Background

Though life and business has paused in many ways due to COVID-19, this has not been the case for insurance companies. Governments closing offices as part of lockdown programs and a surge in demand across various business lines have combined to form the perfect storm. This has had a profound impact on three key business areas:

  • Finances: New business volume has disappeared after the temporary surge in demand, eroding revenue. Additionally, the renewed focus from regulators on how customers are treated in terms of claim handling and premium paybacks has compounded this impact with urgent cost pressures. Stressed investment portfolios, coupled with maintaining client service levels despite uncertain premium payments, have put a significant burden on companies.
  • Client Servicing: Companies have struggled to fulfill demand, and hour-long queues have become the norm. Even as some countries have begun easing their stay-at-home orders, most companies have not recovered completely and struggle to meet key performance indicators consistently.
  • Business Continuity Plans: While companies with multi-location delivery models managed to maintain front- and back-office operations slightly better than those with single-location delivery models, no organization came out of the situation unaffected. Most business continuity plans (BCP) had to be restructured overnight.

Though the current situation is clearly extraordinary, it demonstrates that most companies must revisit their operating models and reassess how they can not only recover from the current state, but also be ready for an uncertain future.

Outlook for the Future

Business leaders responding to the unprecedented economic impact of COVID-19 face the tough task of balancing customer services with cost reduction targets.

A LIMRA survey on the effects of the pandemic indicated a decline in face-to-face applications. Companies that accept online and mobile applications saw an increase in applications in March 2020, clearly showing an uptick in digital channels. Products such as term life insurance, short-term disability, and absence are experiencing a major demand surge.

While there are still many uncertainties due to the nature of current situation, digital technologies will play an important role going forward. This includes solutions such as applying advanced automation to customer interactions and business processes. Intelligent process automation (IPA) and conversational AI are two solutions that will prove invaluable during the current crisis, and should be at the top of the agenda for forward looking insurance leaders.

Four Questions for Insurance Leaders

Insurance leaders looking to update and scale up their existing automation programs should consider four questions:

How can the company enable a virtual workforce that -

  • Helps manage cost while improving customer experience?
  • Improves EPS, revenue, and the bottom line?
  • Ensures resilient business operations capable of handling volatile business volumes?
  • Delivers geographical independence?

The shift to remote working has revealed gaps in IT infrastructure, highlighted digital upskilling requirements, and pushed workforce planning to the limit. This has strengthened the case for augmenting the current human workforce with virtual workers.

Leveraging a digital workforce that dynamically adjusts to changes while delivering services with little to no impact across geographies can yield major immunity to such unforeseen business interruptions, allowing organizations to be more resilient, recover, and sustain improvements beyond the current crisis.

As a starting point, the following digital transformation themes should be considered across the operational value chain:

  • Intelligent Process Automations: The combined capabilities of robotic process automation (RPA), business process management (BPM), and machine learning can automate operations end-to-end for straight through processing, delivering operational scalability and agility to offset any productivity loss due to new operating environments.
  • Digital Mailroom Operations: Optical character recognition (OCR) and AI-based solutions can extract and digitize unstructured or semi-structured data, such as email or documents, resulting in improved customer experiences, stronger persona data controls, and better operational resiliency.
  • Customer Experience Transformation: Conversational AI with cognitive virtual assistants (CVA) and natural language processing/understanding (NLP/NLU) engines delivered to mobile and web ecosystems can improve customer experiences while lowering cost across voice, chat and social media channels.

As insurance companies come under pressure to preserve stakeholder value, regulators such as FCA have started to sharpen their focus on operational resilience, customer service levels and experience1. To meet this balance, insurers must combine digital solutions such as RPA, CVA, and OCR, integrated with the human workforce, to streamline end-to-end processes and prepare for the new normal.

Underwriting and Investments – Safeguard Market Cap and Stakeholder Value through Automation

While insurance leaders may be familiar with the use of automation for operational efficiency, automation can also be used to manage the financial impact of COVID-19.

  1. Accelerated Underwriting and Automated New Business Onboarding: Automation and data analytics can help agents quote, underwrite, compare, and bind insurance via one digital platform, resulting in higher quote-to-bind ratios. This onboarding process can be automated end-to-end to generate a policy ID and notify new customers, freeing up operational capacity.
  2. Insurance Claims Pay Out to Policy Holders: Regulatory obligations to change premium allocations on demand may impact an insurer’s premium cash flows, the size and frequency of claim pay-outs, loss ratios, and cash reserve calculations. Actuaries can use IPA to run millions of scenarios, examine mortality rates, and perform other analyses to better gauge liquidity requirements and improve financial performance.
  3. Investments in the Financial Markets: IPA solutions can help assess the impact on an insurer’s investment portfolios and liabilities. Actuarial practices, such as asset and liability management, can utilize advanced automated solutions, such as market rate watch and interest forecasts, in financial modeling.

Resilient Global Business Operations, Enriched Customer Experience, and Reduced Costs through Automation

IPA and digital labour have now become critical for business continuity plans and client service operations looking to reinforce their workforce.

  1. Automated Policy Service, Administration, and Management: Solutions combining OCR, NLP/NLU, and RPA can automate the extraction of content from e-mails or voicemails through voice-to-text, interpret these requests, and update the underlying policy administration system for requests not requiring underwriter review. This allows underwriters to focus on exceptions, helping offset productivity loss.
  2. Digital Mailroom: A number of insurers have already embarked on the digitization of paper documents to meet privacy regulatory requirements, reduce storage costs, and improve serviceability. COVID-19 has increased interest in this process from brokers and insurers alike. Integrated solutions for this area can digitize and automatically categorize inbound and existing paper documents using AI and ML. This provides an optimal solution for commercial insurance quote bind and renewal processes. The solution also allows companies to achieve compliance with GDPR and CCPA regulatory requirements.
  3. Contact Center Operations: Digitally augmented contact centers should integrate cognitive virtual assistants, self-serve capabilities, and an omnichannel communication management module. This can yield better demand deflection across the sales, service and claims process lifecycle, improve productivity, and increase customer satisfaction. A number of insurers, especially in personal lines, have started implementing these solutions to automate common requests for frequently asked questions and first notice of loss. Insurers looking to start their automation journey should begin by identifying, prioritizing, and delivering on opportunities, beginning with a few pilot candidates and gradually scaling up the level of automation through a Center of Excellence (COE). Such digitized operations and an augmented workforce will be crucial for organizations to enable continued business operations, empower the organizations to remain resilient, and safeguard stakeholder value.

Reviving Struggling Digital Programs and Creating an Effective Digital Workforce

Insurers that invest in advancing their digital capabilities are better positioned to maintain services to their clients. According to a Gartner, 60% of organizations with more than US $1B in revenue have begun their intelligent automation journey, a number expected to increase to 85% by 2022. However, while most insurance companies realize the importance of digital transformation, roughly 70% of digital transformation initiatives fail, and 48% of companies are not even prepared to execute.

In order to fix underperforming digital programs, sustain long-term growth, and improve financial and operational health, an organization needs to develop a Digital Turn- Around Strategy. This proven strategic framework enables organizations to holistically assess their distressed digital programs, generate insights, develop a recovery roadmap, and execute course corrections.

The first step of the Digital Turn-Around Strategy is to diagnose the specific challenges facing the organization and establish clear objectives. The approach applies a holistic Automation Health Check framework, which assesses, identifies, and fixes gaps in ongoing programs by implementing best practices, and prepares a roadmap for successfully scaling up IPA programs across three tracks:

Common Themes Identified by Applying the Automation Health Check Framework:

  1. Automation Strategy and Maturity Curve – Can the digital program scale and offset productivity losses?
    • It is imperative to align digital goals with organizational objectives to solve both operational and economic problems posed by the pandemic. The constrained maturity curve and inability to scale must be addressed with effective change management. This is especially vital now to address employee concerns that may be heightened by COVID-19. The keys to success in this area are training and consistent communication.
       
  2. Governance and COE Structure – Are frameworks and processes in place for effective functioning?
    • A defined governance, demand intake, and qualification process is a key upfront activity that will empower insurers to prioritize implementing a digital workforce in the most important areas.
       
  3. Operating Model – Is there efficacy across the full delivery lifecycle?
    • A robust delivery, service, support, and maintenance model ensures few to no automation outages. This maintains business continuity while meeting defined service level agreements, giving the business team confidence in the program.
       
  4. Performance Measurement – What is the reality of delivered value?
    • Review and realign your performance targets in view of the immediate requirements, i.e. average handling time, exception rate etc. as per process requirements. Optimize any production bots that deliver mixed results and are prone to issues.
       
  5. Technology – Is your technology infrastructure robust enough to enable augmented workforce with digital solutions and remote support for long periods?
    • Evaluate the technology architecture and automation platform infrastructure along with the revised policies and procedures. Assess the technology support required to maintain the hybrid workforce against evolving digital adoption and business volume spikes.

Expected Outcomes

The Digital Turn-Around Strategy uses a data-driven approach for transforming customer, process and data experiences. This eliminates risk and identifies the right intervention points to help revive digital program and enable required future business resiliency and flexibility. It allows insurers to review and realize the full potential of a digital workforce, delivering results across three key business areas:

Financial Impact

  • Protect growth and profitability with digital solutions that generate deep insights from activities such as scenario planning, financial modelling for cash reserves, and risk exposures to the economic impacts of the pandemic
  • Automate underwriting and new customer onboarding to facilitate digital adoption among customers
  • Identify opportunities to free up cash flow by cost avoidance and work reduction through automation

Business Continuity

  • Accelerate digital transformations as the possibility of prolonged remote working, workforce management, and intelligent automations form the new normal for business
  • Build future business resiliency to maintain service level agreements during significant volatility and variability in volumes with advanced digital solutions such as conversational AI and chat bots
  • Offset any productivity loss due to remote work with digital labor solutions

Client Servicing

  • Focus on customer experience as a long-term strategy designed to gain a competitive advantage and sustain growth
  • Achieve geographical independence and operational resilience with a digitally augmented workforce
  • Maximize cost avoidance and work reduction with prioritized automation opportunities in areas such as policy service and claims

The Digital Turnaround Strategy provides a view of an organization’s current position on the digital maturity curve, resulting in creating an effective baseline and roadmap. It is a proven framework to analyze comprehensively more than just cost savings and capacity gains, with an added emphasis on key business areas such as financial impact, business continuity, and client servicing.

Conclusion

Leveraging digital transformation for a virtual workforce is a pressing priority to enable resilient business operations. COVID-19 has made insurers reprioritize digital transformation as a strategic element for redefining customer and employee experience, resilience, and flexibility as opposed to just cost or efficiency gains. As organizations fight to overcome the operational and financial impacts of these uncertain times, it will be imperative to bring the focus back on digital and build the right capabilities and technology infrastructure.

Further, it is crucial that insurers develop an all-inclusive automation strategy, aimed at strengthening both frontand back-office operations, as well as improve their financial position to recover strained investment portfolios and inconsistent cash flows as the pandemic recedes. A hybrid workforce empowered by intelligent automation solutions will not only help in securing insurers’ current positions, but also accelerate the industry towards a digitally transformed future.

1https://www.fca.org.uk/firms/insurance-and-coronavirus-our-expectations

 

Authors

Amit Dhawan
Senior Manager, Digital
Consulting for Insurance, EXL

Pranika Kapur
Manager, Digital
Consulting for Insurance, EXL

 

Sumeet Goswami
Head of Digital Consulting
(UK & Europe), EXL

 

 

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