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UNSTUCK: USING TECHNOLOGY TO BUILD INSURANCE RESILIENCE

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February 8, 2023 by Majesco Brand Spotlight

Many of you know I grew up in Iowa on a century farm near Clear Lake. Iowa is,
if you’ve never been there, full of great people who really embrace the state,
its heritage with roots in agriculture, and is part of the breadbasket of the
world. Even if you live in a city in Iowa, chances are, you still know quite a
bit about farming, livestock, and the farm machinery that it takes to cultivate
the soil, plant crops, harvest, and hopefully make a profit. Iowans are known as
hard workers, proud, and a highly supportive and resilient group.

For those who farm, preparing for the future — an uncertain future — is a way of
life. Weather is unpredictable. Markets for crops and livestock are always
changing. Not preparing means you can get stuck. You can get figuratively stuck
in circumstances that are not desirable. You can get literally stuck in
physically difficult conditions — blizzards, mud, storms, and floods. In
agriculture, you prepare for the worst scenarios so that when the unpredictable
happens, you’re ready. Whether that means using a winch to extract a truck or
picking a seed that might survive a drought, or leveraging new technologies to
help with planting, harvesting, or managing the farm operations — resilience is
a key to longevity, success, and profit.

In a previous article, we identified five trends that are going to be shaping
insurance for 2023. One of those trends is a focus on risk management and risk
resilience.

Resilience could perhaps be the priority theme for most insurers in 2023. In
resilience, insurers find ways to overcome the humps, hurdles, bogs, and blind
spots. They tackle the sticky stuff. When they get stuck, they refuse to stay
stuck. Resilience doesn’t just happen; it is active. It takes planning. It is
driven by initiative. It is an investment in the future.

In today’s article, we are going to look at technology as the tool for risk
management and resilient preparations. Insurance Technology is a broad term, so
we’ll look at InsurTech from the perspective of the roles that it can play
within the organization to build resilience into an insurer’s strategic plans.

Interestingly, we’ll find that in many instances, technology’s role in building
resilience is growing more “human” in its capabilities. This makes sense in
light of the fact that insurers are now faced with focusing on the customer and
customer relationship more than on policies and books of business. Insurance’s
new human factor may enable it to become more resilient.

We’ll look at several specific roles, including:

 * Technology as the eyes into risk
 * Technology as the facilitator
 * Technology as an extension of knowledge and talent
 * Technology as the path to personalization
 * Technology as the answer to innovating with purpose


TECHNOLOGY AS THE EYES INTO RISK.

Risk management and resilience both begin with adequate knowledge. There is the
knowledge insurers already maintain — the actuarial end of underwriting.
Insurers grasp the risks inherent in people and property and situations. There
is the knowledge that insurers need to obtain. This would include application
requirements gathering, but it would also include constant, even real-time
information, that may change the circumstances that will increase risk.

In an ideal world, insurers would have as many human inspectors as they could to
see into all areas of risk. They would be the perceptive eyes and analytical
minds needed to give clarity to the full picture. Unfortunately, this ideal
doesn’t match reality. Quadrupling the inspection team is untenable and now,
unnecessary.

Since insurance profit is affected by handling risk, avoiding risk, and lowering
the business costs due to risk, insurers need technology to see clearly into
risk. In life insurance, for example, insurers that previously found themselves
stuck with a lack of product innovation, are now finding ways to work with
insureds to maintain and monitor their health toward improvement. In P&C
insurance, carriers are expanding the use of AI and machine learning to examine
real property images, scrutinized through the eyes of hundreds of thousands of
previous interactions and claims. Majesco’s LossControl 360 and Majesco Property
Intelligence are great examples of how an insurer can use technology to stay
resilient by lowering risk.

Risk resilience is more crucial than ever, as economic, social, and
environmental factors will make risk knowledge a competitive differentiator. For
more on loss prediction, see my article, Faster Than We Can Learn: The Need for
Digital Tech-Enabled Underwriting.


TECHNOLOGY AS THE FACILITATOR.

Decades ago, insurers made themselves resilient by making their systems
customized and “self-sufficient.” They didn’t need to rely upon other companies
or manual efforts to give themselves the technology lift they needed to run
operationally efficient businesses within the confines of the company. Systems
were castles with moats, drawbridges, and closed networks that lasted decades.
The idea of facilitation was just keeping open the lines of communication with
agents and customers, often via paper and eventually via portals.

Today’s resilience is platform-based. It looks more like an industry-wide
network of interconnected, mutual support. It takes many technologies and
partners to accomplish real resilience because no company can go it alone.
Insurers may still have firewalls and tight security, but these are assisted
greatly by the distribution of information and data across cloud platforms and
API-based transfer protocols. Technology must be designed to enable the business
by facilitating production, distribution, and transactions.

Today’s platform insurance solutions are experts at traffic management. They may
look a little less hub and spoke-oriented than traditional core systems, but
their ability to act as a hub for high volumes of communication is dramatically
improved. APIs allow for direct connections while increasing the level of
automated facilitation. They not only direct the movement of data and
information, but they also keep better track of what is going on, which makes
them more reliable, usable, and secure. But as the number of APIs being used
grows, so does the complexity of managing them, which is why Majesco introduced
its new Enterprise API Management Platform in our Fall ’22 Release. It’s another
reason that insurers should transition to a next gen intelligent core system in
the cloud. Workflow has changed, but it is still necessary. Today’s core
solutions, such as Majesco’s P&C Core Suite and L&AH Core Suite have redefined
workflow for maximum efficiency and automation, but also have enabled speed to
market with out-of-the-box content, best practices, and easy configuration.

Facilitation impacts insurer resilience. It allows for true digital connections,
both within the administration of insurance and with all customer-facing
systems. It is making insurers easier to do business with — a competitive
distinction in times when customers can better weigh their options. And, it has
given insurers the capability to open new channels of distribution that were
previously unavailable. This is like broadening an investment portfolio in order
to reduce the risk of negative economic impact. Facilitation improves resilience
by increasing options.


TECHNOLOGY AS AN EXTENSION OF KNOWLEDGE AND TALENT.

In the midst of a talent shortage, insurers are also grappling with the growing
wave of retirements. Insurance will be losing institutional knowledge and
experts in business, technology, and distribution faster than they can replace
them. The only way tomorrow’s insurance business will survive is if it can
become resilient by taking that institutional knowledge and configuring it into
the systems and automating as much as you can to allow people to focus on the
important things and improve customer satisfaction, expense, and loss ratios.
Insurers that are now redefining their businesses, by introducing value-added
services, will also benefit from introducing value-added technologies to their
current systems.

A great example of this may be found in generative AI such as ChatGPT by
OpenAI.[i] Machine learning may hold the key to warehousing insurance data and
knowledge — understanding it in ways that will yield improvement. It won’t just
automate customer service (though it will do that). It holds the promise of
solving issues, fixing problems, and bringing greater analysis and creativity to
business. At some point, AI will become like the employee you absolutely must
retain to stay competitive. Generative AI may one day understand companies
better than they understand themselves, which may be humbling for experts, but
relieving for businesses struggling with talent shortages.

Underwriting is already an area where automated insights are providing relief to
knowledge and talent issues, while at the same time adding the resilience of
better outcomes. Majesco’s Digital Underwriter360 for P&C is an example of next
gen technology that fills important gaps in the transformation of real-time data
into value-added insights.


TECHNOLOGY AS THE PATH TO PERSONALIZATION.

Resilience is facilitated by seamless and effective communication. In risk
management, this may take on many forms. You could probably make a long list of
how your organization is improving communication in order to better manage risk.

But communication’s contribution to resilience will be in the realm of
personalization and personalized data management. The tight job market is
affecting customer service. The new expectations of the digital customer are
creating an unprecedented culture of convenience. Together, these pressures are
pointing to digital solutions that can both know the customer and communicate
with a greater degree of autonomy, clarity, and personalization.

Front-end digital tools were some of the first areas of InsurTech application
and growth. Now that they are maturing, it is evident that they are often held
back by an organization’s inability to extract and use a customer’s data that
needs to be drawn from many silos. What seems like it should be a small issue
becomes more acute in an economic downturn. As businesses and people look for
areas they may be able to trim their own budgets, they will most often land with
companies that have simplified customer service and gained efficiencies through
newer data architectures.

The company that understands its customer and can effectively deal with those
who are price-shopping may gain experience in providing price-lowering
alternatives. Whether the insurer is communicating directly through its website
or indirectly through an agent, it needs to provide clear and personalized
communications that fit the circumstance. Communication and product messaging
should certainly become a part of an insurer’s risk resilience management plan.


TECHNOLOGY AS THE ANSWER TO INNOVATING WITH PURPOSE.

In November, Majesco held an insurance transformation webinar that included Seth
Rachlin from Capgemini and Edin Imsirovic from AM Best, and myself. We discussed
innovation in light of upcoming industry challenges, including the economy. I
asked the panelists about the economy’s impact on innovation. “Should the
industry pull back or move forward? What should business priorities be, in light
of today’s macroeconomic factors?

We were all in agreement that this is the time and place to make the technology
investments that will optimize and improve the business. We discussed the
reality that today’s insurance leaders, according to AM Best, were those
companies that were investing in technology innovations that would give them a
firm foundation for the future. At that time, I listed eight priorities:

 * Optimize & Innovate Business — continue to optimize while creating innovation
   around either the existing or future business.
 * Risk Resilience — focus on risk prevention and risk mitigation to avoid
   claims and improve customer experience.
 * Customer Expectations — look at the expectations that are driving the
   business.
 * Personalized Niche Products — match smarter customer spending by insuring and
   underwriting based on lifestyle/behavior/business need.
 * Market Reach & Growth — allow customers to buy insurance differently, through
   additional channels and embedded options.
 * Ecosystem and APIs — foster partnerships and distribution arrangements that
   depend on APIs which allow insurers to connect.
 * Long-term Data Strategy — expand data sources for underwriting and claims,
   plus the application of AI and machine learning.
 * Interconnected Tech Foundation — customize the technology set that can be
   brought together to meet your business strategy.

Is your organization stuck in a pattern of reacting to economic forecasts and
pulling back from important technology investments? Is it building resilience
through a technology strategy that will pull the company through and set it on a
course for success? Is it time to shift gears and set a course for a future of
innovation and growth?

Join Majesco and a panel of outside experts on January 26, 2023, for an
informative webinar, 2023 Signals Shaping the Future of Insurance, where we’ll
discuss advancements in digital capabilities, platform technologies, and data
sources that are now crucial to industry growth.

--------------------------------------------------------------------------------

By Denise Garth

--------------------------------------------------------------------------------

[i] Chui, Michael, Roger Roberts, Lareina Yee, Generative AI is here: How tools
like GPT could change your business, McKinsey, December 20, 2022

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