Perspectives from HFS, EXL, and a selection of its P&C clients on the data-driven future of the industry
 

Since the onset of the pandemic, organizations have largely embraced digitization. Whereas before, much of the innovation drive came from challengers to incumbent enterprises, “going digital” has since become an urgent necessity to maintain competitiveness, no matter a company’s market position or historical standing. There are some property and casualty (P&C) carriers that are making the requisite shifts to their businesses in order to innovate in line with market demands. However, like other industries that have already undergone a significant period of change, such as the airline and newspaper industries, there are also incumbent organizations that have been slow to embrace such necessary business model changes. It is the former that are best positioned to succeed in this new digital landscape.

In this POV we will focus on P&C carriers and brokers, understanding their digital transformation challenges, how the pandemic impacted them, and their goals for becoming data-driven brokers and carriers in the pandemic economy. In fact, if you look at Exhibit 1, you can see that deficiency in overall data quality ranked as a leading inhibitor of digital transformation initiatives for insurance carriers.

As Exhibit 1 demonstrates, carriers must first identify their data challenges and then outline how to address them. After all, it is data that is at the core of digital transformation. The insurance industry has so many data points to take into consideration as well as enormous tranches of data. Therefore, getting data management right is the key to successful digitization. What this essentially means for carriers is a new kind of workflow operation with interconnected data management components at its heart and consigning the restrictions of data siloes to the past. Many Insurance companies struggle to harness the true power of their data – and in turn – data modernization can serve as the backbone or foundation of other transformation capability builds.


 

These capabilities include the likes of OneOffice, EXL’s conversational AI platform Exelia.AI™ - but also data ingestion solutions like EXL XTRAKTO.AI™ – and Analytics modeling solutions across domains. What’s more is that the modernization effort can run partially in tandem to implementation of these solutions such that the data models and stores created (centralized, federated, hybrid, etc.) are then ready to enable the downstream ecosystem of tools/platforms/applications.

We interviewed a selection of EXL’s P&C clients, finding that while each had slightly different priorities when it came to digital transformation, data is a pivotal to help them get there. In the following sections, we explore how the OneOffice mindset has fueled data-led digital transformation.

The HFS OneOffice mindset resonates with P&C industry, with key goals around driving new efficiencies in operations

The HFS OneOffice is our version of what digital transformation looks like in action, and you can see it in Exhibit 2. At its core, OneOffice is about aligning the front, middle and back offices to create seamless customer and employee experiences, while driving down operating costs by digitalizing your core infrastructure. It’s a mindset shift that resonates well in the P&C market, and particularly with EXL’s clients – they explained to us that better internal alignment into a “OneOffice” is a critical operational goal of their digital transformation initiatives. It’s easy to see why; embracing this mindset would help them drive internal alignment, helping them better serve customers, producers, and stakeholders end-to-end. However, before any business can truly embrace the OneOffice mindset they must ensure they have a mature data strategy and foundation, as better data and decisions will play a crucial role in helping them redesign their operations and start to create anticipatory insights to better serve customer needs.


 

HFS sees EXL making strategic bets in “Connected One-Enterprise” in achieving the Insurance OneOffice

Since its inception in 1999, EXL has been heavily focused on building out insurance vertical solutions in the front, middle and back office. While the industry initially demanded point and functional solutions, EXL has placed strategic bets in addressing data-based challenges to break down these operational silos, outlined in Exhibit 3, and is helping its clients to become data-driven by redesigning and transforming data exchange and flows to move from legacy to data-driven future state. And these bets are starting to pay off. We spoke to C-level executives in a number of EXL’s clients where these investments are evidentially in play and driving value across the front, middle, and back office. The following 3 cases in point are discussed below:


 

Case 1: Customer and employee experience is at the very core of the OneOffice mindset, and P&C brokers and carriers are looking towards data-driven investments to fuel these experiences with repeatable and scalable enterprise-wide solutions

We’ve discussed countless times in our research the importance of customer experience – it’s every businesses’ front office, the first thing clients think about, and it’s a substantial driver of brand loyalty, a critical differentiator in a homogenous market like P&C insurance. Because of this, customer, employee, and partner experiences are at the very core of our OneOffice mindset, and it’s something that simply must be at the top of every single enterprise executives mind if they hope to win in the “have-to-have” post pandemic economy. Unfortunately for P&C carriers, they are fighting a battle on two fronts; on one side customer demographics are shifting and they expect a seamless digital experience, and on the other side they are shackled by decades of technical debt, a daunting hurdle they have to overcome before they can truly unleash a suite of digital technologies to drive these new experiences across their global enterprise. EXL’s P&C clients believe that addressing their pre-existing data challenges will help unshackle themselves from the technical debt, allowing them to create digitally enabled experiences with an Enterprise Center of Excellence framework, as one explained themselves:

"For us, data is the output that’s going to help us create the efficiencies needed to drive a better customer experience. We’ve got to simplify turnaround time for clients, they’ve got to get what they want faster.

- A C-Level executive from a global broker"

To put the case for powerful data ingestion solutions into context, consider this: Insurers manually process huge amounts of bulk-generated data and documentation spanning the customer journey, from onboarding to servicing to claims on a daily basis. This alone can engage up to 5-10% of enterprise bandwidth and related costs, according to EXL. In fact, EXL estimates that a large global insurer or broker can spend around $125 -$175 million and 4-6 million hours annually on manual document handling across the entire value chain. Unfortunately, like countless other insurers, this global broker had traditionally processed this data manually. They explained that this not only increased the workload for its employees, but it also slowed response time, seriously impeding the customer experience. This global broker was no stranger to the benefits of RPA – claiming in other areas of their business they had automated one million business hours in the last two years – but they explained that because this data was often unstructured, they had thus far been unable to deploy digital technologies at rapid scale and repeatability across their global enterprise.


 

In response to this, EXL with its client are leveraging EXL’s AI:OS, which we outline in Exhibit 4, to unlock the true potential of AI-based technologies to deliver enhanced customer and business outcomes. NLP and ML technologies are helping EXL’s client convert unstructured data, which accounts for 80% of all their data, to structured data in machine-readable form, and extracting usable insights for better decisions. This allowed the client to manage customer communications and data. This case study is just one example of how EXL is combining deep insurance expertise with digital leadership, on their mission to assist carriers and brokers in identifying how to apply cutting-edge technologies in new and exciting ways to transform critical processes - and this client even claimed efficiencies upwards of 30-40%.

But enhancing the customer experience alone isn’t enough, the P&C business places brokers at the front-end of an ecosystem of partners unique to the services they provide, and aside from the regular suspects like clients and carriers, they have to deal with extensive repair and recovery networks in the event of a claim. EXL’s client recognized this and explained that the repeatability of a solution like EXL XTRAKTO.AI™ made it a good fit for this too, as it allows them to quickly ingest data from a range of different sources, processing it quickly and creating quick, accurate outcomes for all parties involved. For third parties like repair garages, the enhanced efficiency will likely be passed onto the P&C carriers’ own clients, and it means brokers will be more likely to drive business for that particular carrier, as they have had their own positive experiences.

Case 2: Data is the fuel for “Front-to-back” transformation: Perspectives from a leading Global Carrier specializing in SME, mid-market commercial and specialty lines

We have written continuously about how the OneOffice drives true digital transformation by using data and intelligent automation to breakdown the silos and to access the data to drive customer-led transformation across the front, middle and back office. Another one of EXL’s clients, a leading global carrier, started this journey with an objective to build and execute on enterprise transformation to reduce costs while driving a simpler, customer-centered organization. This required driving large-scale transformation program and a partnership-driven approach. EXL, in partnership with a Big 4 firm, engaged with the carrier to drive a comprehensive and holistic approach by breaking the scope barriers and creating integrated transformation teams.

This engagement placed governance and change management at the pinnacle of the program to examine the end-to-end roadmap across business silos in order to prioritise and shape an agreed transformation roadmap thereby bringing collaboration and co-design mindset between business, enterprise IT, Analytics and partners.

To do this, EXL and their partner leveraged EXL Nerve Hub™, a solution that combines process mining and discovery (something we at HFS call ‘process intelligence’) to provide the client with visibility, control and analytics to generate a transformation roadmap. They then set up a dedicated Automation center of excellence (CoE) with the skills required to run and execute on the transformation plan. Finally, in this engagement, it was critical to ensure a “digitally native” mindset to drive sustainable change. To achieve this, EXL trained and certified the client teams in the use of digitally enabled technologies, including EXLerator.AI™ and the new ways of working, embedding a “digitally native” mindset at the company core to drive their future initiatives.

The client told us that the program delivered multiple tangible benefits across underwriting, claims, finance and customer management, including:

  • A 40% reduction in volume of manual journal entries through policy changes, robotics and actuarial model standardisation for estimating unclosed premiums.
  • Leveraged intelligent process automation to introduce speed and efficiency into SME renewals.
  • Introduced speed and effective resolutions by digitizing the end-to-end customer complaint management process.
  • Achieved a 20% expense reduction, alongside 10% indemnity savings, by re-designing the end-to-end claim recovery and settlements.

Case 3: How a US Global Carrier is using data and analytics to transform its Finance Operations

Finance operations have been historically deprioritized as enterprises instead plough their investment capital into new product development and IT modernization programs. This is often an even bigger challenge for P&C carriers, thanks to the fragmented nature of their business and ever-tightening regulations, which means their finance operations are now plagued with manual and time-intensive tasks, which increases operating costs and impedes the customer experience.

One of EXL’s P&C clients recognized this and embarked on a program to transform its finance operations, with the ambitions of finance becoming a true partner of the rest of the business, rather than a siloed and under-invested department. The journey began in 2017 when they consolidated their finance operations with a single global provider across 20+ countries. The scope cut across multiple lines of business in retail, commercial and specialty insurance, and the processes ranged from transactional payables and receivables to regulatory reporting, treasury, tax, and reserving. The over-arching objective was to fundamentally modernize the way in which finance operated, enabling professionals to become “advisors versus book-keepers”, in short, to become a data-driven business.

While many programs are over-ambitious and rushed, which ultimately leads to their downfall, this client embarked on a sustainable three-year initiative. Digital transformation was at the very heart of the program, which mean they first had to tackle their archaic data management practices. To achieve this, EXL and the client established joint governance and a central transformation office, whose purpose was to:

  1. Driving the principle of consistency and standardization, “wherever, whatever, however”
  2. Focusing on the “last mile” to enable finance and business interactions
  3. Embedding automation, data and analytics at the heart of the solution to become a “data-driven business”
  4. Ensuring the highest degree of resilience with a robust compliance, risk, and a business continuity framework
  5. Win hearts and minds with change management based on co-option versus a mandate, open communications, and a continuous earning culture

To achieve their goals, EXL provided their data, analytics and automation expertise, embedding their EXL XTRAKTO.AI™ solution, as well as their partnership with BlackLine. These capabilities addressed product development, pricing, actuarial, distribution, claims and finance customer experience.

To achieve their goals, EXL provided their data, analytics and automation expertise, embedding their EXL XTRAKTO.AI™ solution, as well as their partnership with BlackLine. These capabilities addressed product development, pricing, actuarial, distribution, claims and finance customer experience.

"Covid demonstrated EXL as a shining star… within 4 weeks we were back up and running with 95% of our EXL colleagues working at home, and zero impact in our finance operations

A C-Level executive from a global broker"

Finding a strategic partner is an essential part of the journey for P&C carriers looking to tackle their data challenges and unleash their digital potential

There’s no such thing as easy digital transformation, once you’ve wrapped your head around the latest and greatest technologies, and how your business can leverage them, you still have to establish how best to effectively implement them, and how to get key stakeholders on board. All of this is before you’ve even considered the domain specific challenges, like the harsh regulatory environment facing P&C carriers, so it’s easy to understand why finding the right strategic partner is an essential early step. And it’s a role EXL is working hard to fill – we’ve written countless times about their analytics capabilities, which they couple with deep insurance expertise, to make them a good partner for any P&C broker or carrier looking to address their data management practices.

So, EXL already boasts the foundations needed to help its insurance clients address their data challenges, and we can see the beginnings of the relationship between digital and data, but how exactly are they targeting the P&C market specifically? We connected with the EXL’s senior leadership in the space, and they outlined a straightforward strategy for the sector:

"The future belongs to enterprises who are able to embed intelligence into operations and develop analytics capabilities that produce insights that spur outcomes. Both of these objectives are impossible without first removing data siloes.

- Raghav Jaggi, Senior Vice President and Global Insurance F&A and P&C Co-Leader EXL"

He went on to explain that EXL’s go-forward strategy and plan for P&C Insurance is along the four following areas:

  1. Continue to expand partner ecosystem: EXL hopes to expand and leverage its extensive partnership ecosystem and focus heavily on key industry challenges and solutions to support its clients.
  2. Focus on data and analytics: EXL has consistently reported impressive double-digit growth in its analytics business, and it plans to continue the trend by investing heavily in the areas such as new center of excellences’ and its data factory.
  3. Build and expand industry solutions: EXL has developed a number of proprietary platforms across the value chain - business acquisition, property inspections and surveys, premium audit, medical claims and subrogation, and continues to build its own range of insurance specific solutions: FNOL, SmartAudit.AI and Billing – and EXL believes these solutions are quickly becoming a key differentiator, as they look to create seamless data flows and orchestration.
  4. EXL operationalizing technologies like AI, Analytics and the Cloud to help clients differentiate experience, outcomes and efficiency, with speed as a foundational goal. They recognize that these technologies cannot be operationalized with simple “plug-and-play”, so EXL designs a data-driven future state for clients with following typical attributes to move from legacy current state to data-driven future state of AI:OS (AI Operating System), outlined in Exhibit 5.
    • EXL’s AI solutions applied upstream of legacy technology and/or processes to provide clean data
    • Redesign of data (process) flows with data / analytics driven decisions insights
    • Automate redesigned workflows that leverage the scale of Cloud
    • Elevate and modify role of humans

The Bottom Line: Data quality is a leading inhibitor of insurers digital transformation, and given that digital is data, it’s hardly surprising. P&C carriers and brokers must adopt a OneOffice mindset to drive digital transformation and find a partner who can help them crush their data siloes.

The pandemic exposed a shocking amount of technical and process debt across countless industries, and P&C insurance is no different. If insurers hope to thrive in the post-pandemic economy, they must address their data challenges to create efficient operations, new risk models, customer and distributor experiences. To achieve this, it’s crucial that they find strategic partners who can combine the capabilities and expertise needed to not only provide the technology solutions, but also to enable the mindset shift required by carriers and their employees. EXL is well-placed in orchestrating this transformation thanks to their continued investments in the likes of AI:OS, EXL Nerve Hub™, EXL XTRAKTO.AITM and Exelia.AITM alongside their tried-and-tested domain expertise and analytics capabilities – all of which is augmented by a strong focus on governance and change management. EXL even recognize that they can’t be everything to everyone and have nurtured a healthy partnership ecosystem to drive successful client’s outcomes – and this was highlighted throughout all of our conversations with their clients.


HFS Research authors
 

Sam Duncan | Associate Director, Research

Sam Duncan, is an Associate Director, Research at HFS. He developed a fascination with how the evolution of technology accelerated globalization while completing a degree in economics at Bournemouth University. At HFS he gets excited by blockchain and other cutting-edge technologies as they impact business. He maintains a focus on banking and financial services.

 

Nigel Edwards | Chief Client Officer

Nigel Edwards is Chief Client Officer at HFS Research. He works closely with the CEO and the Leadership team to set the strategy for collaborating with our clients to help them achieve their business goals. Nigel oversees client relationships across all new and existing accounts, and works with the Chief Strategy Officer and Chief Research Officer to ensure that we bring the best of our capabilities behind our clients’ agendas.

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