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HAS COVID CONVERTED CUSTOMERS TO CONVERSATIONAL AI?

By Cathal McGloin, CEO of ServisBOT

 

A recent webinar hosted by Insurance Post asked customer service experts working at leading insurance companies whether social distancing would cause the demise of the traditional contact centre.

It was noted that, at the start of lockdown, insurers had anything between 15% and 50% of their contact centre employees working from home, which created a particular challenge for offshore operations. The assembled experts discussed whether they had seen any impact on customer satisfaction levels as their customer service colleagues adjusted to working from home.

 

Shorter queues

Andrew Jones, Head of Express and Retail Claims at Zurich insurance, noted customers’ willingness to use online portals because they assumed they would be waiting in a queue if they called the contact centre.

David Thompson, Director of Claims at Tesco Underwriting, noted that at the start of the UK’s lockdown in March, customers showed a great deal of empathy for the difficulties facing insurance contact centre staff as they adjusted to working from home. However, he noted that this early goodwill appeared to be returning to pre-COVID levels towards the end of September.

The webinar participants were asked to what extent technology such as chatbots and digital AI assistants had been used to assist with triaging insurance claims, to alleviate some of the pressure on contact centre staff, while still looking after customers.

David Thompson, Director of Claims at Tesco Underwriting, emphasised that when customers have been involved in traumatic events, they need to speak to a contact centre agent and value the empathy that can be provided during these conversations, adding “but certainly, there will be others who will be happier going through a digital journey.”

Paul Ridge, Banking and Insurance Specialist at SAS UK & Ireland, observed that consumers are becoming more accustomed to a range of channels available to them and a number of insurers are exploring how this shift could be used to introduce lower cost channels.

 

Distance Drives Digitisation

Ridge noted the value of using automation to take simple, routine, lower value tasks away from contact centre staff, so that they can focus on those customers who need more support. He believes that a good blend of technology and human skills can be used to benefit both employee experience and customer experience.

David Thompson agreed that automation and digitalisation had been ‘turbo-charged’ by the national lockdown. He underlined the importance of using technology to support the wellbeing of contact centre staff, noting that employee experience feeds directly into customer experience.

As Deloitte’s MD of Applied AI practice, Sherry Comes has observed, “While robotic process automation (RPA) and one-touch ordering buttons are transforming many of these tasks, they don’t always provide the most customer or worker-centric experience. However, finely-tuned conversational systems can.”

By employing conversational AI to understand the customer’s intent and automate the tasks and responses involved in issue resolution, or escalate their query to the right contact centre agent, resolution and CSAT levels remain high, while also reducing the number of routine issues that agents handle.

Digital AI assistants are key to driving down the cost to serve through either fully or partially automating routine customer interactions. AI assistants can also use these interactions to prioritise the correct course of action if they cannot fully automate to completion. By gathering pertinent information that can be passed on to agents, digital AI assistants save customers from having to repeat themselves once they get through to a customer service agent, helping the agent to resolve the issue more swiftly.

 

The personal touch 

Conversational AI applies natural language processing so that customer intent can be understood, appropriate responses can be provided, and actions can be automated to solve their issues, while still providing the option to speak to a human. The advantage is that consistent, high-quality responses can be provided at scale, without overwhelming contact centre employees when human resources are stretched because some employees are self-isolating, or when the organisation is handling a sudden spike in customer enquiries.

While enabling financial organisations to automate repetitive transactions, conversational AI also allows them to be personalised by referring back to elements of previous interactions. The benefit for customers is that they don’t have to repeat themselves and conversations can be picked up where they left off, at the customers’ convenience.

 

Designed for Digital Natives

According to Deloitte, “younger generations seem to be gravitating toward accessing information through chatbots, with 70 percent of millennials reporting a positive experience after using them.”

Whatever their age, when applying conversational AI, brands must make it clear to customers that they are engaging with a digital assistant and not a human. It’s equally important to avoid trapping customers in a ‘bot loop’ and to provide a clear route to speak to a human if a query can’t be resolved by the digital assistant.

PWC believes that organisations that get their branding and persona development right within their conversational AI can create a customer experience that is akin to engaging with a human agent. However, getting it wrong will alienate users. EY emphasises the need to use the right data when ‘training’ conversational AI, explaining that “The bot uses logic to determine user inquiries and connect with enterprise systems to get the desired results”. Therefore, the bot is only as smart as the data used to build it.

This is why The AA Ireland invested time in studying genuine livechat conversations when developing its successful chatbot project, the Quote Helper Bot, so that they understood what people asked, how they asked, and what the intent was behind their questions. As a result, the Quote Helper Bot provided consistent on-brand responses that were based on live chat conversations with previous customers who had the same requirements. When social distancing measures were introduced in March, The AA Ireland was able to re-apply what it had learned and quickly spin up a call deflection bot, within 48 hours, to ease pressure on contact centre staff as they adjusted to working from home.

 

The future:

Paul Ridge observed, “The pandemic has given us the chance to glimpse into the future and see what role the contact centre will serve.”

Andrew Jones, Head of Express & Retail Claims, Zurich, commented, “A lot of claims are settled without using voice. In the future, rather than big contact centres, we’ll see more smaller collaboration centres, with people coming in one or two days a week and for training”.

Angus Rogers believes that the traditional service model will change, saying, “There will always be a need for people to work together, but I think that the model of the contact centre we see today will change.”

What we have seen is that organisations are using a blend of conversational AI and highly skilled customer service agents to automate routine enquiries, swiftly adapt working practices to abide by social distancing rules and deliver the right experience for customers and employees alike.”

 

Business

HOW TECHNOLOGY IS MAKING AIRLINES SMARTER DURING LOCKDOWN

Captain Nadhem is the General Manager of Alpha Aviation UAE

 

2020 has provided challenges to all industries, but few have been as directly hit as air travel by the Covid-19 pandemic. Across the world, entire fleets have been grounded as international airports closed and travel bans were introduced worldwide.

Unfortunately, the challenges faced by airlines do not stop there. Airline economics dictate that planes be used as much as possible. For larger planes, this means keeping them in the air as close to 24/7 as is possible. For this reason, there simply aren’t enough dedicated storage facilities at global hub airports. At Frankfurt Airport for example, the tarmac on the 4th runway is now the home of many of the airport’s planes. It can also often take as long as 30 days to return a commercial jet to circulation after it has been mothballed.

As a result, many planes that are still in circulation have been transferred to the Indian sub-continent where air travel hasn’t been as badly disrupted. It will take some time for them to be rehomed to their previous routes if flight paths do reopen. In 2021, the aviation industry will also need to adapt and re-assess both its fleet sizes and operational strategies in order to re-build in the wake of this global crisis.

Pilots account for a key proportion of overhead costs and airlines will be constantly rethinking their pilot training strategy, which is likely to include a need to outsource and decentralise to maximise efficiency. At the same time, trained pilots will require training updates and renewals to their licenses, even as fleets are grounded.

Flight simulators have therefore assumed a crucial role in 2020. Usually developed to keep experienced crews sharp by creating challenging scenarios in safe environment for them to overcome, they have now become important across the industry for several reasons. Flying, like any other skill, requires constant practice to maintain the highest level of competency. That’s why airlines have recency rules that require pilots to perform a specified number of take-offs, landings and approaches within a certain period of time.

Advancements in simulator technology continue to bridge the gap between theory and reality. At Alpha Aviation we’ve recently invested in the new Alsim-AL172 flight simulator that features a Cessna 172 cockpit, with two seats and a flight deck. As pilots still need to clock up over 1,500 flying hours to receive their ATP certificate, advanced simulators like these will also be effective in providing pilot training without the operational costs of a real flight.

This year also highlighted the need for regulators to make changes to the training process. For example, there will need to be more reliance on e-learning in the initial cadet training and the acceptance of integrated technology in simulator training will also be important. Further adoption of Artificial Intelligence (AI) can also offer a vital competitive advantage.

AI technologies have already been widely adopted across the aviation industry. From facial recognition at airport passport security to baggage check-in and remote aircraft monitoring. For years these innovations have been streamlining processes, both for operators and customers. However, AI has a much greater potential beyond these practical applications.

Among other benefits, AI and machine learning algorithms excel at recognising patterns and are extremely efficient at collating data from the process of training cadets. As most flight simulators are already equipped with sensors that generate considerable amounts of data, this resource can now be used to assess pilot competency from the onset of training.

Powerful AI and machine learning systems can analyse hundreds of flight parameters and sort through thousands of hours of simulator data to produce findings that a human coach wouldn’t have been able to determine. For example, AI programmes can evaluate a pilot’s ability as they execute key manoeuvres and create a comprehensive assessment of a cadet’s strengths and weaknesses based on real-time data.

The data collected from these training sessions can also be analysed by AI programmes to evaluate how the cadets fly certain training routes, for example, considering their angle of descent and acceleration periods. From this, airlines can gather enough data to build a picture of each pilot’s unique flying style and determine the optimum routes for them to fly.

A crucial part of this assessment centres around the rate each pilot burns fuel. Real-time decisions about the throttle settings during take-off and the climb can have a significant impact on the amount of fuel burned during a flight. With airlines spending around 33 percent of their operational costs on fuel, reducing the rate that fuel is burned can have a considerable effect on the finances of an airline and its carbon footprint.

Airlines already use AI systems to collect flight data regarding route distance, altitudes, and aircraft weight to determine the amount of fuel needed for a flight. However, now the data collected from simulators can also be used to pair pilots to specific routes, based on optimum fuel usage. This will result in cost savings for the airline by optimising the potential of their pilot crew to reduce excess overheads.

As we continue to work directly with regulators and the airlines to further expand the use of technology and AI in the industry, our ability to continue to adapt and innovate in this crisis will hopefully mean clearer skies ahead.

 

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THE INEFFICIENT MARKETS THEORY

Fraser Thorne, CEO at Edison Group

According to accepted financial thinking The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value.  So current prices are the best approximation of a company’s intrinsic value.

If that is true then why are so many companies being taken over at values of up to 70% more than their stock market price?.  What is the market missing?  Either accepted economic thinking is wrong or it is suffering from a period of abnormality or maybe something more fundamental is taking place.  Something which challenges the hypothesis of existing theories as to how share prices are created.

In recent months FTSE 100 businesses G4S and Royal Sun Alliance (RSA) have both been bid targets with insurer Hastings Group Holdings plc and Urban&Civic plc falling to earlier bid, following other leading industry names such as Macarthy & Stone .  Even the doyenne of roadside assistance the AA was finally taken off the market following a 6 year downhill journey.

A common feature is the gulf between the company’s stock price when the bid was launched, and the stock price offered by the potential acquirer. Yet if companies took advantage of the IR resources at their disposal, which have been significantly enhanced as digital capabilities have been developed as a result of COVID-19, this share price gap would have been considerably narrower or the companies might not have been the subject of a bid at all – potentially saving millions in defence fees.

Struggling stock prices have, of course, been a key stock market feature during the pandemic. Like many listed companies, G4S´s stock price fell sharply in the spring and then gradually recovered in the early summer to around 110p – still well short of the 200p at the start of this year – when Gardaworld made its first bid of 145p. Gardaworld’s final bid in December of 235p a share, was not enough to win the competition with Allied Universal trumping them at 245p cash. A 70% premium to G4S’s share price when Gardaworld’s first bid was made. The stock now trades at 257p implying some believe the bidding war may rumble on.

Similarly, Urban&Civic received a bid of 345p from Wellcome Trust, a 64% premium on its trading price at the time, RSA a joint bid from Intact Financial and Tryg, of 685p, a 49% premium and Hastings a 250p bid from Dorset Bidco, a 47% premium.

While the AA bid was at a premium of 40% to its price 4 months prior or 230% from its lows in February.  Even serial underperformer Talk Talk was taken over at a 16% premium.

Having reviewed a number of deals over the past six months most had a bid premium of over 40%+ which compares with an average of 15% for the previous two decades.

Takeovers are natural part of corporate development and a key requirement for markets to function efficiently.  But their value to shareholders has to be set against the recognition of the underlying value of the business before the bid is made.  A premium is normal and is normally required for control but what is most notable is the scale of such premiums.  Such price mismatches challenge the foundations of economic thinking, the market is not efficient.

A 10% bid premium is good, 15% very good and anything north of that is exceptional but this depends on the underlying price before the first bid is made.  Numbers in excess of 20% suggest the underlying stock is mispriced and therefore the stock market is inefficient.  This is hard to fathom in age of open access to so much information but the numbers demonstrate a dislocation between the stock markets value what others are prepared to pay for exactly the same assets.

True, bid prices are not always representative of the value of a business and its future cash flows might improve as a result. But one has to review the fundamentals of stock market valuations when the world’s largest security business can be undervalued by 200%+. Does the market lack the relevant information about the business outlook to make the same assessment as the bidder?  Is it that the market is dominated by analysts whose collective glass is half empty?  Or maybe it is the risk averse nature of large, bureaucratic investment houses who hope to demonstrate their precise calculations to reassure fund holders that they are looking after their savings.

Some of the quoted discount results from the public/private differential of the cost of capital and the tax treatment of debt v equity.  But perhaps a more obvious challenge has to be met by the companies and their boards’ – make sure everyone recognises your value, not just a potential bidder.

With as much investment now funded via debt (PE) as by quoted equity financial theories need a much wider lense. The efficient market hypothesis can only be applied to the market if investors and analysts incorporate the activity of the wider economic and investmsnt market.  This must include the valuations applied to private companies.  It is a great irony that in the age of the internet he time when more and more information is freely available to all markets are seemingly becoming less efficient.

The cost of private v quoted capital plays a part as does the massive growth of private equity v quoted funds, with active money halving in percentage terms in the last 20 years.

EMH theory came to prominence at a time of relative stock market stability, before international takeovers had come into vogue and in a time of greater higher interest rates.

 

US Mergers since 1897

According to Keynes “markets can remain irrational longer than you can stay solvent” and while they may re balance in the long run they can experience long periods of price dislocation.  We are not talking days but months or even years in some extreme cases.  Long enough for those closest to the business (the board) to highlight the error and try to rebalance it.

If the stock market cannot see the value opportunity then maybe it is not being given the full picture.   When that is the case then it is the obligation of the board to put the market right, yes the business needs to deliver what it promises but the other side of that is to highlight to investors how they will long term returns for shareholders.

While public perception may be that M&A deals and takeovers are decided by thrusting company directors, brave bankers and diligent lawyers, heroically fighting their corners in smoke filled boardrooms.

The reality is that these situations can only arise either when resources are scarce ie a mega merger between two dominate indsurty players scarping over a low growth or shrinking market or if one neglects its duty to achieve a proper value for its shares in the most public of arenas the stock market.

Certainly, the current gulf between share and bid prices suggests that management teams are not doing enough to properly communicate the value of their business to the wide variety of investors, which have holdings in their company.

In these uncertain economic times, clear and direct communication with investors is more important than ever. But not only do management teams need to communicate effectively with their existing investors, reaching out to potentially new investors who are likely to back an existing management team is also important.

A healthy share register is a diverse register incorporating all types of investors from retail through to the large institutions.  This means reaching out to a wide and fragmented audience.  The modern investment landscape is increasingly characterised by new and exciting pools of capital.  The growing significance of these new pools and the value of funds they represent is magnified as a result that active funds have shrunk as a percent of global funds under management by up to 30% in the last 20 years.  Boards should focus on building a more diverse and engaged share register, reach out beyond the more mainstream institutional investors to include, family offices, private wealth managers and the end individual investor herself.  To ignore this part of the market could be the difference between success and failure in a bid, just ask the board of GKN.

 

To address these issues, the IR industry has been adopting to a new level of innovation and tech-enabled solutions to respond effectively to these demands. For example, Edison has developed a new market-leading digital approach, which harnesses the latest in data and tech-driven tools, effectively transforming and enhancing the firm’s IR capability to not only efficiently reach out to existing holders but also to target new investors, which in an unwelcome bid situation could make all the difference between independence and redundancy.

Edison’s starting point is to monitor the behaviours of tens of thousands of investors by using smart targeting, with algorithms identifying not just interest but interest with intent to buy. These ‘propensity to purchase signals’ are detected via Edison’s digital content tracking system, InvestorTrack® and layered over market activity and fin depth knowledge of funds flows.

The recent spate of high premium bids highlights management failures to invest in their capital market communications.  It is not sufficient to concentrate on the top holders, nor to assume that exhaustive meetings with the sell side is an effective way to get your message carried to the wider market, in the format you want.

Initiating a bid is expensive, even more so defending one.  The combined advisory fees alone in the G4s bid are estimated to be in excess close to $30m or close to the annual IR budget of the combined FTSE100.  If the FTSE was repriced to close the average bid premium of the last two decades then it could increase in value by more than £300bn.

So, the choice appears straightforward: implement a long-term IR strategy, utilising all the modern digital methods now available to robustly communicate a company’s commercial case and strategy so the business is as fully valued as possible, or neglect this and risk a future bid and if it transpires then spend potentially millions of shareholder funds in fees in a possibly futile attempt to protect the company’s independence. If I was part of a senior management team, I know which option I would choose..

 

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