How insurance companies can create a successful digital labor strategy to unlock growth.
Despite significant investment in automation, most insurers are struggling to achieve an enterprise-wide approach and move from pilot to profit. In this article we identify five factors behind a successful digital labor strategy.
‘Digital labor’ means leveraging digital technologies to augment, or automate tasks performed by people. Many insurers are using digital labor to drive their transformation strategies, including incubating concepts in venture capital units, or partnering with insurtech startups.
The majority of insurers have robotics/automation pilot projects under way and have managed to automate routine processes, particularly in finance. Most are now trialing more sophisticated robotics techniques.
According to KPMG global research, almost one-third of insurance CEOs say it is “extremely likely” that five percent or more of their technology workforce will be replaced through automation within the next 3 years.
New cognitive capabilities could usher in a new era of insurance productivity and customer centricity. Bots are making key decisions in areas like specialty commercial policy renewals and personal line claims approvals. Insurance visionaries recognize that digital labor goes beyond cost savings and headcount cuts; it can unlock productivity, organizational agility and customer responsiveness, enabling them to compete with nimbler startup rivals.
Despite this potential, insurers lack roadmaps for digital labor and often fail to turn pilot projects into full-scale production, or to share gains around the enterprise. And few have the right resources, skills or IT infrastructure. Nine out of ten insurance CEOs say they are concerned about the challenge of integrating automation with AI and cognitive computing.
In our experience, those leading in digital insurance share five common characteristics:
1. They see the big picture: by understanding how digital labor will apply across the organization, they look beyond single solutions and prioritize investments that deliver maximum value.
2. They apply a change management approach: recognizing that digital labor will dramatically change the organization, they foster a new ‘digital first’ culture to help employees embrace new ways of working.
3. They think globally and act locally: centralizing key capabilities and processes related to insurance digital labor and leveraging global scale, while commercializing local ideas. Many are creating Centers of Excellence to gain consistency, oversight and synergies.
4. They create the right governance: these insurance leaders stimulate insurance digital labor through appropriate structures and guidance. They know what is happening in the organization and encourage the right behaviors to manage risk.
5. They measure and monitor the benefits: they know what they want to achieve from their investments, and continuously monitor the outcomes of insurance digital labor initiatives to uncover new opportunities and learn new lessons.
Recognizing the connection between improved internal processes and customer satisfaction, the executive team of one large multilateral global insurer wanted to explore how they might leverage predictive analytics and automation to help streamline their claims payment process. The leadership had a lofty goal: to reduce the total time to pay from 30 days to just 15 minutes.
The organization began by identifying the key data factors underpinning the process and, after collecting and processing the structured and unstructured data, developed a proof of concept that used new machine learning algorithms to achieve their goal.
The initiative has been a tremendous success, delivering potential savings of almost 50 percent of the cost of claims processing, improved consistency within the process and creating better global cohesion. More importantly, the initiative has helped deliver dramatic improvements in customer experience at a critical ‘moment of truth’, enabling better interactions driven by the right people asking the right questions at the right time.