Digital Transformation in the Insurance Industry

A few topics come to mind and I'll call out two customer needs that come up often in my conversations with industry leaders. First is the use of an automated rules engine to provide instantaneous underwriting decisions at the point of sale (POS). But the obvious win that insurers are after is not limited to just better straight-through processing (STP) rates and turnaround time. There are other significant operational efficiencies to be gained as well.

More importantly, they are looking to meet constantly evolving customer expectations by providing a more personalised experience. 

Second is the utilisation of artificial intelligence (AI) models in parallel with the automated rules engine to drive a richer set of decisions at the POS. As you know, AI topics are no longer mere theoretical discussions. Insurers are constantly looking for better ways to leverage their data pool, and it provides them with some exciting opportunities to enhance revenue performance and risk management.

 These two topics take centre stage because customer expectations are always evolving, and insurers need equally dynamic and scalable solutions to maintain their competitive edge. 

 Technology, as we know, is advancing faster than ever before. So many insurers are finding it challenging to create an ecosystem that is stable, yet nimble enough to allow for innovation.

At Munich Re Automation Solutions, our modularised solutions were designed to be future-proofed, and this is important for two reasons. First, many insurers are saddled with legacy solutions that are expensive to replace and too complex to decouple. Hence, it's not only important, but also necessary to provide a way for insurers to modernise in phases to manage the complexities.

Second, insurers may optimise their return on investment by implementing solutions that complement the near-term objectives first, then add on additional modules or technology later.

Some insurers have managed to achieve high STP rates above 70% and faster turnaround times with our solutions. Others have reduced or eliminated paper-based processes from their new business operations. With underwriting rules aggregated in one place, it makes it not only more cost effective to launch new channels or campaigns or onboard new products and monitor underwriting rules performance, but also create a more disciplined environment for managing changes.

In summary, our automated and augmented underwriting solutions, if successfully implemented, could offer insurers the ability to scale their business while keeping risk at an acceptable level. Our insurer clients are well on this path, capturing extremely valuable data along the way with flexibility to integrate other data sources or technologies in the future.

The exciting news is that many, if not all, insurers have made or are still making significant investment in digital transformation. Most of the market leaders I talk to are transforming one or more parts of their businesses to stay ahead of their competition. If they have automated underwriting solutions and analytics in place, the next priority would be to streamline the entire new business process or adding AI capabilities to further improve underwriting decisioning at the POS.

However, about 70% of global digital transformaton projects fail. They are myriad of challenges facing every organisation, no matter the economy or market it operates in.

Despite all this, I expect significant efforts to continue among life insurers because, frankly, they have no choice, if they want to understand and appeal to the new generations of customers who consume information and expect a convenient and personalised buying experience.

 While many insurers are getting better at capturing, organising, and monetising structured data, some still struggle to create a platform for sustainable change. What I mean by that is the ability to bring together market knowledge, culture, technology, skill sets, infrastructure, and partnership to create future-proofed solutions. 

Munich Re Automation Solutions began more than 30 years ago, and today we have clients in more than 40 countries. So, our solutions are tried and tested in various regulatory environments, proudly serving 140 clients globally. 

We have never failed in helping our clients implement our automated and augmented underwriting solutions. Our experience and robust solutions will help insurers to leapfrog the steep learning curves and resource deficits that all organisations most certainly will face if the volume of business is sufficient. 

I must say that there are few advantages to building and maintaining an automated or augmented underwriting solutions on your own. No matter how you look at it, whether from cost efficiency, technical superiority, IT security, engineering support, or the ability to onboard new products and channels quickly, the arguments for subscribing to a robust cloud-based underwriting service, such as the one offered by Munich Re Automation Solutions, trump the arguments for building a similar solution in-house.

I understand why some executives are still having this dilemma. The two reasons that come up often in my meetings with executives are:  

1. First, their business may be skewed to selling either guarantee or simplified products that require very little or no underwriting. 

2. Second, their organisation lacks both the culture and experience to drive digital transformation involving automated or augmented underwriting. 

 To the first dilemma, I always ask if they have the ambition to scale the existing business to capture high volume or increase sales, or create new sales channels, or simply to diversify the protection product shelf. My guess is that very few organisations could juggle complex change management initiatives in the presence of sales performance pressures. 

With that in mind, consider the potential opportunity cost if insurers were to build and fine tune their own solutions. 

To the second dilemma, we have the use of global and regional experience baked into our technology and content to help our clients avoid pitfalls. We will also partner with  our clients to align with best practices and transfer the necessary knowledge to business users, so they are empowered to manage and monitor change rapidly and in so doing, free up scarce IT resources. 

There is a reason why SaaS applications have gained so much acceptance around the world. Insurers should not burden themselves with building solutions like an automated or augmented underwriting solution, but rather focus on their core business, so the nuances of building, fixing, and supporting the solutions is left to a partner who makes it their only priority.

Insurers that have opted to build their solutions in-house would have to be concerned with the high costs of maintenance, enhancements, and support. Employees can be expected to leave, so retention of knowledge could also present another hurdle. In my opinion, the most important downside to having an in-house solution is the inability to respond quickly to change requirements due to the heavy dependency on scarce IT resources.