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AN EXL WHITE PAPER

Why Insurance Companies Should Re-evaluate Operations in a Digital World

Vishal AroraAssistant Vice President, EXL Services

Supported by:

Suneel KanteVice President, EXL Services

[email protected]

Written by:

By enhancing their digital capabilities,

insurers can meet these customer needs,

provide excellent customer service to

improve retention, and cuts costs to

provide competitive premiums in an

increasingly price-conscious market.

This creates both a challenge and an

opportunity for the insurance industry.

Insurance companies have decades of

optimized processes and systems that are

not aligned to this new digital business

model. Disruption is a real and looming

risk, and perceptive insurers realize they

must adopt a digital strategy.

Today’s insurance customers demand more. They expect their insurer to quickly process and

underwrite their insurance application online or through an app, easy self-service transactions, and

speedy claims resolution. The good news, according to most studies, is that consumers are willing to

pay more for the value and convenience of a world-class seamless experience .

Figure 1: Digital Transformation involves six dimensions

• Customers are rapidly adopting digital channels and tools for interacting with providers

• Customers have higher expectations for seamless interactions convenient to the moment

• Insurers feel pressure from investors and competitors to increase efficiency and effectiveness in processes and delivery

• Data has proliferated but accessing the relevant data and using it fruitfully remains a challenge

• Insurers need to make significant investments in new capabilities and technologies

• Digitized businesses have new requirements around culture, organization and desired behaviors

• Digital experience focused on the customer and with human centered design in mind

• An Omni channel sales, distribution and customer engagement model covering the full customer journey

• Digital operations that is optimized to enable - Self service - Using Robotics to automate the digital process

• Using big data and analytics to contextually identify trends and patterns, enable cross-sell, optimize premiums to generate loyalty and help drive better decisions

• Building a Front-Middle-Back office model to drive the best digital transformation powered by cognitive computing, machine learning and artificial intelligence

• Building a change culture to help organizations adopt the digital transformation

External trends have prompted …these key dimensions

Source: Global Digital Insurance Benchmarking Report 2015

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What is Digital Transformation?Digital transformation must reimagine

customer engagement at every step,

increase operational capability, and

augments process execution with new

enabling technologies across the front

office, middle office and back office through:

• A highly automated flow of structured

data between online, enterprise and cloud

applications;

• Enabling transparent transactions and

interactions between brokers, customers

and third parties and,

• Supporting smarter decision-making

through real time reporting and

embedded analytics

These drivers are pushing insurers to

implement digital initiatives in the following

areas:

Back office:

Automation: “The speed of the fleet is that

of the slowest ship.” Any manual activity

– compared to automation - brings three

negatives to a process; lower performance,

less accuracy and a hindrance during

normal volumes and a chokepoint at

peak demand. Further, not capturing data

from non-automated activities can result

in insurance companies to working with

a fraction of all the data they need – the

very antithesis of digital. Automation and

analytics can transform claims processes,

enabling insurers to improve fraud

detection, cut loss-adjustment costs, and

eliminate many human interactions.

Increasing demand of an agile and

scalable IT infrastructure: There are

many positive outcomes when an

insurer’s technology structure is able to

support the core business drivers, from

enabling brokers to win new customers to

maintaining high retention through digitally

transforming customer engagement.

Insurers can significantly increase the ability

to make quick updates without sacrificing

the IT resources required for day-to-day

operations, and customers have quicker,

easier access to information. Brokers may

benefit the most as they reap increased

premium volumes and greater customer

loyalty. To get there, insurers must augment

their existing IT with a software delivery

approach designed to accelerate digital

innovation. This will allow them to quickly

move the business forward without

disrupting their existing IT systems and

processes.


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Middle office:

Analytics: Mining Big Data to gain highly

specific business and customer knowledge

is a foundational underpinning of any

digital strategy. Bear in mind that this data

is usually an aggregate of enterprise data

and qualified third-party data. Assuming

an enterprise’s data is not compromised

by silos and black holes, this aggregation

can provides insurance companies with a

strong, unique, competitive edge.

The same goes for customer knowledge.

Aggregating this information with third-

party data provides such companies with

a powerful risk assessment underwriting

edge, making it easier to retain existing

customers, run an efficient operation and

yet maintain healthy profitability ratios.

Additionally, fraud poses a major threat

to both insurers as well as policyholders.

As fraud creates significant financial cost,

insurers pass on this cost to policyholders

in the form of increased premiums.

Using advanced analytics, it is possible

to implement efficient fraud detection

strategies. Advanced analytics techniques

like logistic regression and Gradient

Boosting Model (GBM) can often identify

potential cases of fraud at the First Notice

of Loss (FNOL), instead of waiting weeks

or months for an adjuster to review a claim.

Since advanced analytics is capable of

assessing the propensity of an individual

to engage in fraud before it has occurred,

it can also be used in the sales and

underwriting process before a policy is sold.

Front office:

Front office: Digital channels will replace

and augment physical channels: A 2015

Bain survey of insurance companies

projected that digital channels will continue

to significantly replace physical channels

in the next three to five years. The survey

found that most physical activities in

insurance will be transitioned to digital.

Specifically, pre-purchase, purchase,

servicing, renewals, claims handling and

management, payments, and customer

feedback and resolution will become digital

first, followed by other functions later. This

transition will require incremental IT and

integration transformation.


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What should be done?Insurers need to think beyond strategy.

They need to get to transformative

execution and outcomes and ensure those

outcomes create key differentiators in the

marketplace. It’s important to develop an

approach that can span this divide between

strategy and execution so that once the

transformation objectives have been

selected, there’s a clear path to a unified

architectural approach for holistic digital

execution.

Step 1: Identify digital transformation objectives

As Insurers progress from strategy to

execution, it’s important for the strategy

to set the stake in the ground in terms of

target business outcomes. Digital business

is often discussed solely from the lens of

the digital customer experience, but that’s

only a part of the story – albeit a vital part.

In addition to re-thinking and re-designing

of entire business models, the key desired

transformation objectives often map to the

following steps

Step 2: Study technology enablers in the market

Insurers must be fully aware of, and

leverage, technology enablers in the

market. That means looking beyond the

SMAC stack and into the next wave of

enablers: personas and context, intelligent

automation, human-machine collaboration,

and the Internet of Things.

In addition to these more recent enablers,

the core SMAC stack is evolving as well.

Mobility is evolving through wearable

technologies, the cloud, hybrid IT, and

software-defined data centers. These

disruptive technologies are today’s building

Figure 2: Digital Channels continue to replace physical channels and contact centers for many activitiesChange in percentage between today and in 3-5 years of customers using channel

Before Purchase Purchase After Purchase Claims Feedback

Seeking Information

Advice Purchase Inquiries and

Servicing

Policy Renewal

Seeking Information

Claims Submission

Reimbursement Submit feedback for resolution/ complaints

Physical Channels Contact Centers Digital Channels

Notes: Underwriting is excluded in purchase; responses of “other” for the channel used are not shown

Source: Bain Digital Insurer of the future Benchmarking, 2014-15

40%30%20%10%0%

-10%-20%-30%-40%


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blocks – some mature, some emerging

– in the new digital business platform

ecosystem of on-demand services. Taking

a holistic view across all these enablers can

help to maximize business benefits and

unlock new forms of value.

Step 3: Envision the future platform for digital business

Architecturally, these foundational

technology enablers can assemble a

highly-virtualized, highly-distributed

platform of on-demand services. Based

on an insurer’s current infrastructure and

architecture, selecting various technology

combinations is extremely critical to achieve

expected business outcomes that includes

harnessing the digital customer experience,

enhancing the digital workplace,

transforming and simplifying business

processes and optimizing infrastructure

Step 4: Master the digital services lifecycle

The next step for IT is to consider the “how”

as well as the “what.” It’s no longer sufficient

to have an innovative set of products or

services. You have to be a master of how

you design, develop, deploy, manage and

continually evolve your digital services as

well. Mastery of the digital services lifecycle

is going to become a key competency for

insurers to grow their business and build

sustainable competitive advantage in the

years ahead.

All in all, there are six key approaches that

are shaping how IT services are produced

and consumed: agile, DevOps, as-a-service

infrastructure, intelligent automation,

personas and context, and finally, digital

service management. Progress in these six

areas helps you build your organization’s

mastery of the digital services lifecycle.

Step 5: Organize for digital business innovation

Having established the platform ecosystem

for digital business as described earlier,

organizations will select the appropriate

sub-set of disruptive and enabling

technologies based on their specific

target business outcomes. Rather than

a monolithic platform that integrates

everything, the future platform will consist

of a highly virtualized, highly distributed,

ecosystem of services from best-in-

class providers. Foundational services

will be selected based upon role-specific

and outcome-oriented needs. Common

groupings of pre-integrated services

will emerge such as those provided by

software-defined data centers so that you

don’t have to do all the assembly yourself.

In terms of practical execution, business

managers can select from this palette


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of options based on their specific needs.

For example, for the digital customer

experience we need a new set of

capabilities including a persona-driven

approach, omnichannel integration,

customer centricity, and insights from

analytics. Some of the key elements are as

follows:

• Persona-driven approach to support new

work patterns and preferences

• Omni-channel integration and re-designed

business processes for faster, improved

experience

• Customer centricity using social, mobile

and cloud computing to transform work

processes

• Contextually-relevant anticipatory

analytics to enhance customer insight and

differentiation

Step 6: Execute a swift journey to the future platform

Finally, when taking the journey to this new

platform, it’s important to bear in mind that

we live in a hybrid IT world. Organizations

need to take the journey to the future

platform, while supporting and maintaining

their existing applications and infrastructure.

While some elements may be retired or

modernized, other elements may need to

co-exist and be integrated into the new

platform.

Since IT will be a hybrid environment for

quite some time, it will be important to

interoperate across these two divides. In

addition, an agile and iterative journey to the

future platform can simultaneously optimize

infrastructure and simplify management

on the back end (the IT transformation) as

well as improve the user experience and

transform business processes on the front

end (the business transformation). That way

the business can gain early benefits for

customers and end users at the same time

as IT transforms its own delivery model.

End Notes1http://www.bain.com/publications/articles/global-

digital-insurance-benchmarking-report-2015.aspx


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