Unstuck: Using Technology to Build Insurance Resilience

Published on

January 12, 2023

Many of you know I grew up in Iowa on a century farm near Clear Lake.  Iowa is, if you’ve never been there, full of great people who really embrace the state, its heritage with roots in agriculture, and is part of the breadbasket of the world. Even if you live in a city in Iowa, chances are, you still know quite a bit about farming, livestock, and the farm machinery that it takes to cultivate the soil, plant crops, harvest, and hopefully make a profit. Iowans are known as hard workers, proud, and a highly supportive and resilient group.

For those who farm, preparing for the future — an uncertain future — is a way of life. Weather is unpredictable. Markets for crops and livestock are always changing.  Not preparing means you can get stuck. You can get figuratively stuck in circumstances that are not desirable. You can get literally stuck in physically difficult conditions — blizzards, mud, storms, and floods. In agriculture, you prepare for the worst scenarios so that when the unpredictable happens, you’re ready. Whether that means using a winch to extract a truck or picking a seed that might survive a drought, or leveraging new technologies to help with planting, harvesting, or managing the farm operations — resilience is a key to longevity, success, and profit. 

In last week’s blog, we identified five trends that are going to be shaping insurance for 2023. One of those trends is a focus on risk management and risk resilience.

Resilience could perhaps be the priority theme for most insurers in 2023. In resilience, insurers find ways to overcome the humps, hurdles, bogs, and blind spots. They tackle the sticky stuff. When they get stuck, they refuse to stay stuck. Resilience doesn’t just happen; it is active. It takes planning. It is driven by initiative. It is an investment in the future.

In today’s blog, we are going to look at technology as the tool for risk management and resilient preparations. Insurance Technology is a broad term, so we’ll look at InsurTech from the perspective of the roles that it can play within the organization to build resilience into an insurer’s strategic plans.

Interestingly, we’ll find that in many instances, technology’s role in building resilience is growing more “human” in its capabilities. This makes sense in light of the fact that insurers are now faced with focusing on the customer and customer relationship more than on policies and books of business. Insurance’s new human factor may enable it to become more resilient.

We’ll look at several specific roles, including:

Technology as the eyes into risk

Technology as the facilitator

Technology as an extension of knowledge and talent

Technology as the path to personalization

Technology as the answer to innovating with purpose

Technology as the eyes into risk.

Risk management and resilience both begin with adequate knowledge. There is the knowledge insurers already maintain — the actuarial end of underwriting. Insurers grasp the risks inherent in people and property and situations. There is the knowledge that insurers need to obtain. This would include application requirements gathering, but it would also include constant, even real-time information, that may change the circumstances that will increase risk.

In an ideal world, insurers would have as many human inspectors as they could to see into all areas of risk. They would be the perceptive eyes and analytical minds needed to give clarity to the full picture. Unfortunately, this ideal doesn’t match reality. Quadrupling the inspection team is untenable and now, unnecessary.

Since insurance profit is affected by handling risk, avoiding risk, and lowering the business costs due to risk, insurers need technology to see clearly into risk. In life insurance, for example, insurers that previously found themselves stuck with a lack of product innovation, are now finding ways to work with insureds to maintain and monitor their health toward improvement. In P&C insurance, carriers are expanding the use of AI and machine learning to examine real property images, scrutinized through the eyes of hundreds of thousands of previous interactions and claims. Majesco’s LossControl 360 and Majesco Property Intelligence are great examples of how an insurer can use technology to stay resilient by lowering risk.

Risk resilience is more crucial than ever, as economic, social, and environmental factors will make risk knowledge a competitive differentiator. For more on loss prediction, see my blog, Faster Than We Can Learn: The Need for Digital Tech-Enabled Underwriting.

Technology as the facilitator.

Decades ago, insurers made themselves resilient by making their systems customized and “self-sufficient.” They didn’t need to rely upon other companies or manual efforts to give themselves the technology lift they needed to run operationally efficient businesses within the confines of the company. Systems were castles with moats, drawbridges, and closed networks that lasted decades.  The idea of facilitation was just keeping open the lines of communication with agents and customers, often via paper and eventually via portals.

Today’s resilience is platform-based. It looks more like an industry-wide network of interconnected, mutual support. It takes many technologies and partners to accomplish real resilience because no company can go it alone. Insurers may still have firewalls and tight security, but these are assisted greatly by the distribution of information and data across cloud platforms and API-based transfer protocols. Technology must be designed to enable the business by facilitating production, distribution, and transactions.

Today’s platform insurance solutions are experts at traffic management. They may look a little less hub and spoke-oriented than traditional core systems, but their ability to act as a hub for high volumes of communication is dramatically improved. APIs allow for direct connections while increasing the level of automated facilitation. They not only direct the movement of data and information, but they also keep better track of what is going on, which makes them more reliable, usable, and secure. But as the number of APIs being used grows, so does the complexity of managing them, which is why Majesco introduced its new Enterprise API Management Platform in our Fall ’22 Release. It’s another reason that insurers should transition to a next gen intelligent core system in the cloud. Workflow has changed, but it is still necessary. Today’s core solutions, such as Majesco’s P&C Core Suite and L&AH Core Suite have redefined workflow for maximum efficiency and automation, but also have enabled speed to market with out-of-the-box content, best practices, and easy configuration.  

Facilitation impacts insurer resilience. It allows for true digital connections, both within the administration of insurance and with all customer-facing systems. It is making insurers easier to do business with — a competitive distinction in times when customers can better weigh their options. And, it has given insurers the capability to open new channels of distribution that were previously unavailable. This is like broadening an investment portfolio in order to reduce the risk of negative economic impact. Facilitation improves resilience by increasing options.

Technology as an extension of knowledge and talent.

In the midst of a talent shortage, insurers are also grappling with the growing wave of retirements. Insurance will be losing institutional knowledge and experts in business, technology, and distribution faster than they can replace them. The only way tomorrow’s insurance business will survive is if it can become resilient by taking that institutional knowledge and configuring it into the systems and automating as much as you can to allow people to focus on the important things and improve customer satisfaction, expense, and loss ratios. Insurers that are now redefining their businesses, by introducing value-added services, will also benefit from introducing value-added technologies to their current systems.

A great example of this may be found in generative AI such as ChatGPT by OpenAI.[i] Machine learning may hold the key to warehousing insurance data and knowledge — understanding it in ways that will yield improvement. It won’t just automate customer service (though it will do that). It holds the promise of solving issues, fixing problems, and bringing greater analysis and creativity to business. At some point, AI will become like the employee you absolutely must retain to stay competitive. Generative AI may one day understand companies better than they understand themselves, which may be humbling for experts, but relieving for businesses struggling with talent shortages.

Underwriting is already an area where automated insights are providing relief to knowledge and talent issues, while at the same time adding the resilience of better outcomes. Majesco’s Digital Underwriter360 for P&C is an example of next gen technology that fills important gaps in the transformation of real-time data into value-added insights.

Technology as the path to personalization.

Resilience is facilitated by seamless and effective communication. In risk management, this may take on many forms. You could probably make a long list of how your organization is improving communication in order to better manage risk.

But communication’s contribution to resilience will be in the realm of personalization and personalized data management. The tight job market is affecting customer service. The new expectations of the digital customer are creating an unprecedented culture of convenience. Together, these pressures are pointing to digital solutions that can both know the customer and communicate with a greater degree of autonomy, clarity, and personalization.

Front-end digital tools were some of the first areas of InsurTech application and growth. Now that they are maturing, it is evident that they are often held back by an organization’s inability to extract and use a customer’s data that needs to be drawn from many silos. What seems like it should be a small issue becomes more acute in an economic downturn. As businesses and people look for areas they may be able to trim their own budgets, they will most often land with companies that have simplified customer service and gained efficiencies through newer data architectures.

The company that understands its customer and can effectively deal with those who are price-shopping may gain experience in providing price-lowering alternatives. Whether the insurer is communicating directly through its website or indirectly through an agent, it needs to provide clear and personalized communications that fit the circumstance. Communication and product messaging should certainly become a part of an insurer’s risk resilience management plan.

Technology as the answer to innovating with purpose.

In November, Majesco held an insurance transformation webinar that included Seth Rachlin from Capgemini and Edin Imsirovic from AM Best, and myself. We discussed innovation in light of upcoming industry challenges, including the economy. I asked the panelists about the economy’s impact on innovation. “Should the industry pull back or move forward? What should business priorities be, in light of today’s macroeconomic factors?

We were all in agreement that this is the time and place to make the technology investments that will optimize and improve the business. We discussed the reality that today’s insurance leaders, according to AM Best, were those companies that were investing in technology innovations that would give them a firm foundation for the future. At that time, I listed eight priorities:

Optimize & Innovate Business — continue to optimize while creating innovation around either the existing or future business.

Risk Resilience — focus on risk prevention and risk mitigation to avoid claims and improve customer experience.

Customer Expectations — look at the expectations that are driving the business.

Personalized Niche Products — match smarter customer spending by insuring and underwriting based on lifestyle/behavior/business need.

Market Reach & Growth — allow customers to buy insurance differently, through additional channels and embedded options.

Ecosystem and APIs — foster partnerships and distribution arrangements that depend on APIs which allow insurers to connect.

Long-term Data Strategy — expand data sources for underwriting and claims, plus the application of AI and machine learning.

Interconnected Tech Foundation — customize the technology set that can be brought together to meet your business strategy.

Is your organization stuck in a pattern of reacting to economic forecasts and pulling back from important technology investments? Is it building resilience through a technology strategy that will pull the company through and set it on a course for success? Is it time to shift gears and set a course for a future of innovation and growth?

Join Majesco and a panel of outside experts on January 26, 2023, for an informative webinar, 2023 Signals Shaping the Future of Insurance, where we’ll discuss advancements in digital capabilities, platform technologies, and data sources that are now crucial to industry growth.

[i] Chui, Michael, Roger Roberts, Lareina Yee, Generative AI is here: How tools like GPT could change your business, McKinsey, December 20, 2022