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With interest rates near zero percent, insurance carriers are facing a shifting paradigm. Investment income will not be able to drive return on equity alone, and combined ratio will have to bear the burden of its own weight. Consequently, organizations have renewed their interest in insurance operations.

Executive Summary

Anuj Jain, an executive for the insurance outsourcing and operations firm ReSource Pro, describes four best practices for insurance carriers attempting to integrate automation into carrier workflows and highlights some of the common mistakes to avoid. Among them is failing to ensure the process being automated is the most efficient and accurate, Jain writes, noting that bad habits can lead to bad automation outcomes. Summing up, he notes that organizations should expect incremental results with processes that generate most impact being automated first, and more becoming possible every year thereafter.

After years of underinvestment in technology for some, amid heightened M&A activity for others, there are carriers operating in an environment built on a legacy patch job. Manual processes are maintaining the organization’s operations, just waiting for a digital transformation agenda to come along and shake up the status quo.

Enter automation. Market participants have typically viewed automation as an interim solution, one that provides incremental efficiencies at a lower cost when investing in a full digital transformation is not economically viable.

That said, automation is not a silver bullet.

For an automation implementation plan to be successful, companies should consider these four best practices:

  • Automation must be a business-led solution.
  • Automation requires pre-work.
  • Automation can fail and requires humans in the loop.
  • Automation should be considered an organizational change management exercise.

Automation as a Business Solution

More often than not, an automation business case is measured in the potential hours of efficiency gained. While efficiency and, consequently, the capacity uplift of humans may be the leading rationale, it is not the only one. Automation can impact revenue and fundamentally improve processes, leading to agile decision-making.

For example, with the assistance of an automated system, an underwriter can enter the office at 8 a.m. and find 50 cleared and triaged submissions waiting for a quote. The accounts with higher probability to bind are already on top of the pile.

In another scenario, with the help of an automated system, a specialty business unit leader could get business performance reports weekly, rather than quarterly, allowing the leader to manage exposures more actively.

Bots need meticulous procedures. While a human may fix an error on the spot, a bot will repeat an E&O until the issue is noticed by a human.
On the flip side, automation can have adverse consequences. First, bots do not have empathy. An automated decline email may go out to a broker if the requested submission does not fit the carrier appetite. However, a human underwriter may have viewed the submission differently and worked with the broker in a way that made sense for the specific relationship, if not data-driven sense.

Further, bots need meticulous procedures. While a human may fix an error on the spot, a bot will repeat an E&O until the issue is noticed by a human.

The Importance of Pre-Work

As mentioned above, a successful automation implementation cannot be established without proper preparation and planning. To meet these criteria, an organization should consider the following:

  • Establishing a working group or Center of Excellence. This group will include business and IT partners with subject matter expertise in the processes being considered, as decisions made in isolation seldom work.
  • Developing a clear methodology. Prioritize the areas of impact based on volumes, complexity of tasks, business impact as defined by a business case, technical requirements such as number of systems being touched and information security requirements, and risks such as the introduction of E&O.
  • Conducting a thoughtful process re-engineering and redesign. Ensure the process being automated is the most efficient and accurate because bad habits can lead to bad outcomes.

Defining the Human in the Loop

While some measure of automation may be key to an organization’s continued success, the value of humans in the workforce cannot be discounted. Automation is a tech-augmented solution, and virtual labor cannot compete with the flexibility of human labor.

First, humans are necessary to execute tasks that cannot be automated due to complexity, decision-making requirements or audit needs. Second, humans are needed to implement and maintain the bots.

When setting up the valuable human team for an automation initiative, organizations should consider the following steps:

  • Ensure the automation team resides within or close to the operations team rather than IT. The change requests and need to customize are far too frequent to go through the IT change management cycle.
  • Make sure team members have prior experience in the processes they are trying to develop. The best frontline automation experts are former processors looking for carrier advancement or a new skillset.
  • Support the team with 24/7 IT assistance to handle information security risks and system exceptions with a quick turnaround time. By design, bots are deployed on processes with high volume and hence have a larger impact.

Change Management Will Be Critical

Finally, it will be key for leadership to recognize that robotic process automation (RPA) implementation is not a one-time exercise but an institutional shift with fundamental changes to the operations of an organization. It also presents an opportune time for an insurance carrier to establish a much-needed culture of continuous improvement.

In fact, as the implementation progresses, an organization will recognize improvements across its systems, from the establishment of a governance framework that is responsible for monitoring and implementing technical advancements to the development of a roll-back plan to address scenarios where the automation fails—a good business continuity exercise. Additionally, the organization could see the progress in change management processes and policies regarding processes and linked automation, as well as the creation of a program that incentivizes humans to continuously improve processes and automation.

Insurance is a complex industry with many lines of business, industries served, distribution models and state regulations, so standardization and automation within our industry have built-in limitations. While a carrier can extract tremendous value from automation, the implementation of this technology should be viewed as a journey and not an overnight solution. Organizations should expect incremental results as processes that generate most impact are automated first, and more become possible every year.