David Kuhn, Insurance Solutions Director at Mendix
What is digital transformation? This is a term that countless CTO’s have battled with in every industry.
Essentially, it can be viewed as the process in which you capitalise on the power of technology to enhance your business model, acquire customers, and most importantly, create meaningful experiences. For insurance companies, digital transformation is also a response to new competitive threats, aging technology, evolving regulatory requirements, and emerging service-based product offerings. Today, digital transformation holds the key to a radical change in the industry, which will enable carriers to roll out products faster, respond to customer needs, and enable its employees to stay productive.
Changing dynamics within insurance
The insurance sector is under huge pressure to offer its customers the kind of services that they want. This includes a wide portfolio of products, a high level of personalisation and pricing transparency, combined with the need to know what factors are under consideration for the premiums being quoted to prospects. Unless an insurer is matching those expectations, there is nothing that will sway a prospect in the first place. But not reaching prospects isn’t the only challenge insurers face. Existing customers also expect this level of transparency. If it’s not met, they will switch providers without a second thought. Insurance has been ranked as the hardest to gain new customers so if current customers are also leaving, this is a serious challenge.
But this is only the tip of the iceberg. Insurance companies have always had a large amount of claims. This has been amplified by the current coronavirus pandemic, which has led to a surge in claims that clog insurers inboxes. These new claims, arrive in such volume that customers find themselves waiting for hours, if not days, to speak directly with someone who can explain how the outbreak affects their policy. If smaller claims are not automated, this forces the claims team to spend time on claims that do not require the human interaction. Agents are overwhelmed; and it has become clear that the industry needs to automate processes to mitigate loss to revenue growth and improve experience.
But that is not all. In addition, market leaders are coming head-to-head with new entrants that are planning to transform insurance in much the same way Uber has changed ride-hailing or Amazon has taken over ecommerce. The combination of data-driven technology features with insurance products, called “Insurtech” has become successful because the capability enables companies to diversifying their offerings. Some of them are even offering data services and moving away from traditional insurance methods. This is changing the rulebook for large carriers who are looking at their own strategies to keep existing customers, attract new ones and provide them with the experience they demand.
With this, it quickly becomes apparent that digital transformation isn’t something that the sector can afford to wait on – it needs to happen now. So why is it not commonplace yet?
Inhibitors to innovation
The first culprit in insurance’s slow rate of adoption of innovation is the large footprint of legacy systems. These rigid, cumbersome enterprise systems plague the insurance industry more than any other economic sector. Due to this, adopting a radical approach is rarely possible. Instead, insurance companies prefer to incorporate new solutions that integrate easily with core and legacy systems. This approach doesn’t continue to push the enterprise forward, it is just adding technical debt.
This is an area where large carriers can take a leaf from the “insuretech” book, where microservices architecture is the norm. This type of distributed computing enables IT professionals to update and deploy one application of function at a time, without any impact on the wider business. Luckily for large carriers, they don’t have to choose between their legacy infrastructure and this more agile take on operations management. Using the right kind of technology, they can combine both to offer the best level of service, regardless of their internal challenges.
Then there is the age-old issue that all industries face: a lack of appropriate resources. Too often, businesses have the willingness to innovate, but their limited talent pool prevents them from turning their ideas into real-world solutions. Whether it’s a limited number of developers in the IT team or a lack of communications between the divisions coming up with new services and improved solutions to their business challenges, important projects often end up being pushed back simply because the company doesn’t have the right people to deliver them.
Betting on low-code – it’s a no-brainer
So how do insurance companies get themselves out of this conundrum?
First, the industry needs to change the way it looks at digital transformation. Too often, insurers focus on speed when it comes to digital transformation. But that need for speed is not a goal in itself. Being able to process information faster and deliver a better service to customers at speed is simply an outcome of successful digital transformation. Instead of focusing on pace, insurers need to assess what the objectives of their digital transformation really is. Do they want to compete with new entrants? Do they want to arm their staff with modern data-driven tools to attract tech-savvy talent and find new customers? Do they want to automate manual or paper-based processes to increase the productivity of their staff?
Once they’ve identified their objective, they will be able implement the biggest mindset shift associated with digital transformation: that it is not the sole responsibility of the IT team, because the IT team is seldom on the frontlines when it comes to assessing the needs of customers and staff. Instead, insurers will benefit from greater collaboration between IT and the various business divisions. Insurance companies that are already embarking on this mindset change have an ace in the hole: low-code, a technology that enables employees who have little to no technical experience to turn their ideas into real-world applications. This is a tremendous benefit when it comes to experimenting with ideas that could have a significant digital impact on the business. Paired with traditional software engineers, these teams can challenge market differentiation at a pace envied by others. By empowering employees across the whole business with tools to collaborate on software development, insurers can tap into huge creative potential to turn ideas into applications that support the business’ long-term ambitions.
Crucially, the real problem isn’t that there is a lack of digital skills in the insurance sector; what we truly lack is activating digital mindsets across all employees. Today, every graduate coming out of university is tech-savvy and has the technical ability to code. They only need to be given the right tools in order to significantly contribute to the business.
This also helps ease the burden on the IT team, which often starts working on projects without full visibility of the implications for the business and any governance issues. For an industry that is wary of risks and keen to mitigate them, this may come as a surprise. Fortunately, with low-code, this problem can be eradicated. To ensure the highest level of transparency, low-code is a way of self-document everything IT is working on, providing a holistic view of every project within the business. This means that compliance with regulation becomes a whole lot easier, especially in an industry where changes occur frequently, and audits are commonplace.
The insurance industry is already embracing digital transformation – it just needs the right tools and mindset to ensure it empowers all employees to participate in this major change for the industry.
COMPETING IN A DIGITAL WORLD – SMES FIND THEIR FEET
– Stefano, Product Manager
Digital transformation is different for small and medium-sized companies. Or is it? In this article, we take a look at the current state of digital in SMEs and look ahead to see what is in store.
“Changes in business operations, and in the way customers are served, driven by digital technologies.”
That is a compact definition of digital transformation. And the digital technologies in question? They range from IoT (internet of things, or connected devices like smart sensors), to Robotic Process Automation and AI, to cloud computing.
SME rate of digitisation
Whether your business employs ten people or 10,000, the ingredients for digital transformation are the same. So how are small and medium-sized companies faring? Are they even interested in digitisation? Research1 says they are, and UK SMEs are doing better than many of their European counterparts, with high scores for adoption rates of cloud computing, Big Data and AI. To put this statement into perspective, 58% of companies have adopted cloud computing, but only 27% use some sort of AI-based technology.
Still, only 40% of SMEs report that digitisation is a top priority. An important fact, as the European SME survey 20191 shows a correlation between prioritising digitisation and investment. Those companies that say getting digital is a top priority invest more than companies that give digitisation a lower priority. The companies that prioritise digital also expected to export more than companies who see digitisation as less critical.
Naturally, as SMEs are a very heterogeneous group, there are differences in the area of digitisation as well. Some sectors are further along than others. Roughly speaking, finance & accounting firms, manufacturing companies, and the logistics sector are a step or two ahead of firms in the construction business and the legal profession2.
The big gain
So, what is it that drives digital transformation? What do SMEs stand to gain?
The short answer is a competitive edge, or even just remaining competitive (enough). Digital transformation is not an option; it is a must. The 24/7 economy demands fast service and quick supplies, and that goes for B2B markets just as much as for B2C. Digitisation enables companies to satisfy such demands.
The predictive capability of AI can reduce downtimes, for example – it will know in advance when machinery is likely to break down and can schedule preventive maintenance accordingly. Another example is increased productivity through the use of RPA or software robots. With RPA, a company can automate routine jobs like checking invoices relatively quickly and cheaply, freeing up human capital for other tasks.
The digital future
To look ahead, we also need to take a look at some constraints SMEs face with regards to digital transformation. The main issues UK firms face in this respect are around cybersecurity and the lack of skilled workers. In other countries around Europe, insufficient IT infrastructures also ranks high on the list of concerns.
Dealing with cybersecurity risks and especially ransomware attacks, is a significant worry for companies, as they are costly, difficult to prevent and have the potential to damage their reputation. Financial constraints are also a leading problem firms face when trying to skill up. Salaries for highly skilled IT talent have risen to a level that is prohibitive for many. At the same time, it is also hard for SMEs to attract and retain people, as candidates consider them as less attractive in terms of opportunities for growth.
According to Hays2, most employers say the lack of skills of existing staff prevents them from taking full advantage of the opportunities digital technologies provide. They are turning to solutions to train their employees and outsourcing work.
Nonetheless, digital transformation also provides plenty of opportunities. Look at fintech. Not what you were expecting, perhaps, but the rise of fintech has undoubtedly been advantageous for SMEs. Where SMEs have traditionally been caught in the middle between large corporations and consumers, as far as banking services were concerned, fintech is now providing smaller companies with choices that were not available before. A survey by EY3 shows that, in the UK, 18% of SMEs have adopted fintech services. These services include banking, payments and financing.
SMEs have taken essential steps, but they have some way to go as well. What lies ahead seemed brighter in January 2020 than it is now, just a few months later. Still valid for any company setting out on the digital transformation path, though, is that investing in people – skills, communication and culture – is crucial. Although the survey done by Hays found that many employees feel that ‘going digital’ is not a bad thing, the human factor does seem to be a stumbling block for many SME’s. One possible solution is for organisations to cooperate in creating training programmes and offer employees a challenging, cross-company career path.
1 KFW Going digital – the challenges facing European SMEs | European SME survey 2019
2 Hayes What workers want
3 EY Fintech is a world of choice for small and medium-sized enterprises
AI: CUSTOMER FACING EMPLOYEES’ BEST FRIEND IN THE FINANCIAL SERVICES INDUSTRY
By Ryan Lester, Senior Director, Customer Experience Technologies at LogMeIn
We’ve all heard the old saying “money talks.” Well when it comes to customer loyalty and retention, good customer experience talks much louder, with 30% of customers leaving a brand and never returning due to a bad experience.
The truth is, there are a lot of companies with similar products and services, but that doesn’t mean that differentiation is impossible. So, what’s the solution? For financial services, large and small, customer experience is becoming the key competitive differentiator and the best way to deliver an impactful experience is to empower customer-facing employees to do their best work. Artificial intelligence (AI) is enabling these employees to create remarkably better customer experiences, resulting in customer loyalty, advocacy, and overall growth.
For financial institutions that have been considering new strategies for improving the quality and efficiency of their customer experience, here are a few ways AI can enable them to deliver the “human factor” that good customer experience demands whilst ensuring customer facing employees can provide a more positive experience for customers.
Increase employee productivity
How much of employees’ time is spent searching for answers to questions? Do they ever have to put customers on hold or even step away to get additional help? AI helps provide front-line employees real-time guidance so they can spend less time looking for information and more time solving problems. An AI-powered chatbot, for example, can be listening in the background of a conversation helping point employees to the right data, solutions, and processes to resolve customer issues faster than ever before.
Deliver a consistent customer experience
When banking customers engage with their financial institutions, they measure the speed and accuracy of the service through two criteria. First, how quickly can the system access their account and deliver the correct information? Is it faster than a human could type it in and share it? And second, if they eventually do need to be connected to a live customer support agent, is their information captured and passed along accurately? AI technology takes those general queries off the customer support team’s plate, providing a quick, accurate, and effective response. If a query needs a more in-depth response, AI can hand it off to support staff to address.
Not only this but leveraging a centralised, AI-powered knowledge solution ensures every employee has access to the same, updated information, so no matter who the customer speaks to, they can be assured that employee responses are both consistent and accurate across the board.
Accelerating employee training and onboarding
Like any industry, employee turnover is inevitable and can be costly. But, not training new employees correctly or in a timely manner could be much more costly. When it comes to financial services there is a lot to learn, whether it is something simple like the process for checking an account balance to all the nuances associated with mortgage loans. AI can support on-the-job training by helping new employees answer questions confidently, correctly, and much quicker than they could before.
Improving employee satisfaction
Today’s banking customer has all kinds of new ideas about their banking experience. “The Amazon Effect” has successfully raised consumer expectations to the extent that a consistent, personal, and relevant experience is the new normal. As a customer, how many times have you been told “I’m sorry, I don’t know the answer?” Customers want solutions to their problems and employees want to be able to deliver those solutions as efficiently and effectively as possible. AI assisting in the background helps minimise those negative moments – making employees job easier, less stressful, and overall more enjoyable.
Identify knowledge gaps
Do you know all the questions employees are getting asked? Do you know what’s easily answered and what’s not? Real-time insights allow knowledge managers to keep up to date on frequently asked questions and gaps in current resources. This allows them to strategically improve or add content where needed.
Augmenting customer service
Whether talking with an AI chatbot or a personable customer service team member, the modern banking customer has high expectations for convenience, speed, and security. Which means that the technology you choose to deploy and how you deploy it is now just as important as who you hire and how you train them.
Today’s AI solutions won’t replace customer service agents or get in the way of the human factors that drive the customer experience. On the contrary, they augment it, allowing the business to do more without adding human resources. The higher the quality of a AI chatbot solution, the better it will be at taking the routine requests off the plate of customer service agents—giving them more time to provide a personalized and positive experience for customers.
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