While the topic of digital transformation has been around for the past decade, consultancies continue to warn that further transformation is required. Post, in association with Marklogic, held a roundtable with senior figures from the insurance industry, to determine whether this is hype or if the industry is taking on these challenges
Attendees at the recent roundtable on digital transformation were confident that change is beginning to happen in the industry.
Adam Mitchell, head of risk innovation at Chaucer, said: “It’s become more than conversation, there are things that are happening. And now it’s really implicit, certainly, in the Lloyds’ market. I’m speaking more from a Lloyds’ perspective here. We’ve got to try and challenge the status quo. And, yes, this is a real opportunity to do things.
“Otherwise, there will be a flight of business and capital away from Lloyd’s. Lloyd’s will start to become antiquated and an irrelevance. Lloyd’s has embraced that, so if the regulators are doing it, the participants in that regulatory environment really need to do that. There are tangible things coming through.”
However, it was also argued that insurer investment in technology can vary, complicating transformation attempts.
Ingenie chief technology officer, Kevin Findlay said: “I’m the CTO, so I’m a spender of money. I’m always campaigning for more investment into it. But, actually, the problem with some insurers is where they don’t necessarily have the consistency of investment in technology over the years and it just goes up and down.
“And every time there’s a problem in business, technology spend gets cut. That just disrupts the software teams who may or may not be inefficient. It doesn’t help.”
One hotly discussed topic was the potential for technology to disintermediate the broker.
Matthew Allam, director of technology, data and strategic change at DAS UK Group, said: “It makes the assumption that the customers are the informed customer. The broker plays an important role, provides a certain amount of expertise and knowledge in the process. So, you’ve got to be careful as you take a break. Also, perception wise, whether you remove them from the process or move to a digital broker.”
Bewica founder and CEO Eva Berg-Winters said: “Unless digital actually helps the buyer to be an informed buyer, they’ll just do a price comparison, but not necessarily have an understanding of the products we are selling. Our products are very complicated. They are long legal documents. These are very hard for any consumer to understand.
“But it might be different if you managed to create an interface, if you managed to convey the message, maybe also, in a graphical way, in a simpler way so customers can themselves make those informed decisions.”
While there were some worries expressed about disintermediation of the broker, in claims automation could be more welcome.
Alastair Burrows, commercial lead at Marklogic, added: “Automation, certainly, with claims is going to, or should, provide that good customer experience. But the underlining data, in order to make those quick decisions is a key element.”
There are multiple drivers of digital transformation, according to the panel of industry figures. These differed across different types of organisation and included customer expectation, as well as efficiency and productivity.
Attendees felt that in cases they had not reached customer and business expectations.
Saga senior manager for strategy and innovation, Nick Reed said: “Ultimately, as a broker, you want to attract more customers and keep more of them and then become more efficient. Digital transformation is probably driving both of those. Speaking from personal experience, we’ve probably fallen short in both cases.
“We are great at selling car insurance to people digitally, but many not so great at servicing them mid-journey. If you look at open banking, we’ve got no equipment like that in any shape.”
Justin Emrich, Atrium Underwriters’ chief information officer, said: “We’ve got some examples in our firm of underwriters who have made that shift and they’re saying: ‘Well, actually, I could trade 24/7 here. Or I could trade in a more efficient way. I can auto-triage my transactions.’ But I’m not hearing that widely. Certainly, around the speciality market in Lloyds, it’s the transformation that we’ve seen so far has been driven by a, kind of, cost efficiency play.”
Charlie Blackburn, co-founder and chief technology officer at Azur Underwriting, added: “Too much of the spend is on lights-on, keep your systems running. Very little is put towards new products, new platforms, new processes. The other number that just astounds me is productivity in the insurance sector is worse now than it was in 2004.
“It went up briefly after the financial crash when they sacked everyone and it’s gone down since then, because they rehired. And if that doesn’t tell you about our investment in technology and infrastructure, I don’t know what does.
“It’s manual underwriting. It’s people calling it risk transfer, but it’s actually keying in something to an arcane system another person checking it, another person keying it in further down the chain.”
There was some discussion of emerging insurtechs. However, there was a sense from some that they were not tackling the problem most key to the gathered businesses, such as speeding up the underwriting process.
Ronan Hanrahan, QBE director of shared services, said: “How many of them are vested in analysing a 40-page document using AI to pick out the insights, versus how much energy is going into digitising the data streams in the first place? For Platform Placing Limited you get a slip out of it. It’s a PDF document.
“We then have to convert that back into some sort of digital stream. Do we ever stop to think: ‘Well, maybe we could just capture the data in a structural format on forms?’ So, thinking far enough up the chain is something that we’re not good at as an industry.
“We as carriers probably go as far as the brokers. I suspect the brokers, probably, concentrate more on the carriers than they do on the customer.”
Connectivity and prevention
Insurers have talked about moving towards risk prevention, rather than just being there to pay out claims, in recent years. Attendees expressed optimism that new advancements were now occurring to enable this, particularly in the specialty market where they have traditionally been slower to take off than in the personal lines space.
However, they expressed some consternation over legacy systems slowing down these processes.
Darren Sharp, group head of IT at Tokio Marine Kiln, said: “It’s happening somewhere. If you look at shipping, they’re now using the sensors to work out if the captain is taking a short-cut through Somalian water and alert you, and reduce that risk of the terrorist attack. So it’s not just knowing if the cargo on the ship is too hot and the tulips are dead by the time they land.
“It’s growing hugely. And that’s more in the specialist space, whereas, traditionally it was sensors in cars and stuff, which we’re seeing far more in personal lines. So, it’s happening in pockets.”
Emrich added: “Application program interface, for us, is the key. And it’s being talked about regularly around our core table, which is good to know. But from two perspectives, you’ve got the retail commodity end of insurance where it’s all about making sure you sell your product really frictionlessly through whatever aggregator, portals, so that people aren’t rekeying to get pricing and so forth.
“So, that’s all about API connectivity to rating engines and so forth. And then, for the speciality end, which is predominantly located in EC3, it’s all about efficiency of movement of data through our various different legacy systems, which were all designed before APIs were even invented.
“We’re having to either throw the whole thing out or wrap our legacy systems in APIs, so that we can be super-efficient.”
Sharp concluded that any investment needs to be spent in the right place for this to work: “In our organisation what they’ve spent the money was on was ‘here’s the nice pretty front end and we’ll just ask the broker 10 questions and then this person sat at a desk that cost £15,000 a year will enter 42 screens and calculate all the tax’ and the whole journey is like three weeks. It’s not digital at all.
“You need tools for automation and in the short-term that’s things like robotic process automation so you can chuck away some of those legacy systems. And even just some nice equipment for the employees, who have much nicer stuff at home than they’ve got in the office.
“So, making them more efficient, creates the time to allow them to get more involved and these kinds of initiatives. It just keeps them more motivated.”