The Intelligent Quarterly from the publishers of The Insurance Insider

Winter 2017

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Fast forward

Aidan O'Neill

Everyone of a certain age will remember the "video wars" between the Betamax and VHS video cassette recorder formats of the 1980s.

Betamax was a consumer-level, analogue recording format for video, in the form of a magnetic tape cassette. It was developed by Sony and was released in Japan in 1975. The defeat of Betamax by the VHS format, developed by Japanese rival JVC, became a classic marketing case study.

Within a decade, however, both formats had been supplanted by laser-based technology. Technological progress is inexorable.

Fast forward 30 years - probably on your Sky Box now - and it is little surprise that Japan remains at the forefront of technological transformation. And the country's insurance companies have already been lined up in the cross hairs of that transformation.

The news from Japan is that an insurance company called Fukoku Mutual Life Insurance is to invest in IBM's Watson Explorer question answering software, which it believes can help automate new efficiencies in its claims team.

The upfront cost to the insurance company is reportedly an outlay of $1.7mn to set up Watson, with annual running costs of $128,000, which would result in savings of more than $1mn a year, according to a report in Japanese news daily The Mainichi.

Japan has always celebrated its technological prowess as well as its cultural traditions, seeming to find an accommodation between the new and the old. The question is can insurance companies today do the same?

Lloyd's and the London bureau market are in the process of adapting to the great technology transformation of the 21st century, which will be remembered 150 years from now as having been as disruptive as the Industrial Revolution of the 18th to 19th centuries.

Human progress as expressed through culture or the economy is less easy to measure, but the fact is that the world of "Industry 4.0" - the trend for automation and data exchange we are currently experiencing - appears to be accelerating transformation across all levels of society, including insurance.

The "Internet of Things", the connected economy, smart devices, social media - all of these innovations are changing the way that insurance companies interact with their customers and sell to them.

The Lloyd's Target Operating Model innovation streams recognise that a technological earthquake is shaking the foundations of EC3. The natural inclination of some carriers may be to put their hands over the ears and to cry out for somebody to make it stop! There is a fine line: one man's disruption is another man's innovation. The London market winners of tomorrow, however, will recognise that if the innovation horse has bolted, it is time to re-capture and tame the beast, then put it to work.

Technological transformation
If the likes of Swiss Re are to be believed, we may not recognise the insurer of tomorrow. According to a blog posting by Charles Marshall and Karsten Rimestad on Swiss Re's Open Minds platform: "The customer of the past is not the same as the customer of the future, and the technology frontier in insurance is incredibly vast and constantly changing. At the forefront of this technological frontier is the consumer. People today want more digital interactions at their fingertips."

So far, so interesting, but what really caught the eye of Docosoft is a later reference in the same piece which asks us to imagine how "smart devices will reduce insurance claims (the extent of reduction varies by line of business), which leads to an interesting concept: insurance companies becoming less of an insurance provider and more of a service provider".

This is a very important point, because only now is it beginning to be understood that technology innovation can be about so much more than reducing costs, overheads and people count. The real benefits will be seen by those organisations that have the foresight to investigate opportunities that increase customer value and offer new sales touchpoints.

Investing in IPAs
For example, there is the prospect of technology that hums in the background, waiting for spoken commands, before carrying out instructions. At the latest Consumer Electronics Show, which was widely covered in the news, it was reported that the dominant theme was artificial intelligence (AI)-enabled intelligent personal assistants (IPAs).

Manufacturers and suppliers of connected cars and homes are investing heavily in IPAs: the clear frontrunner at the moment is Amazon Alexa. As a recent Celent blog posting by Donald Light explains: "There is a deeper potential benefit for the connected car and connected home sellers: developing context-rich data and information about the connected home occupants and the connected car drivers and passengers."

Meanwhile, blockchain, machine learning and AI are being tapped as new technological disrupters that might help insurers to connect better with consumers, create added value and improve transparency. One of the biggest technologies to come along in a while is deep learning, which is essentially a way to automate predictive analytics.

Over the last 12 months, this deepening understanding of machine learning has taken off as part of the new technology tsunami being surfed by proponents of AI. Google, Facebook, Twitter and Yahoo are reportedly using deep learning to classify images, decode human speech and develop computer vision, according to tech media company TechTarget.

Holy Grail
What does it all mean for insurance claims technology? It almost certainly means that consumers are going to be a lot more connected to their claims. We might even envisage a time when risk transfer and claims management becomes more democratised.

As another Celent blog by Nicolas Michellod says: "In our open world where information is so easily accessible and transferrable and where transparency is important, insurers need to make insurance more palpable, and digitisation is a great opportunity to democratise the knowledge of insurance and risk among the public."

It is the same for claims management. From a claims perspective, it seems likely that emerging technologies will add value to customers' experience by placing power back into their hands by enabling swift claims resolution, empowering consumers and delivering the service quality they expect.

Evolving customer expectations and digital transformation are changing financial services as we know it. This transformation is accelerating the growth of the sharing economy and the demand for new customer value, hence the rise of Uber and Airbnb, to take two commonly used examples.

In the insurance market, InsurTech start up Lemonade is probably the closest that we have to an Uber-style disruptor. As Lemonade's website says: "Maya, our charming artificial intelligence bot will craft the perfect insurance for you." How very 2001: A Space Odyssey!

Docosoft is currently conducting research on robotic process automation for enterprise claims management as a way of providing integrated, end-to-end automated solutions. The claims Holy Grail is to integrate all applications and legacy systems to avoid disruption, with 100 percent AI accuracy.

As far as Docosoft is concerned, the future is today and our Write Back-enabled claims management system already frees up "value-adding time" that allows adjusters to be more creative, more focused and therefore better equipped to deal with complexity.

Other potential opportunities can be foreseen that will help the underwriting team and their actuaries to have a more accurate view on future claims exposures, thus connecting claims and underwriting together in an aesthetically pleasing one-stop-shop of insurance tranquillity.

The concept of aesthetics in Japan is seen as an integral part of daily life, defined as wabi-sabi. At Docosoft, we firmly believe in the power of claims wabi-sabi!

Aidan O'Neill is CEO of Docosoft.

This article was published as part of issue Spring 2017

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