A fundamental transformation of the insurance business is under way, driven by technology and innovation, and insurers must seek to drive co-created value through global networks, says Indranil Nath of DXC Technology.
The insurance industry hasn’t always been known for its innovation and for adapting to customer and competitor landscapes. But as competition has intensified, and many insurers struggle to find profits in a price-driven world, companies have worked to find new ways to reduce costs and improve services.
One catalyst for innovation has been the external forces that are innovating and disrupting the traditional insurance value chain. For example, e-commerce aggregators and insurers are developing capabilities using web technologies to go directly to customers, bypassing the existing channels completely.
Numerous technology players have entered the market and, often via joint ventures to sell insurance online, taken market share from insurers by targeting individual customers as well as small and medium-size businesses.
Clearly, value creation and growth in insurance are now being driven by innovation and a company’s ability to access a global network of resources to co-create unique experiences with customers.Are insurers transforming their business processes, technology, and value chains? Are they also implementing the key social and technological architecture required to create an ongoing innovation advantage?
Professors C.K. Prahalad and M.S. Krishnan, in their book The new age of innovation: driving co-created value through global networks, define innovation as shaping consumer expectations as well as responding continually to the changing demands, behaviour, and experiences of consumers.
To do this, companies must access the best talent and resources available anywhere in the world. These two ideas must be connected, they say. The resources of many must be leveraged to satisfy the needs of one.
This converts to reality only if we pay attention to the glue that enables ideas to be transformed into operations. The focus must be on business process, and analytics must be seen as the glue. Equally, business processes must be connected to the skills, attitudes and orientation of managers. The social architecture—including organisation structure, performance measurements, training, skills and values of the organisation—must reflect these new competitive dynamics. Underpinning all this is the technical architecture of an insurer’s information technology (IT).
Two pillarsA fundamental transformation of business processes is under way, and insurance as an industry is not immune to this trend. The transformation is built on two pillars, which can be represented by two simple formulae: N=1 and R=G.The first pillar, N=1, is that value is based on the unique, personalised experiences of customers. Insurers have to learn to focus on one customer, and that person’s experience, at a time, even if they serve one hundred million customers. The focus is on the centrality of the individual, one customer experience at a time (N=1).
The second pillar, R=G, is that no insurer is big enough in scope and size to satisfy the experiences of one customer at a time. Today the focus is on access to resources, not ownership of resources—perhaps access from multiple vendors and often to resources around the globe (R=G).
Coming to terms with the implications of this transformation is both urgent and inevitable for the survival of insurers. It also holds a massive implication for the creation of value and profit for an insurance company.
To win in the competitive landscape defined by creating one customer experience at a time, decision-makers must develop a whole new mindset for understanding the value chain, given the enormous potential for improvements in cost savings and increasing premiums generated as a result of adopting a new system.
Insurers are developing approaches whereby behaviour and lifestyle of an individual customer become the basis of deciding the insurance premium. Value is shifting from products to solutions to experiences to create a unique personalised experience.
However, internal systems and technological platforms can become an impediment. Flexible systems are a prerequisite and must be developed, and insurers are exploring more agile methods to deliver them.
The forces changing the landscape of insurance are rapid digitisation; changing demographics; rising customer expectations; low interest rates; sophisticated fraud; and finally, the organisation itself. The capacity of an insurer to articulate the relationship selectively between these moving parts is at the core of an organisation’s ability to respond, in real time and cost-effectively, to the demands of the N=1 and R=G world.
When it comes to helping insurers on their transformation journey, DXC Technology can point to how it changed its own business model to keep pace with industry trends.
DXC offers insurers an industry-leading robotic process automation (RPA) capability with end-to-end RPA enablement, coupled with a digital generation services delivery model that leverages lean process design, analytics and artificial intelligence to create a comprehensive, high-performance approach to IT services delivery.
Once an RPA capability is established, insurers can gain further efficiencies using DXC’s RPA managed services model, which underpins the DXC Bionix platform and provides an important foundation for future delivery services including applications; business process services; cloud data analytics; security; and workplace and mobility solutions. This model and platform allow DXC to rapidly build and deliver at-scale repeatable offerings and solutions, to help drive our clients’ digital transformation into our insurance operations business.
The performance gains for DXC’s own insurance operations business from DXC Bionix are tangible and have been impressive. They include:
- 50 to 80 percent reduction in time spent on operations;
- 25 percent reduction in testing costs;
- 50 percent defect reduction;
- 60 percent reduction in testing time;
- Reduction in average applications deployment time from 180 minutes to 15 minutes;
- 65 percent reduction in business process transaction time with assisted RPA;
- 71 percent of incidents auto-resolved or auto-diagnosed without human intervention; and
- 82 percent elimination of issues through rules-based filtering and alert correlation.
DXC has automated more than 55 tasks with about 6.7 million transactions over three years, using 37 robots for its own business—the equivalent of more than 900,000 person-hours of saved benefits. The company has done this by launching the use of cognitive technology, and artificial intelligence, an RPA capability.
The company is also working in areas to help provide intelligent data digitisation (IDD)—intelligently extracting data for structuring, complex, variable unstructured data that requires a new Bionix capability to push optical character recognition (OCR) technology, increasing accuracy and automation. IDD learns from human input and manipulation to feed a learning loop, allowing IDD to continuously learn, which will increase accuracy across multiples variable over time.
DXC found a productivity increase of 30 percent, as projected for each core process where IDD is expected to be deployed.
Innovation: creating value
The new age of innovation reveals that the key to creating value and future growth of every business depends on accessing a global network of resources to co-create unique experience with customers, one at a time.
To achieve this, executives and managers at every level must transform their business processes, technical systems, and supply chain management, implementing key social and technological architecture requirements to create an ongoing innovation advantage.
The current transformation of business is forged by digitisation, ubiquitous connectivity and globalisation. This transformation is radically altering the very nature of insurers, and how it creates value is critical for their survival and growth. As yet however, few insurers are embracing this both holistically and systematically to optimise the benefits of innovation.
Indranil Nath is vice president & general manager, property & casualty, global insurance at DXC Technology and the regional industry general manager for the UK, Ireland, Middle East and Africa. He can be contacted at: firstname.lastname@example.org
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