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COVID-19: why targeted automation can help insurers build resilience through the crisis and beyond

Insurance Consulting and Technology
COVID 19 Coronavirus|Insurer Solutions

By Joe Milicia , Sam Keller and Charlie Samolczyk | June 26, 2020

Greater automation of insurance operations has generally been seen as a transformative project, but a little bit of automation could go a long way to helping insurers improve their operational resilience and efficiency in the face of the COVID-19 crisis.

There are plenty of reasons why greater automation of back room operations has been on more insurers’ agendas in recent years. Mounting regulatory pressures have increased the compliance workload without, in most cases, more time or resources to do it. At the same time, market pressures have created a competitive environment where speed and flexibility are increasingly necessary operating traits. With these has also come demand for additional, and sometimes real-time, management information (MI) to inform, direct and monitor investments in pricing, underwriting, claims and so on.

The result. Many insurers find that too many cents of each dollar of premium are going to fund expenses, a situation that many are finding only investment in technology and greater automation can significantly alter.

This is reflected in recent Willis Towers Watson surveys of insurers’ intentions towards employing automation in their businesses. These showed, for example, that in the three years from 2019 insurers anticipated a near doubling of the proportion of work carried out exclusively using automation, from 17% to 28%1. These are figures that allude to more than just plans for tactical investments, but rather a more committed approach to finding ways to do work more efficiently, quickly and cheaply. We would describe this as operational transformation.

COVID-19 shock

Of course, no-one in their wildest dreams anticipated the disruption of COVID-19. Yet even if wide-ranging, transformative projects logically have to temporarily take a back seat, automation capabilities built into products such as our own Unify software can have an important role in improving immediate resilience and laying the foundations for future broader operational applications.

As to how, there are several specific issues that COVID-19 has raised for insurers. Among these is keeping the business running as smoothly as possible with most or all employees working remotely. A consequence is that systems that were never consciously designed for employees to interact with over home wi-fi and virtual private networks (VPNs) are having to do so, not only putting pressure on computing bandwidth but raising the possibility that quick fixes that bypass normal governance and control measures will be used to get things done expediently and pragmatically.

And that assumes that key employees are going to be available to work at the time they’re needed. Apart from the potential health implications of the pandemic, there are ramifications for juggling work with altered home commitments such as childcare responsibilities, looking after older family members and home schooling in lockdown.

Another facet of the unprecedented economic and market impacts of COVID-19 is that demand for operational MI is particularly high. What impact is the outbreak having on capital and solvency positions? What’s happening with claims and claims trends? How are sales and premiums holding up? These are the kinds of questions about which senior management are understandably more jittery than usual and want more regular updates in the current environment.

Turning up the dial of automation, even relatively slightly and in a targeted fashion, can help with all these challenges. And there will be others of course, depending on individual insurer’s circumstances.

Maybe it’s a case of ramping up the automated underwriting footprint for the most simple, homogenous policies. Or automating data gathering, collation and reporting of claims trends for management. Or adjusting how key financial information that investors and regulators require is produced.

Whatever the application, there will be opportunities through targeted automation to relieve employees of some of the manual heavy lifting that has become more complicated in the COVID-19 crisis so that they can focus on more valuable tasks, such as analyzing the changing situation and its implications for the business. Another key benefit is that introducing more automation will keep more processes within the company information technology infrastructure, thereby reducing the strain on communications bandwidth but also helping to maintain governance standards and controls that limit the possibilities of human errors.

Automation considerations

So how might insurers set their automation priorities in response to COVID-19? That is likely to be partly a factor of how much back room automation they already have in place and how this affects how they go to market or interact with regulators. But a few common markers apply when deciding where automation can deliver some quick wins in order to reduce operational pinch points.

First, a process should be repetitive – so that a one-time effort can deliver perpetual return. Beyond that, well defined tasks that currently rely on regular human intervention and are therefore susceptible to mistakes are prime targets – so that you get the same thing every time without errors. And part of being ‘well defined’ is that a task be rules-based. Equally, tasks that rely on gathering digital data, potentially from multiple sources, are strong contenders. And finally, any task that meets some or all of the criteria above and is especially time sensitive can usefully be a target – perhaps where deadlines have accelerated in the relatively recent past.

The bottom line is that automation in any scenario isn’t typically about replacing people but keeping them fresh and enabling them to focus on where they can add most value. Cost savings and enhanced efficiency are natural by-products where this happens.

With these factors in mind, practical, helpful applications of automation in the current situation could include:

  • MI dashboards – since internal teams are getting peppered with new requests as management teams want to take more frequent look at financial positions. Quick production and analysis of sales metrics, for example, will certainly be an aid to better decision making.
  • Reporting and administration – many aspects of regular reporting and financial control are repeatable and relatively easily automated.
  • COVID-19 tracking – creating dashboards that track the impact and progress on claims, investments or other areas of the business.
  • Solvency monitoring – regular reviews of capital and solvency positions are particularly sought after right now. These typically rely on pulling data from various sources, a task that automation can handle very well and which, if automated, can help avoid some of the strains that COVID has introduced when moving data backwards and forwards between company-hosted systems and employees via VPNs.

Significantly, none of these applications needs to involve the kind of timescale and transformative effort of orchestrating multiple inputs and human interventions that might typically be associated with an automation project. Of course, they need to be well conceived and implemented, but their more targeted nature should allow them to be up and running relatively quickly and to build resilience to some of the pressures that the pandemic has put on insurance businesses in recent months. Further, these targeted implementations will have very short return periods – measurable in weeks, months or quarters, not years.

Along with the rest of society, COVID-19 has produced unprecedented circumstances for all insurers. Automation used in a targeted and thoughtful way can be one approach to make a real difference to how insurers manage their business, the welfare of their employees and their bottom line.


Footnote

1 2019 Willis Towers Watson, Pathways to Digital Enablement Survey (Insurance)

Authors

Senior Director, Insurance Consulting and Technology

Director, Insurance Consulting and Technology

Director, Insurance Consulting and Technology

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