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HOW IS GEN Z SHAPING THE FUTURE OF CAR INSURANCE?

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By Evan Davies, CTO, Solera

 

Generation Z is reaching its mid-20s in 2021. This generation has grown up in an age when companies like Amazon, Uber, and Airbnb use AI to simplify purchasing, communicate directly with customers, and apply analytics to their business. Gen Z probably doesn’t remember services or products without voice activations, personalized buying suggestions, and chat bots offering instant interaction. As they become more influential as consumers, their expectations for services and interactions will include many AI-based offerings. This, combined with the purchasing power of Millennials will require all businesses to evolve if they want to meet these collective expectations for technology and rise to the new standard of on-demand interaction.

To come to terms with this, the insurance industry is quickly adapting and integrating AI into business operations and claims infrastructure. In a recent report, McKinsey projected that there is a potential annual value of up to $1.1 trillion in additional business revenue if AI is fully embraced in the insurance industry alone. The sector itself has been slow to mobilize digital transformation in the past, but the disruption seen in the Covid-19 era has pushed the adoption of AI and other next generation technologies up the priority list for many insurers. That said, it’s not as simple as adding something like visual intelligence to the photo estimation process.

Computer vision and the technology that enables it must be underpinned by two fundamental elements: quality data and knowledge of vehicle repair processes. AI-based solutions must be trained and supported by the combination of these two components to ensure consistency of results at every stage. Only then can insurers advance their algorithms to maximize accuracy, ensure faster claims resolution and enhance the customer experience.

 

Evan Davies

Image Recognition and Processing Using AI

For those who have recently filed an insurance claim of any kind, you are probably familiar with the image capture and upload process. While image capture is not necessarily new, the technology at work evaluating and producing the outcomes is quite new and can be complex.

Automation tools improve the first notice of loss (FNOL) and triage processes by speeding up review of damaged photos, identification of total loss vehicles and supports identification of the next best action for repairable vehicles. This means that decisions that affect claims outcomes for the insurer, repairer and insured are made at the beginning of the claims process to streamline the workflow and speed up the claims and repair process for all involved.

When it comes to AI photo based estimating, there is no ‘one-size-fits-all’ solution with more than one way to approach the process. One approach is to train AI models by learning from historical claims data and related damage photos. Another approach is to use a training data set containing annotated or “labeled” photos.

 

Get Quicker and More Reliable Repairs

In addition to customer experience, AI is enabling insurers to maximize the skills and outputs across their own workforce. In the absence of an AI-based estimating system, trained appraisers are required to produce repair estimates. However, with the use of an AI-system, those skilled workers can be reassigned to more complex cases.

Providing an accurate estimate of the size, position, and severity of the damage plays a crucial role in getting the repair cost correct. There are many variables that influence the cost – from material and geometry to accessibility and thickness. Modern vehicles are made of alternative materials, such as different types of steel, aluminum, and carbon fiber, which inevitably impacts cost. Many new vehicles are also fitted with sophisticated advanced driver-assistance systems (ADAS) which need to be considered when assessing damage. This is a lot to consider and, hence, why the repair science element of any AI-based estimating is so important for safe repairs and correct claims valuations.

 

Blending Data and Repair Science

As with any automated technology, the algorithms that power insurance solutions must be trained and supported by the right set of data to ensure consistency of results at every stage and for every touch point served by AI. It’s not just about bringing AI to an existing workflow. Estimating using AI is about blending repair science technology with a database of historical claims and images gathered over years of servicing and supporting the industry that makes this evolution so powerful.

The combined approach of these two types of data enhances machine learning algorithms to drive efficiency and accuracy. It provides an holistics and integrated approach that can effectively increase accuracy and performance across an entire claims workflow, compared to simple AI image recognition point solutions.

 

Future Proofing for Digital Native Generations

Gen Z are pushing the boundaries of digital communication once again – but we know it won’t stop there. Now, more than ever, with the increasing use of digital channels by all generations and younger generations’ expectation for it, AI is becoming trusted by service providers around the world, including those in the insurance industry. Implementation of next generation solutions like the AI now found in many repair estimating solutions is accelerating and must continue doing so if insurers are to navigate ever-changing consumer needs.

It’s widely acknowledged that this is the future of insurance and beyond. Yet, with any new technology adoption, it doesn’t come easy. It takes partners with the right background and expertise to help chart the path, expand adoption and rewrite the standard of service for years to come.

 

Business

JUMP-STARTING PROCUREMENT TRANSFORMATION WITH A CLEAR AND REALISTIC PLAN

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by Alex Klein, COO at Efficio Consulting

 

Following a period of ongoing economic uncertainty, business spend has risen high up on the C-Suite agenda, with the procurement function shifted into the hot seat as the enablers of not only rapid cost-cutting but future profitability. In fact, according to Efficio’s experts and authors of recently released PROFIT FROM PROCUREMENT, companies that break down the silos between departments and effectively optimise the procurement function can expect to add 30% to their bottom line.

But where to begin? In order to successfully embark on a roadmap to profitability, a concrete and realistic plan must be put in place – one that has clear objectives and actions agreed amongst all involved. Unfortunately, this is not something that can be achieved overnight. As with anything worth having, this involves a program of gradual transformation and is likely to take no less than 18 months to really drive an impact. With a long lead time to success, the CPO must ensure that the program makes the desired splash – proving its value and keeping internal stakeholders engaged throughout. This requires a plan that will have a high impact, high visibility, cross-functionality, and be fully resourced. Only then can procurement’s profit potential be truly unleashed.

 

Take a step back and listen

When embarking on a Procurement Transformation mission, getting to know the key stakeholders involved will be a crucial first step to getting the project off the ground. Whether that be the CEO, CFO, functional heads, or business unit heads – the CPO must take the time to listen and understand their expectations, needs, and requirements before a vision for the road ahead can be formed.

Suppliers are often forgotten in this mix, yet they are equally as crucial. Questions need to be asked, such as – what improvement options do they see? How could they help us to reduce cost? And how can we help them in return? What each stakeholder wants from procurement, and where they see value will likely differ, so it is important to have all cards on the table upfront. Not only should these considerations sit at the heart of your plan, but they can actually assist in making it a reality.

 

Determining the desired outcomes

Next up, and at the top of the pyramid that comprises your plan, needs to be a clear vision. Whilst the outcome of your efforts may seem pre-defined – such as, to cut costs and release profitability – the scope of this can span as wide or as narrow as you’d like. Now is the time to consider how far you want to stretch this outcome, and the only way to determine this is to ask yourself, “what does the next level of procurement look like in my organisation”?

This procurement vision, of course needs to link back to the businesses overall corporate strategy. For example, if the business is looking towards aggressive growth, procurement should help facilitate this by aiming for scalability. If the strategy is to rapidly digitise, procurement can play a part in digitising the supply chain.

As part of this vision, the CPO must also consider their desired role and remit. For example, how do you see procurement’s way of working changing? How do you see your procurement people interacting with the rest of the business? What do you want your suppliers to say about you?  Once defined, a clear ambition can keep Procurement Transformation on track and aligned. Without it, and with every stakeholder having varying needs, the desired outcome can quickly become lost.

 

Establishing a step by step improvement plan

So, you now have a solid vision – you’ve spent time listening to your internal customers – surely, you’re now ready to focus on getting there? Not so fast – you now need to think about the various facets of the function, including the organisation, people, and processes to establish where you currently stand. This will act as a baseline, in which a roadmap can then be developed and will require set objectives along the way to keep the journey on track. “House of Procurement tools” can be particularly effective here – these frameworks break down the procurement function in terms of strategy, organisation, people, processes, and systems – marking them against a benchmark of bad, average, and good. By plotting against this framework, you can tackle transformation in chunks, setting concreate objectives as a sub-factor level.

Once the current state of play has been established, the goal can then be plotted at the other end of the roadmap, with the activities needed to get to this end goal plotted in between. Key to plotting such a roadmap will be a review of which activities matter, what people are doing currently, and whether these tasks having a meaningful impact. This may require a restructure of the current team, which may require investing in additional strategic procurement resources as well as upgrading internal capability.

Nevertheless, this plan must be granular, and it must be actionable. It is all well and good having great ambition, but it is nothing unless you know exactly how and what it takes to get there. Transformation takes time, and it will certainly not happen overnight, so make sure to break down your roadmap into smaller, more achievable, chunks. Rather than focusing on a single  end goal 18 months down the track, ensure you have milestones to aim for after month three and month six, that contribute to the overall picture. Assembling such a plan is no easy task, but it is the very foundation needed for procurement teams to jump-start transformation.

So, what comes next? Buy in from the rest of the business of course. After all, a plan can only be successful once it has board level approval and sufficient investment. In part two of this series, Alex Klein will explore the stages that follow, including: developing a savings execution plan, building a business case for procurement investment, and ensuring program structure and governance.

 

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Finance

THE IMPORTANCE OF MANAGING DATA RISK IN THE FINANCE FUNCTION 

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Written by Steph Charbonneau, Senior Director of Product Strategy, Vera by HelpSystems  

 

CFOs and financial controllers play a pivotal role in how organisations evaluate and manage data risk. Analyst firm Gartner reports that more than 30% of organisations will use financial risk assessments of their data assets to prioritise investment choices for IT, analytics, security, and privacy by 2022.

Data is particularly at risk within the finance function. Sensitive data such as customer and supplier information, financial statements, and personnel records are processed and shared daily both inside and with vendors outside the organisation. The finance team communicates with banks, auditors, and lawyers on a regular basis and while laws and policies exist to provide protection, there’s no certainty as to where your data could end up, and you can’t control it once it is sent. The information that resides outside the organisation’s security perimeter is accessible with equal permissions, meaning access is not restricted once someone gains it.

 

Assess Your Vulnerability 

All of this presents an immense risk. Understanding what the risks and potential costs are is an important component of organisational planning. How would the organisation react if sensitive information were disseminated to the wrong audience? What could it cost? Simply thinking ‘it won’t happen to me’ or assuming a party erroneously receiving sensitive data will act with integrity and delete the information can no longer be justified. Data breaches are common and can have a significant impact on your business.

The financial risk of a data breach is typically the cost of lost revenue, compliance challenges, cost of litigation, privacy regulation penalties, and reputational damage. Revenue loss risk and litigation costs risk are tangible impacts that can be measured. However, it is more difficult to quantify the probability. On that front, understanding your data’s level of vulnerability is important. If you are SOC2 compliant, your risk will be mitigated by the controls within the internal bounds of your system. On the flip side, it is difficult to assess the probability for data that leaves your repositories. Internal compliance, including SOC2, cannot address it.

Thankfully, there’s a multitude of methods to protect assets and minimise your cyber risk. Consider securing and managing your data with technology like digital rights management (DRM), data loss prevention (DLP), data classification and security incident and event management (SIEM) software. There are network controls you can put in place, and you should have a process for evaluating the security of any apps you use to minimise your vulnerability. Evaluate your cyber risk holistically to ensure nothing slips through the net, otherwise your vulnerability remains.

 

Implementing Data Security Best Practices

Cybersecurity can be very complex depending on the size and industry of the organisation. New attack methods and new technologies to deal with those attack vectors show up all the time. To maximise efforts at assessing security risk, allocate resources so the most effective tools and strategies (such as encryption or digital rights management) are used to protect the most important information assets.

Finance leaders should follow these best practices to manage their team’s cyber risk.

  • Identify exposures in either tools or processes and work with the IT team to close the gaps in security.
  • Classify your files and with it, understand where your sensitive data is located and how access is provided to parties that need it, especially those outside your organisation. Company policies and processes often overlook, or have no direct control of, data outside the organisation so this awareness is important.
  • Adopt a zero-trust approach to protecting your sensitive data and implement technology that allows you to manage your risk. Software such as digital rights management,for example, protects your most valuable data assets no matter where they travel, allowing you to secure, track, audit, and revoke access if data accidentally or maliciously falls into the wrong hands.
  • Educate and train finance team members to recognise and manage risk. Employees need to understand the importance of the data they are using and have access to the right tools and processes so that it is handled correctly.

 

Protect Your Most Valuable Assets

Evaluating an organisation’s cyber risk starts with clearly understanding the company’s risk tolerance. Is the organisation risk tolerant, or extremely risk averse? The answer may differ depending on what needs to be protected and what industry you operate in. In the finance function, what level of risk are you willing to accept and still justify and defend to stakeholders? Start by identifying those assets where the risk is unacceptable and where access needs to be carefully controlled and managed and focus your execution from there.

 

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