Embracing Automation in the Insurance Industry: Challenges and Opportunities

In this Opinion piece Jesse Power, Head of Insurance, at Duco, looks at automation across the claims chain and how legacy roadblocks can be overcome.

The insurance industry is a vital component of the global financial services sector. Yet, unlike much of the sector, the road to wide scale adoption of automated solutions has been a journey marked by surprising inaction. The tides, however, are turning, as market participants realise the impact that technology can have on their businesses and how detrimental further delay could be. In this piece, we explore the key obstacles that have hindered the adoption of automation in insurance, the remarkable shifts underway, and the applications where automation is rewriting the rules in one of the oldest financial industries.

Roadblocks to automation

The adoption of new technologies (e.g. cloud computing, AI) and automated solutions within insurance is a relatively recent phenomenon, frequently met with caution and scepticism. The notion of Software-as-a-Service (SaaS) itself remains novel to many industry players.

The main barrier to progress has been the persistence of legacy on-premise technology platforms. These ageing systems, while functional, are usually expensive to maintain and lack the flexibility required for integration with modern tools and systems. Compounding this challenge, the reliance on manual spreadsheets, especially the ubiquitous Excel, remains deeply entrenched. This leads to the concept of ‘Human APIs’, where huge volumes of data and information are still being manually extracted and shared across insurance organisations by individuals rather than through an automated workflow or process.

Additionally, the insurance sector’s culture and mindset presents another significant hurdle, particularly when it comes to shifting working practices and large-scale investment in transformation. The path to change, even if it promises improved efficiency and significant long-term cost-savings, is one that demands time, effort, and investment. The need to retrain staff, pivot operating models, embrace new methodologies, and invest capital into new technologies can all trigger resistance. However, as the tide shifts, it’s becoming increasingly evident that these initial investments hold the key to unlocking substantial long-term gains and efficiencies.

Embracing Change through automation

Amidst these challenges, a new dawn is breaking across the insurance landscape. The allure of automation and its potential is gaining traction as insurers realise that evolution and adaptation are not mere buzzwords but crucial strategies for survival and growth. Transformation is being driven by the convergence of data and technological advancements, with AI emerging as a potent force.

Automation’s transformative potential within the insurance sector is already clear across multiple applications.

The automation of claims processing has streamlined data collection, verification, assessment, and payment. These advancements result in expedited claim settlements, paving the way for enhanced customer experiences. A standout example is Insurtech trailblazer Lemonade, who achieved a world record by settling a claim in just two seconds through the power of AI and machine learning. Closer to home, an insurance firm recently implemented Duco’s data reconciliation solution as part of their claims payments process and were able to improve their auto match-rates by 395%, through Duco’s AI powered matching engine.

Automation is also revolutionising the underwriting process. By leveraging technology and automated solutions, insurers can analyse vast troves of historical data to assess risks, determine appropriate premiums, and issue quotes.

However, it is critical to the end customer experience that automation is balanced with the need for a human touch. While automation can optimise middle and back-office functions and processes, many customer-facing interactions will continue to demand a personalised approach with customer experience being the priority..

Security and Privacy in a Digital Age

As cloud technology and automation become more commonplace, data security and privacy assume even greater significance. Insurers, in their pursuit of innovation, have started to embrace SaaS business models and cloud technologies. This shift necessitates robust cybersecurity measures to safeguard sensitive customer information from unauthorised access.

Data transmission and storage are fortified through encryption and other protective measures. Notably, the transition to state-of-the-art cloud architecture actually eases the implementation of these measures, contrasting starkly with the limitations of legacy on- premise systems. Frameworks and certifications such as ISO 27001 and SOC 2 help to ensure organisations active in this space are compliant with high industry standards regarding data management and security.

This shift towards cloud-based solutions is aligning and future-proofing the entire industry.

Charting the Course Ahead

In a landscape defined by data-driven decisions and exponential technological growth, the insurance industry stands at a crossroads. The challenges that once cast shadows on automation’s horizon are giving way to opportunities for growth, efficiency, and customer-centricity. With the work we are doing at Duco an example of this, insurance entities are poised to harness the power of automation while preserving the essence of human interactions. As we enter an era where data and innovation reign supreme, the insurance industry has a unique chance to redefine itself and rewrite its future.

About alastair walker 12099 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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