Digital Automation Leads Change in Insurance

How important is digital transformation to the future of the insurance industry?

Digital transformation is critical to the insurance industry to enable a better customer experience through process efficiency and insights from a myriad of data sources. Insurance has lagged behind other sectors in its adoption of technology due to lower customer interactions, regulatory complexity, and complacency.

At what stage would you say Australian insurers are in their journey? And are there particular segments that lead the way?

All insurers are on different digital transformation journeys. The larger insurers typically have a legacy of systems from acquisitions along with different business units that are built on inherited technologies that do not allow for the capture of data that is available today.

I don’t think any Australian insurers are leading, some have adopted particular technology such as cloud, geospatial, or robotic process automation and some insurers are entirely digital in their interaction with customers. This is not dissimilar to the global experience, for example in the US there has been a higher uptake of telematics for example but state-based regulation slows innovation in other aspects of the value chain such as payments and claims. In Asia embedded offering and micro insurance have gained traction but agents are an entrenched aspect of insurance distribution.

How have customer expectations and behaviours changed and how is the industry recognising and adapting to it?

Customers want insurance to be simple, affordable and from a trusted brand. It needs to be digital with the same experience across channels. When there is complexity either in the sale (underwriting) or claim process then a personal (human) interaction is essential. Artificial intelligence (AI) and specifically generative AI has attracted a lot of interest from industry recently with the recognition of the potential for co-pilot type solutions that enhance both the digital and human parts of the insurance process. However, trust is still key, and data privacy and cyber security are of critical importance in how these technologies are adopted.

What are some key challenges faced by insurance companies in their digital transformation journey?

Insurers have a number of challenges. Regulatory change in recent years has taken priority and due to legacy technology has stifled any other changes given the long lead time and effort in changing multiple systems. For example, one insurer we work with has moved their systems to a virtual cloud environment - however they still have 16 underlying policy systems that need to be updated to comply with regulatory changes driven by the International Finance Reporting Standards.

Culture and the inherent complexity of insurance companies also hinders the pace of change, many teams and business need to work together to implement and embed change from the business area, IT functions and risk functions. Insurance customers themselves are not driving change. There are strong brand loyalties and it's easier for customers to stay with their current product and provider even if there are more suitable products available due to the effort to switch. This is particularly true for the life insurance sector without the trigger of an annual insurance renewal.

What are the essential digital transformation initiatives/processes the industry needs to look at/consider?

Ingestion and claims processes still lag behind the underwriting and sales process in digital transformation for many insurers. It is not uncommon to still have paper and manual processes due to legacy systems and/or niche, and bespoke products. Commercial off the shelf technology is readily available to eliminate insurers delays in ingesting information from customers and suppliers and then acting on it, and industry leaders are recognising the benefit to customers, employees, and market share.

Collaboration between the many different services providers in the claims process is still a challenge with multiple systems, stakeholders and interactions that need to be navigated. Similarly, the distribution process is far from ideal for commercial products with significant manual intervention and inefficiency for brokers and customers alike.

How important do you feel the ingestion of digital information, accurately and at speed, is to delivering a winning customer experience?

Traditionally insurers rarely had to act at speed, insurance renewals were largely annual based on a limited set of criteria, claims catastrophes were infrequent and customer expectations of the insurance industry were poor. However, consumers have changed as has the volatility of the physical and economic environment.

Insurers that are not able to respond quickly to inquiries will be negatively selected against as their competitors target attractive risks. Poor customer experiences are shared quickly on social media by customers who expect instant delivery in an online always-on environment.

What do you feel is the benchmark insurers should strive for?

Insurtechs demonstrate that it is possible to deliver one click underwriting and claims payments in minutes not days for standard transactions, and ultimately these are the benchmarks that Insurers should aim for.

What role do you see AI and IDP leaders like TCG Process playing in the industry over the next five years?

Companies like TCG Process bring global AI experience and deep technology insights that demonstrate how Insurance can be delivered more efficiently, with speed, delivering a better experience for customers.

They also play a critical role in assisting insurers to compete and better meet customer needs. Insurance has a crowded valued chain, and this makes platforms or solutions that integrate and orchestrate stakeholders essential to deliver visibility, efficiency, and security.

How does Insurtech support and work with your members to guide them through their transformation journey?

Insurtech Australia’s mission is to create a world-leading insurtech and innovation ecosystem. We do that through creating an environment to make connection between entrepreneurs and tech leaders and insurance experts through events, introductions, and individually curated programs. We help bring an external perspective to the insurers to understand new and emerging technologies through connections and involvement in the insurtech ecosystem.

Insurance companies now find themselves under immense pressure to process claims with efficiency, while maintaining compliance and detecting fraud. Digital transformation is a must if companies want to win the customer’s favour and maintain a competitive advantage. Organisations like Insurtech play a significant role in connecting knowledge and digital technologies like TCG Process to the right organisations.

For more information on Insurtech Australia visit: https://insurtechaustralia.org

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