The Intelligent Quarterly from the publishers of The Insurance Insider

Summer 2018

Search archive


Getting a grip on automation

Dr Bernard Cosgrave

Today's Fourth Industrial Revolution encompasses machine learning, genetic engineering and automation - promising more leisure time as work demands are removed by better, cheaper and more efficient technology.

The possibility that mechanical or automated processes might one day free mankind from the burden of labour is a widely shared utopian concept, but the dream has its nightmarish aspects.

Ever the since the First Industrial Revolution, work has been seen as the way in which people justify their existence. The rise of automation, industrialisation and creeping modernity must be set alongside the memory of the Luddite riots and the Great Depression, and indeed many sociologists have warned about the dangers of automation, which comprise one of the fundamental themes of modern dystopian fiction.

The fear today is that the cyber threat in its widest sense (setting aside data and hacking perils) could result in the decimation of entire industries from black cab taxi drivers to bookkeepers, lawyers and, potentially, insurers - including their claims teams.

Organisations like McKinsey Global Institute (MGI), the business and economics research arm of management consultancy firm McKinsey, have been exploring the implications of workplace automation across multiple industries.

Towards automation

A McKinsey report on automation ("Where machines could replace humans - and where they can't (yet)", July 2016) presents some stark conclusions.

For example, it says: "automation will probably change the vast majority of occupations, and up to 45 percent of all work activities in the United States, where MGI performed its analysis, can be automated right now with current technology.

"But significant changes are clearly approaching in many industries, including insurance, whose potential for automation resembles that of the economy as a whole."

More optimistically, McKinsey speculates that some positions will be engines of job creation. These include analytics teams tasked with detecting fraud, and smart claims avoidance.

To meet these new challenges, the report advises that: "Insurers will need to source, develop, and retain workers with skills in areas such as advanced analytics and agile software development; experience in emerging and web-based technologies; and the ability to translate such capabilities into customer-minded and business-relevant conclusions and results."

Using advanced investigative data analytics and developing data mining techniques to detect and investigate fraud is one option. Risk managers in sectors outside of insurance are already using data mining techniques to assist FTSE 100 companies and government bodies in successfully prosecuting civil and criminal cases with asset recovery orders and custodial sentences. Similar practices in insurance can expect to bring in proactive and reactive counter-fraud data mining strategies to assist in the development and implementation of continuous monitoring solutions.

Using automated claim-scoring tools to identify which claims to fast-track could yield operational efficiencies and increase staff availability to recognise and follow false claims. This would enable London market carriers to spend less time on legitimate claims that warrant payment and help them to allocate more time to addressing larger volumes of claims that are potentially fraudulent.

The third generation of link-analysis tools allow the automatic visualisation of linkages between elements in a data set that can then serve as the canvas for further exploration or manual updates.

From operational efficiency to a more in-depth view of claimants, claims technology is now contributing to underwriters' ability to reduce the risk of fraud.

Under pressure

The fear persists, however, that when we eventually move from automated process into true artificial intelligence it could be game over for the skilled underwriter and claims specialist.

A new white paper produced by research and analytics firm Insurance Nexus explores themes such as insurance practitioner fears of automation by interviewing underwriting and claims professionals.

According to Steve Tait, RSA's head of claims automation: "We are always under pressure to deliver more with less and that drives the focus to how can we reduce the amount of expenses in claims.

"And also, there is a pressure to understand how we can do more with the information we have access to and convert that to data to drive insights that reduce claims cost. Basically, be leaner as a business; that is a constant."

In today's challenging market conditions, underwriters in London are coming under pressure to cut costs and that pressure is being applied to claims teams. The London market is a different beast to the personal lines and SME market, however, and when it comes to major corporate clients and major risks, clients still demand the personal touch. People can still make a difference, but they can be supported by automation.

Hiscox's head of UK claims, Eva Berg-Winters, suggests: "Win the hearts of the team and allow them to flourish and drive the answer. It's their future and they should be the ones shaping it. If the team believes and can see how automation changes their working lives in a good way, they will not only support it but drive it."

Customer experience

It is obvious that speedier claim resolution is going to play an important role in improving customer experience. At the same time, a superb customer experience and falls in indemnity costs are two sides of the same coin. Improving one benefits the other.

The key point to make here is that intelligent application of both human and technological resource will be the major driver of improvement.

Docosoft attends numerous events throughout the year focused on the joys of innovation, where panellists talk glowingly of new start-ups like Lemonade transforming the insurance landscape and generally causing a fizz. There is no doubt that some InsurTech start-ups will shake things up but we believe that we forget the human element at our peril.

At Docosoft we are strong believers in innovation that works in practice, in real-time - that is, today. The benefits of automation are clear but we are not breeding a new race of insurance Cybermen here, we're just looking to create useful systems and tools that help claims adjusters to serve their clients better.

Taking advantage of the data insights in an organisation requires new ways of automatically organising, classifying and labelling documents. Using advanced machine learning techniques, for example, Docosoft Data Analytics, does just this.

It takes thousands of documents as inputs and outputs their hidden thematic structure and relationships, which leads to actionable insights such as improving compliance, cost structures and competitiveness.

Our machine learning technology crunches petabytes of data more efficiently and makes sense of a complicated claims world.

Insurance professionals have always had access to a vast pool of unstructured digitised documents but have never been able to structure their hidden value advantageously. Our new solution provides a statistics-based method that can automatically read insurance texts.

The advanced data analytics technology magnifies text (or data) that is indistinct and brings it into more granular focus, with practical benefits for insurance companies and their clients.

At Docosoft we will be consulting our clients and listening to their needs and concerns. Let us not all get carried away by talk of disruption and the end of the insurance market as we know it.

Change is going to come and in the long run it will have profound implications for the way we do business.

The Docosoft view, however, is that it is important to focus on what can be achieved today and generate tangible automated efficiencies that support rather than replace the claims team.

Dr Bernard Cosgrave is chief data scientist at Docosoft

This article was published as part of issue Autumn 2017

Euromoney Trading Limited - 3rd Floor, 41 Eastcheap, London, EC3M 1DT, United Kingdom. The content of this website is copyright of Euromoney Trading Limited 2018. All rights reserved Euromoney Trading Limited actively monitors usage of our website and products and reserves the right to terminate accounts if abuse occurs.