Director of Avenga Labs
First of all, digitalization has enabled new digital channels of interaction between customers and insurance service providers using portals and mobile applications.
It has replaced, to a large extent, traditional phone calls and filling tons of paper forms.
To a much lesser extent, it improved operations on the insurers side. Yes, there are modern systems to support operations better than ever, but still it sometimes reminds me of the “faster horse” analogy (H. Ford) for the insurance industry processes than the real industrial revolution.
It’s great . . . but not so great, for many of us.
At the same time, the explosion of insurtechs who deliver a much better personalization of services and customer experience make it proactive, simple and even fun to use.
And, it made customers notice the difference between fintech and large traditional insurers. Customers still need to fill out a form, maybe on their smartphone, but nevertheless they have to. The process is different, but still there’s this feeling of disappointment and that more could have been done to make it easier, faster, and more personalized, and not just more digital.
→ Read more about Transformation as a solution for new business reality
What’s beyond digital then for the insurance industry? What can they do to thrive in our digital future?
Bionic services are a strong trend for the insurance industry. But what is this idea about?
The first time I heard this term I was thinking about humans with their bodies modified by chips, etc. However, it can also be applied to the insurance industry (especially health insurance in the near future), but the term has a much broader meaning than just augmented humans.
The goal of the bionic revolution is to efficiently combine the best of two worlds: digital and human.
Software with its cloud services, faster and better algorithms (including machine learning), and hyper automation enable much more efficient handling of massive and repetitive tasks and processes. Getting rid of paper once and for all while tracking the processes and data facilitates more efficiency from the teams.
Humans are expected to better handle the emotional side of things and build customer trust. In this model it is the humans who augment the digital enterprise by being empathetic and sensitive to the emotions of the customers.
The big focus of bionic operations is to make machine to machine interactions the most preferred way of communicating between various devices, partners and customers.
What can be automated is to be automated and what cannot be automated has to be changed to allow automation. Reducing interactions between humans and digital solutions is the key.
Processes are to be further optimized by reducing manual steps and simplifying the number of steps. If the third acceptance step results in 99,9% saying yes, it can probably be removed, and the effect of a better customer experience will be more beneficial than the small possible direct loss.
Do not ask customers and business partners to provide data which can be gathered through APIs and shared data sources. Requesting customers to fill in the form with their name and address is killing the customer experience. Customers should not be required to act as the integration between different service providers and their systems. This is expected to be done automatically.
Effective API communication is the key for this part of the bionic scenario.
→ Explore AsyncAPI for digital communication
Reducing the number of interactions makes it seamless and does not bother the customer with your internal processes.
Automation and integration does not mean hiding the internals from the customers, on the contrary, with bionic operations implemented properly customers can have full visibility of the process.
It also involves decisions made by AI; explainability of the algorithms is the key here (XAI).
→ Learn more about Explainable AI (XAI) for business
Proactively monitoring risks and helping customers to take action to minimize losses is appreciated greatly by the end customers. Nobody wants the damages to their properties or their health in the first place. Obviously, it also helps to reduce the number of cases that need to be handled and improves financial efficiency.
Proactively filing claims on behalf of the customer instead of making it harder for them to fill out claim requests is a new revolutionary step towards even better customer experience in insurance.
Customers will need to just take a look at the claim, as all the pictures and explanations are done automatically to assess their damage and claim. For instance, drones can take pictures of a flooded property and AI can assess the damage, and the rest should be done automatically.
Simple segmentation of the clients is to be replaced by total personalization.
For instance, a simple division of clients by their yearly incomes can result in many assumptions about their risk behaviors and the products in which they may be interested.
However, this is also a source of frustration with many prejudices and over simplification of customer profiles. We are different in many more ways and dimensions than simple segmentation can handle.
AI can help to build multidimensional models of individual customers, individual preferences and risk profiles.
In the old times, the decision support systems were created to support humans making the decisions. In this new era, it is the algorithms making decisions. We have seen this phenomenon before in the banking sector (loan decisions are the most famous case), but it was just the beginning.
Algorithms stand on a hybrid of decision trees and machine learning that are based on high quality data from internal sources and partners.
→ Avenga on what is quality of the source data and how it impacts the entire business.
Once the quality of those decisions extend to humans in a particular process, there will be a revolutionary change and (for instance) much faster claims processing.
AI supports human consultants with full profiles of the customer and context information. In the case of an actual person to person meeting or a phone call, it will be much more valuable to both parties than before. Real time reporting will show immediately the full picture of the customer along with suggestions on what to propose to them.
Thus, making conversations more relevant, proactive and personalized which also creates customer loyalty on an emotional level. Not wasting anybody’s time is the key here.
Traditional insurers have a workforce filled with tons of experience in real life processes, problems and solutions. It’s something that many fintechs do not have and simply cannot have. With moving towards bionic operations replacing traditional digital experiences, their market relevance and even advantage will be clearly visible.
Simple digitalization times, which mean another mobile app for the end customers, is no longer enough.
The future might be bright for traditional insurers as long as they embrace bionic operations and processes as soon as possible.
A digital ecosystem of partners will enable massive machine to machine communication through APIs minimizing digital to human and human to human interactions.
Reduction of the workforce by half is expected as the result of this automation.
Humans with high emotional intelligence that augment AI based algorithms will be trained or hired to support customers on an emotional level.
These incoming changes are revolutionizing the industry, but they require significant effort and won’t happen overnight.
If you feel overwhelmed by the number of technologies and changes required to move to the next level, Avenga’s insurance sector experience and technological prowess can be a great asset to help you move faster towards your goals and staying successful in this fast paced market.