The formula for successful digital transformation includes artificial intelligence (AI), data analytics and business process automation. However, simply investing in technology alone will not ensure ROI from digital. In fact, applying digital technology in the right mix to solve specific business problems can be a challenge for industries historically slow to embrace change, such as insurance.
Insurance companies today are increasingly pressured to innovate due to the customer expectations, disruptive competition, and evolving risk profiles due to climate change and cyber-crime, among other reasons. Meanwhile, insurers are also expected to increase revenue and profitability against the backdrop of slow growth and low interest rates.
In a recent interview for The Economist about the evolution of the insurance industry, EXL Vice Chairman and CEO Rohit Kapoor says he finds the insurance industry in interesting times. “There is a big shift towards consumerism,” he explains. “That means the individual consumer is becoming more and more important. You need to have a much more customised offering and the ability to deliver it in real-time.”
“One big issue, if you take a look at the insurance industry, which is a legacy industry, is that the time to buy an insurance product takes too long. The interaction is too cumbersome and customers can be confused about what they are ultimately buying. Making sure insurers deliver the right product at the right time is a critical aspect, and the urgency among them to transform is changing quite rapidly.”
Given the speed at which the insurance industry needs to move and the scale of the operations they must transform, most insurers will need to a strategic digital transformation partner, according to Kapoor, to apply what his company calls Digital Intelligence.
“Digital Intelligence is a strategy and approach to transformation that requires a combination of domain and data capabilities to understand the context of the problem that needs solved and the ability to orchestrate people and technology to solve it,” Kapoor says.
A Harvard Business Review (HBR) study by EXL, published last year, suggests that only one-third of companies are achieving significant ROI from digital. This suggests that the push for digital in the insurance industry requires bridging the gap between what companies expect to achieve from transformation and the outcomes ultimately delivered. This means there is a chasm forming in the insurance industry between the haves and the have nots — those who have the digital talent, data capabilities, change management and strong governance, and those who lack these some or all of the elements crucial for successful transformation.
“We don’t hone in on a specific digital technology per se, but understand the business outcomes the client wants to achieve and then orchestrate our people and myriad digital technologies to achieve those outcomes, depending on the specific client problem”, he says.
Orchestration and outcomes
EXL therefore helps its client to focus on the business outcome first. “From an approach standpoint it’s based on partnership and our application of Digital Intelligence”, Kapoor says. “The first step is to understand our clients’ challenges, map business processes end to end, and undertake some ‘whiteboarding’ through a design thinking exercise. This allows us to understand everything from a customer, employee and user experience perspective.”
Once this has been completed the challenge is, he says, “to determine the right digital interventions (be it automation technology, AI, specific advanced analytics techniques – or all three) to apply in a way that solves that challenge and generates quantifiable business outcomes – and do so quickly and at scale.”
Depending on the client and the required outcomes, this tactically entails a tailored combination of analytics, operations management, data services and technology. In the context of consumer personalization, analytics, AI, automation and digital interaction channels can be used together to target customers and accelerate the sales and underwriting process.
In a recent HBR study on the topic of AI sponsored by EXL, almost half of all respondents cited a difficultly finding talent to build and deploy AI. Nearly as many reported they struggled to find the business talent to work alongside AI once it’s deployed.
Successful transformation requires both an understanding of the technology and the specific business context in which best to apply it. “So, the real skill-set requires somebody who knows the technology and the business”, says Kapoor.
He says this ability to orchestrate people and technology within business operations has to be built over time, requiring significant investment and is not easy to replicate. EXL has taken its insurance subject matter experts and trained them on analytics and digital, as well as ensured that technologists understand the business context.
He then explains: “We have these individual resources sitting side-by-side, and that’s what allows them to become much more skilled on both dimensions. We have a number of proprietary platforms and analytics solutions that we can orchestrate with this human talent in order to deliver value to our clients.”
EXL’s Digital Experience Center has been created, he claims, to make digital transformation real for its customers by creating create a place conducive for creative thinking. The centre was launched two years ago in Jersey City, New Jersey in the United States, with the aim of being a highly collaborative space to design and architect digital solutions to transform clients’ businesses.
The company’s press release at the time also said that is aims to provide a hands-on, experiential laboratory where the firm, its clients and partners can “actively work with technologies such as advance automation, robotics, analytics, machine learning, natural language processing, IoT, cognition and other techniques.”
Kapoor states: “The centre is a perfect environment to use EXL’s design thinking techniques to reimagine the way that businesses work, prototype solutions and processes, and assess the transformational impact that digital interventions will have on customer experience, operational performance and enterprise cost structures.”
He concludes: “We embrace innovation and disruption; and have demonstrated that we are willing to disrupt ourselves to be better partners for our clients. Our industry’s legacy is heavily FTE-based, with the primary benefits being cost reduction through labour arbitrage and incremental productivity. That’s not enough today.
“Clients are being disrupted by market shifts, customer behaviour, technology and new digital natives, in virtually every industry. They need solutions that navigate those challenges, or they go out of business.”
Insurance companies, for example, therefore need to embrace the 3 A’s of artificial intelligence, analytics and automation to ensure that they can improve the delivery of their insurance products, how and what they offer their clients by becoming equally disruptive.