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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

IT COST MANAGEMENT: 10 STEPS BUSINESSES CAN’T IGNORE

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By Matt Dando, Director, Strategic Business Value Consulting at Serviceware

 

In today’s ever-accelerating digital era, and as we recover from a global pandemic, digital transformation has stepped more firmly into the limelight. Over the last 18 months, digital initiatives have accelerated, with investment in the cloud also increasing dramatically. Digitalisation is arming CFOs and CIOs with data, but understanding what to do with it can be overwhelming, especially when battling to manage cost data from the various vendors associated with both cloud and existing on-premises investments.

With pressure around sustainability acting as another catalyst for cloud adoption, never has there been a greater need for businesses to have a complete, detailed and transparent view of all IT costs. In fact, now is the time for businesses to ensure that they are managing IT costs effectively – not just in terms of cutting, but also optimising, investments, and reinvesting in the tools and technologies that can and will enable them to keep up with the wider business strategy. Luckily, there are 10 simple steps that businesses can follow in order to ensure a comprehensive, detailed and streamlined control over all IT costs.

Step 1: Building a comprehensive IT service catalogue

The starting point for IT cost control is the creation of an IT service catalogue. This catalogue outlines individual IT services, information about their purpose, location and costs, to create a detailed overview. Having a clear and complete definition creates standards for available services and bridges the gap between different departments.

Matt Dando

Step 2: Effectively monitoring IT costs

One of the most important tools for the efficient tracking of IT costs is the control of the value chain, from the smallest cost units to finished business units. With the help of service catalogues, benchmarks, the use of IT Financial Management (ITFM) or what is often referred to as Technology Business Management (TBM) solutions, comprehensive access to this data can be guaranteed, creating a ‘cost-to-service flow’ that identifies and controls the availability of IT costs.

Step 3: Assessing IT budget management

Even with perfect transparency of IT costs, there are different approaches to allocating IT budget – centralised, decentralised and iterative. With a centralised approach, the budget is determined in advance and distributed to operating cost centres and projects in a top-down process, allowing for easy, tight budget allocation. With this approach, however, there is the risk of overlooking projects that offer potential growth opportunities. With the decentralised approach, the process is reversed. Operating costs are precisely calculated before budgeting and projects are determined. The downside is that budget demands might exceed available resources.

Finally, the iterative approach tries to unify both methods. Set budgets, overhead and prospective projects are put together to make a detailed assessment of the most viable course of action. Although the most lucrative approach, it also requires the most resources. None of these approaches are necessarily superior. Instead, it depends on the available resources, and the enterprise’s structural organisation.

Step 4: Managing IT budget for growth

Before allocating IT budget, it is important to define costs into two categories: ‘run’ and ‘grow’ costs. ‘Run’ costs usually include operating costs, while ‘grow’ costs refer to all services and products that are intended to change, transform or expand the business. Benchmarks and standard definitions can help with this categorisation, but do not necessarily have to be followed, as long as cost allocation remains consistent. When definitions have been clearly determined and projects assigned, the IT budget needs to be allocated and decisions need to be made on how to split the budget. Whilst a split of 70% run/30% grow is the norm across most enterprises, there is no one-size-fits-all approach, and decisions will rely on varying factors such as availability of resources and the goals of the enterprise as a whole.

Step 5: Keeping a positive gross profit margin

By following the steps above, organisations can achieve complete transparency with regards to which products and services are offered, where IT costs stem from, and where budgets are allocated. This makes it easier to analyse how much of the IT budget is being used and where costs lead to profits and losses. If the profit margin is positive, the controlling processes can be further optimised, and, if the profit margin is negative, appropriate, or timely, corrective measures can be initiated.

Step 6: Staying tax compliant

One additional important factor in comprehensive IT cost control is tax compliance. The more the enterprise of a company operates internationally, the more relevant it is to stay on top of varying international tax regulations. IT products and services that are marketed abroad are subject to country-specific tax laws and, to ensure that they are adhered to without errors, it is necessary to provide correct transfer price documentation. This in turn depends on three factors:

  • Transparent analysis and calculation of IT services based on the value chain
  • Evaluation of the services used and the associated billing processes
  • Access to the management of service contracts between providers and consumers as the legal basis for IT services.

By achieving the transparency enabled by the previous steps, it is possible to demonstrate international tax compliance.

Step 7: Benchmarking IT service pricing

The first step in pricing IT services is to collect benchmark data. These can be researched or determined using existing ITFM solutions that are able to obtain them automatically from different – interconnected – databases. Next, a unit cost calculation is necessary in order to define exactly and effectively what individual IT services – and their preliminary products – cost. This enables businesses to easily compare internal unit cost calculations with the benchmarks and competitor prices, before making decisions about pricing.

Step 8: Providing factual cross-driver analysis

A properly modelled value chain makes it clear which IT services or associated preliminary products and cost centres incur the greatest costs and why. This analysis allows for concise adjustment to expenditure and helps to avoid misunderstandings about cost drivers – for example, the importance of infrastructure on the generation of IT costs. Then, strategies can be developed to reduce IT costs effectively and determine more careful use of expensive resources.

Step 9: Accounting and invoicing IT costs

IT cost control through the value chain enables efficient usage-based billing and invoicing of IT services and products. If IT costs are visualised transparently, they can easily be assigned to IT customers. This increases the transparency of the billing process, and provides opportunities to analyse the value of IT in more detail. There are two options for informing managers and users about their consumption: either through the showback process – highlighting the costs generated and how they are incurred – or through the chargeback process, in which costs incurred are sent directly to customers and subcontractors.

Step 10: Managing supply and demand

The manual nature of Excel spreadsheets poses a risk to data integrity and should therefore be avoided, as they are impossible to keep up to date all the time and require significant effort to maintain. A holistic analysis and greater cost transparency results in a larger, more detailed overall picture of IT service consumption, which allows conclusions to be drawn in a timely manner to enable the optimisation of supply and demand for IT services in various business areas.

Optimising and maintaining IT cost control

Following the above steps will ultimately enable businesses to reach new levels of efficiency and maturity – and, more importantly, create a secure, transparent, and sustainable IT cost control environment. Budgets can be optimally utilised, IT costs can be cut and overall productivity significantly boosted. However, businesses that ignore this advice will be severely hindered if they do not stay on top of the ever-changing conditions of the current market landscape.

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Finance

QUESTIONS TO ASK YOUR FINANCIAL ADVISER

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With World Financial Planning Day approaching, it is the ideal reminder to meet with your financial adviser and review your financial position. To help you prepare, Jaco Prinsloo, certified financial planner at Alexander Forbes, outlines some questions to ask:

 

Am I sufficiently covered?

Just like insuring your car against a loss or damage, you also need to insure your life and your ability to generate an income. Your financial planner can assist you in setting up a personal insurance policy to protect you against the loss of income or life. You can use the proceeds from the policy to replace your income or take care of your loved ones when you are no longer here to provide for them. A good financial adviser will also warn you if you are over-insured, as this leads to paying unnecessary premiums which could be better used elsewhere.

 

Jaco Prinsloo

Am I invested according to my risk profile and goals?

Knowing your risk profile will help you determine your risk appetite to reach your investment goals. You might like the safety and security of money market funds, but saving for retirement using money market funds means your money will not grow fast enough. You exchange the risk of your money fluctuating with the market, with the risk that you will not be able to retire due to insufficient savings. Your financial adviser can help you find a balance between your comfort level and your investment goals to make sure you sleep well at night while being able to retire one day.

 

Are my investment goals on track?

Your investment returns must be secondary to your goals. Ask your financial adviser to give you a future cash flow projection for your goal to see if you are on track. Although the projection is just an assumption, it will give you a target to aim for. In addition, if you need to make adjustments, your financial adviser can help you find a cost-effective and tax-efficient solution to meet your investment goals.

 

What fees am I paying?

Some investors believe that they are not paying any fees or that there are no costs associated with their investments. However, reinvesting dividends, issuing statements, and buying and selling shares all come at a cost. Ask your financial adviser what your effective annual cost (EAC) is. This will show you the total cost of managing your investment. If you are paying above the industry average, ask your financial adviser to help you to explore alternatives. With investments, you get what you pay for. So do not always look for the cheapest option – look for the option where you believe you could get the most value for your money.

 

How is my financial adviser doing?

As you will be sharing personal information about your finances, it’s important to build a trusting relationship with your financial adviser. To ensure you receive up-to-date and current advice, remain current with industry changes and do not be afraid to question your financial advisor on these developments and the potential impact to yourself. An informed decision will give you the trust and confidence to act on any advice provided by your financial adviser, as you know it is the best for you.

Our emotions and feelings are often our worst enemy when it comes to personal finances. Your financial adviser cannot pick the next hot stock or make your debt go away. But they can save you from making emotional decisions and provide you with the support to reach your goals. Schedule that meeting with your financial adviser – and if you don’t have one as yet, there’s no time like the present.

 

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