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Winning the Insurers’ race with robotics

Written by Diederick van Thiel on Jul 20, 2017

The insurers’ race
In the aftermath of the recession that started in 2007, it is critical for insurance companies to exhibit financial strength in an increasingly tough economic climate. Financial strength assures consumers that they are making financially responsible investment decisions. Financial strength entails having strong quality assets, the ability to raise long-term capital, adequate money reserves, a proven risk-management strategy and high ratings given by companies or organizations that assess financial strength.

Robots conquer financial services
In my academic paper “Explaining the customer experience of digital advice” I showed the fast growth or financial robo-advice. Currently, across many geographies, an increasing number of financial service providers are operating or considering the use of robo-advisors; online advice platforms that provide advice by complex computer algorithms. These robo-advisors make use of the increasing amount of behavioral data and apply algorithms that match consumers or small business with financial products or portfolios. Examples are investment brokers, such as Betterment, Wealthfront, and Nutmeg that optimize personal investment portfolios. Lend Up and Kreditech connect borrowers to loans, and platform lenders such as Zopa or Funding Circle connect savers and investors to borrowers. Furthermore, established traditional advice firms have introduced robo-advisors. Vanguard and Schwab introduced free robo-services in addition to their offline advice, and these are growing faster than the internet-only robo-advisors. Fidelity offers robo-advice to customers making use of the Betterment platform. Intermediaries like Learnvest, and MoneySupermarket introduced robo-related services. Still, further growth of robo-advice services is expected. AT Kearney predicts that robo-advisors will run $2.2 trillion in assets in 2020 because of the fast-growing adoption rate of this service model amongst young generations. So, if it works for banking, how can robots contribute to the insurers’ race? Here are some robo-trends and interesting applications to get activated by.

Trend 1: Automation of core administrative processes
Claim handling is one of the most labor intensive processes in an insurance company. But also customer acceptance and service processes are often still labor intensive. Automation of core administrative processes is the first step insurers have to take to win the insurers’ race. Not only high cost reductions, but also higher speed and less rework are the main benefits for insurers.

Trend 2: Software Robotics & Robot Process Automation for human interaction
Once a core process has been automated, human interactive tasks can be performed with software robotics. A software ‘robot’ is a software application that replicates the actions in a task of a human being in interaction with the user interface of a computer system. For example, the execution of data entry into a SAP system – or indeed a full end-to-end business process – would be a typical activity for a software robot. Robot Process Automation (RPA) is the application of software robotics on a series of tasks in so called back office processes. The software robot operates on the user interface (UI) in the same way that a human would; this is a significant difference from traditional forms of IT integration which have historically been based on Application Programming Interfaces (or APIs) – that is to say, machine-to-machine forms of communication based on data layers which operate at an architectural layer beneath the UI. Software robots are trained, not coded in the traditional way. So, how does software robotics and RPA help to win the insurers’ race? Firstly, it enables operations departments to self serve. Secondly, it frees up the limited and valuable skills of IT professionals to concentrate on more strategic IT implementations such as ERP and BPMS rollouts. Such programs are often upheld as being transformational in nature, delivering huge returns in the medium to long term, whereas RPA is typically focused on immediate operational effectiveness, quality and cost efficiency. RPA is therefore typically seen as complementary to existing automation initiatives.

Trend 3: Cognitive Computing & Cognitive Robotics
Cognitive computing is an advanced technology that mimics the human brain to solve complex problems. It describes software platforms that are based on the scientific disciplines of artificial intelligence and signal processing. These platforms encompass machine learning, reasoning, natural language processing, speech -, vision- and human computer interaction. Cognitive robotics is concerned with endowing a robot with intelligent behavior by providing it with a processing architecture that will allow it to learn and reason about how to behave in response to complex goals in a complex world.
For insurance companies this will eventually differentiate the winners of the insurers’ race from the losers. All kind of personalized predictive services can be developed with this technology.

Two examples that tap into this third trend; both are companies I actually founded:

  • AdviceGames applies cognitive computing & robotics to develop virtual assistants and intelligent financial agents. Intelligent agents that can support or replace humans in service processes in the customer contact centers, or as behavioural driving personalized apps. Think of the Apple Siri for health insurance, the intelligent car insurance assistant or life insurance. These kind of intelligent agents and virtual assistants will fundamentally reshape the interaction and engagement between consumers and insurance carriers.
  • AdviceRobo specializes in cognitive computing for risk predictions. Big data driven predictions of customers’ creditworthiness, claim predictions, fraud predictions and churn predictions are key for delivering personalized treatments. AdviceRobo applies cognitive robotics on delivering the integrated risk prediction and personalized treatments to insurance companies to drive ROI breakthroughs.

Diederick van Thiel (AdviceRobo) at DIA Barcelona 2016
Diederick van Thiel (AdviceRobo) at DIA Barcelona 2016

Winning the insurers’ race with robotics
One critical success factor for the insurance industry as a whole and particularly for individual insurance companies, is the need to update the way that business is conducted. The Bureau of Labor Statistics (BLS) notes that growing use of the Internet will eliminate some jobs within the industry and increase employment in others. While it may adversely affect the employment of sales agents, for example, by allowing people to obtain instant quotes online, its power as a marketing tool will provide the industry with an undeniable ability to continue to grow and increase revenue by reaching people quickly. But with robotics, this will go much further.

Robots are fundamentally changing the Insurance operating models
To drive efficiency, robots are currently invading the insurance industry. And CEOs are welcoming them in the door. But as insurers become more sophisticated in their use of robotics and start to hand over ever-more control to robots, deeper concerns will start to emerge on the replacement of high educated co-workers by robots. For the insurers business model however robots bring efficiency breakthroughs. For the employees, they will have to be educated for jobs working with robots.

Over the past few years, businesses of all types have rushed towards robotics. The greatest focus has been around Robotics Process Automation (or RPA), particularly in functions like finance where processes are highly repeatable, regular and routine. But software robots (‘bots’) are also hard at work across the wider insurance enterprise – supporting management decisions, facilitating transactions and even managing aspects of office security.
Expect more robots to enter the workforce soon. According to a recent survey of more than 100 insurance CEOs conducted by KPMG more than a quarter of CEOs see automation – a key step towards robotics – as the answer to managing their current skills gaps. Almost everyone recognizes the efficiencies that automation delivers by driving out inconsistency in decision-making, improving compliance and eliminating errors in processes. Many are starting to realize that wider use of software robotics could deliver significant additional value in winning the insurers race.

Robots are fundamentally changing customer experience
But the most impact probably will come from virtual assistants and intelligent agents fundamentally reshaping insurers customer experience. Accenture research on robotics in insurances in the USA and Canada shows that almost three-quarters of insurance customers report they are open to robo-advice for their insurance purchases, just over three-quarters for their investment-asset allocation and more than two-thirds for retirement planning. This willingness to accept computer-generated advice does not extend to every type of insurance, investment or retirement purchase. For more complex transactions and for complaint-handling, two-thirds expect first-class human interaction. But the successful application of robots will fundamentally reshape insurers customer experience and will eventually differentiate the winning from the losing insurers! So, if you want to be among the winners, start embracing the insurance robots now!

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