fashion.”

As deep fake technology improves, so does the ability to combat it, Hearn said. That tech also helps tackle check fraud. Perhaps it’s a fraudulent image or an alert that there was no hail in the claimant’s area on the claim date.

“Computer vision becomes critical,” Hearn said. “When you think about what we’re attempting to do is in a business function we’re trying to mimic the way that the brain is working. If you think of someone in claims getting an image from an initial claim, they’re looking at that and they’re making determinations. 

“To make that determination, you’ve got to bring all those fundamental elements together. And for us, it’s key because our algorithms and our models are using those across the board instead of just honing on one piece. If I can read an email and understand the image attachment to that email, I have pushed up my value chain. It doesn’t have to pass off to someone else, or I can weed out a lot of the things that are fairly standard or fairly low value so that it doesn’t have to make its way to multiple people.”

  • Tony Zerucha

    Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.