By Neil Murphy, Global VP at ABBYY
There are still many industries that are document and paper heavy in their processes and the insurance industry is one of them. It’s certainly true that prior to the pandemic, digital transformation was well underway in the insurance industry, but the last year has accelerated the need for technology and it has shone a light on the importance of insurers taking a new digital approach to underwriting.
To be frank, paper forms in today’s digital world are archaic, why should insurers be filing through documents when intelligent automation can do the job for them? One thing’s for certain, continuing to use manual processes will not drive the level of profitable premium growth that insurers need to thrive. Even for companies who were already working in the modern era of automated underwriting, there were many processes that fell through the cracks. As a result, insurers have had to pivot to manage virtual interactions and exchanges between all stakeholders in the process. In fact, Deloitte forecasted that, post-pandemic, historical data may be less valuable to the underwriting process, insurers might face unexpected spikes in claims, and insurers who take an agile approach to risk assessment might be more resilient than those who do not.
This is where process intelligence comes in: it can help insurers see their processes in real-time, spot bottlenecks, and identify where data is missing. So, how can insurance leaders make the most out of their technology investments to accelerate their underwriting transformations?
Embrace document AI
Automated underwriting within itself is nothing new, and while it’s a step in the right direction and can process lots of data at once, there is still a large amount of content that is creating vulnerability. In turn, cracks can form in the system. In fact, since the pandemic, there have been several examples of gaps and broken processes that have emerged. One insurance carrier, for example, focused process automation on improving the customer experience, while gearing up for automation at scale. However, when employees began working from home, operational processes supporting critical outcomes became difficult and many were simply broken.
Insurers are flooded with copious amounts of data in various forms every day. As soon as data enters automated underwriting – whether for personal lines, commercial, or life – it feeds into many manual processes. This can result in a delay in the process, an incorrect decision, or both. In today’s digital age, companies may have automated systems in place for their structured data, but they lack artificial intelligence (AI) solutions capable of addressing the volume of unstructured data from documents.
With more consumers preferring to engage digitally, there is now an even greater emphasis to accelerate the digitisation of content and business processes across the front, middle, and back office. The significant gap between customer expectations and insurer’s abilities is driving insurers to push for better connections, including their people, processes, and customers.
Understand your processes before you start
There is no doubt that digital transformation has revolutionised customer relationships. But the journey is yet to be complete, as many insurers are still struggling to identify which automation technologies would benefit their customers experiences the best. The first step to achieving this is having a better understanding of their current document-driven processes.
This is where process intelligence come in. Process intelligence can help insurance companies gain an oversight into the businesses. This includes discovering in real-time where bottlenecks occur, where repetition happens, where data is missing, and where automation is working or not. It can also see the flow of documents and their data through your processes, identifying exactly where automation – additional technologies like Artificial Intelligence (AI), Robotic Process Automation (RPA), and Machine Learning (ML) – can make the biggest impact. Too often, business leaders simply guess which processes would be best to automate without leveraging real data.
For the best results, it’s more than just one type of technology like RPA tools. By introducing content intelligence, AI that understands documents, combined with RPA solutions, businesses can quickly improve process bottlenecks, strengthen operational efficiencies, and enhance the customer journey. Not only this, but employees can focus on meaningful and creative responsibilities within the workplace, rather than wasting time on admin-heavy tasks. Essentially, content intelligence solutions are now enabling enterprises to make unstructured content more valuable and equip AI-powered robots with the necessary skills and understanding to make intelligent business decisions.
Gain digital intelligence
By marrying process and content intelligence solutions together, companies can speedily process a variety of documents while simultaneously automating insurance processes to gain comprehensive digital intelligence. Implementation of intelligent solutions to underwriting can significantly speed up functions such as data collection from both external and internal sites, assessment of loss runs and engineering reports, reviewing the history of customers’ claims and producing recommendations based on previous losses.
By having a strategic, holistic approach in place, insurance companies can reap the near-term rewards across the board and set the pace for the industry for years to come. Looking ahead, the potential for intelligent automation in the industry is limitless.
FOMO, FOLO, AND THE VOLATILITY CONUNDRUM
Katharine Wooller, Managing Director, UK, Dacxi
‘There is a lot of surface noise in the cryptocurrency space and most of it is the psychobabble of investor sentiment. One week it is the sound of everybody rushing towards a feeding frenzy. The next the wailing and gnashing of teeth as those near the surface (the ones most exposed) get spooked and rush the other way, falling over each other in the race to escape.’
I wrote the above paragraph on June 11th as the introduction to an article I was asked to contribute to a national newspaper.
The piece was essentially about what drives the roller-coaster of cryptocurrency prices – a pattern I have often referred to as ‘exquisite volatility’.
IT’S EASY TO OVERTHINK IT
Day to day volatility is something that market analysts and crypto critics alike are obsessed with on a day-by-day basis. In my view they overthink it. The main thrust of my argument in June, with crypto prices tanking, was that ‘buying the dip’ is a tried and tested strategy. At that time Bitcoin was priced around £25,000. Over the next few weeks, it then ticked down even further to £21,762 on July 20th.
At time of writing, about a month later, it’s around £32,680 or US$44,700. If you follow certain online forecasts, pundits are now suggesting Bitcoin could push the $100,000 barrier before the year is out. But, as I said above, it’s easy to overthink things, and sensational predictions make headlines.
IT’S INVESTOR SENTIMENT THAT REALLY DRIVES PRICES
Cryptocurrency in general is currently trying to find its identity. Is it a currency or is it a commodity? Is it something you ‘trade in’ or is it something you use to ‘trade with’ – i.e., use to buy other goods? Currently short-term prices are being driven by traders not users – nothing wrong with that, the function of any market is to allow people to buy and sell and make a profit through matched bargains.
The value of any commodity is only what somebody is prepared to pay for it, or what they can sell it for. On a speculative basis, rising values are driven by fear of missing out (FOMO) when the price is on the way up, which ramps the price up. Downward values are driven by fear of losing out (FOLO) when the price starts dropping and the feeding frenzy turns into a selling frenzy.
Interestingly, traders measure their success not by what they can afford to buy with their crypto wallet, they measure success in terms of converting gains back to their local fiat currency – which rather misses the point of why Satoshi wanted to create a DeFi world in the first place.
THE RISK OF GAMING THE MARKET
The fact is that most traders are gaming the market. The risk is that there are some really big swinging crypto traders out there who can influence the market. Playing ‘coin’ like a computer game has inherent risks – rather like trying to predict when a murmuration of starlings over Brighton pier will change direction. I believe that as the market continues to mature and cryptocurrencies follow their destiny to become the enabler of decentralised finance on a global basis, the margins for traders will inexorably tighten.
At Dacxi we take the long-term view. We are firmly ‘buy-and-hold’ investors who, having looked at crypto’s growth curve and analysed the true sense of purpose of DeFi, don’t over-react to the short-term metrics. Dacxi is a wealth building platform and experience has taught us that very few people get rich quick – and more than a few of those that do, get poor again just as quickly.
For most of us building wealth takes a measured view and a measured time frame. From my point of view there’s nothing at all wrong with that!
HOW CHANGES TO PROVIDENT FUND ANNUITISATION AFFECT APPROVED LUMP-SUM DISABILITY BENEFITS
By Dolana Conco – Regional Executive – Alexander Forbes Retirement Consulting
New tax rules on the annuitisation of provident funds and lump-sum payouts made at retirement took effect on 1 March 2021. Fund members should be aware of additional implications for approved lump-sum disability benefits.
On retirement, members of these funds who were under age 55 on this date (known as T-day) may still take amounts which accrued prior to 1 March 2021, plus the fund return, in cash. Members over age 55 on T-day will have access to all amounts in the fund in cash when retiring from that fund. This is referred to as “vested benefits” as opposed to “non-vested benefits” where annuitisation rules apply to amounts above R247 500.
Approved lump-sum disability benefits paid by a pension fund
The approved (provided by the fund) lump-sum disability benefit in a pension fund was previously included as part of the fund benefit. It was normally treated in its totality as an ill-health early retirement benefit from the fund. The cash amount was limited to a maximum of one-third of the benefit, while the balance was used to buy a pension.
Approved Lump-sum disability benefits from provident funds
Those under the age of 55 will have the same limitations on their lump-sum disability benefit and how this is treated in terms of annuitisation as applies to pension funds.
- Members over age 55 on 1 March 2021
The lump-sum disability benefit will be part of the vested benefits in the provident fund of which the member had membership on T-day. This means that the member can receive this payment in cash, after tax.
But if the member transfers to a new fund after T-day, and is then disabled, any lump-sum disability benefit paid out of the new fund will be a non-vested benefit. This means that annuitisation rules will now apply.
- Lump-sum disability benefits under 55
Only amounts which have accrued before T-day fall into vested benefits. If a member is disabled after T-day, the lump-sum disability benefit payable will not fall into the vested benefits. The payment will be treated as a non-vested benefit. This means that the annuitisation rules, where the total benefit exceeds R247 500, will now apply to the lump-sum disability benefit.
While the above may be an unintended consequence of the annuitisation rules, we should take a step back and reconsider the real intention of reform.
Various stakeholders in the industry introduced and agreed upon reform as it became evident that current regulations were failing the member. Almost 50% of members retire on less than one-third of their final average salary, which renders a large part of people poor and dependent on the state. This is unsustainable and needs to change.
Reform has brought in different forms of laws to increase the savings culture and provide certain incentives – like a tax deduction if a member saves more, up to a certain limit.
With the lump-sum disability benefit now subject to annuitisation, funds need to consider this question: Would an income structured benefit still meet the intention and expectations by members, the fund and the employer in terms of their incapacity procedure?
The trustees and employer will have to revisit why the approved lump-sum disability benefit was selected in the first place. Was this to ensure that there would be a lump sum to:
- meet the cost of additional care or adjustments to the home to assist the disabled employee, or
- provide cash support ultimately to members who are found to be totally and permanently disabled?
If the above intent of providing a lump-sum benefit still stands, the trustees and the employer may need to consider changing the tax status of this benefit from approved to unapproved. This will ensure that the initial intention and expectations are still met.
Caution is made that changing to an unapproved benefit would mean that the employee would need to pay fringe benefit tax on the monthly premium. However, the benefit would be paid as a tax-free lump sum separate from the retirement fund for total and permanent disablement.
These discussions must therefore include decision makers on the employer side to:
- help facilitate the messaging to the employees
- manage any payroll impacts
- align with their incapacity procedures
Any benefit structure implemented must be well considered to best suit the needs of the members. This could enhance the financial well-being of employees and lead to the best retirement outcomes.
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