Akin to other industries, the insurance sector is facing the winds of digital change. Stereotyped as a somewhat traditional industry, one not often associated with innovation until recently, the scenario appears to be changing.
Eyeing Singapore as an example– we noted that PwC reported a significant number (77%) of banking customers said they were interested in adopting digital solutions. Additionally, a study by the Institute of Banking and Finance (IBF) and the Monetary Authority of Singapore (MAS) expects data analytics and automation are likely to transform some 60 jobs in the financial sector from 2022 to 2024.
To dive deeper into the Singaporean scenario, Disruptive.Asia talked with Karen Bailey, senior vice president Industry Solutions at Kofax, a company specialising in intelligent automation software for digital workflow transformation.
Much of her comments encourage insurance players to see the year ahead as an opportunity to modernise and transform or risk losing out to new, digital-only insurance companies.
Post-pandemic insurance landscape
Shortly after the initial fallout from the COVID-19 pandemic, Singapore’s insurance sector bounced back with the resumption of key economic and social activities.
General insurance is expected to touch SGD5.6 billion in 2025, while the boost in demand is consolidating a highly stable life insurance market.
However, within the general optimism, we note some acknowledgment from industry players of the many challenges ahead.
These challenges include inflation, rising interest rates, the looming threats of recession, and competition from insurance tech companies (InsurTechs), said Karen.
“The insurance industry has already faced challenges in profitability even prior to the pandemic, and the sudden and unexpected spike in inflation only added to it,” she said, citing McKinsey, which suggested rising prices have contributed to about a US$30 billion increase in loss costs—the amount an insurer must pay to cover claims—in 2021, over and above historical loss trends.
Moreover, outdated technology infrastructures—still found in many insurance companies—are also driving operating costs higher. This hampers the much-needed flexibility required to manage rapidly changing market conditions effectively.
“In order to remain resilient and agile in the ever-changing technological landscape, insurance companies should be willing to overcome their technological reluctance and modernise or risk losing out to new, digital-only insurance carriers,” continued Karen.
“Given these predictions, both banks and insurance firms should capitalise on this growing demand from consumers and heed the winds of change by digitising their paper trail and offering better and more efficient digital services.”
Quicker to the punch
“The rise of InsurTechs is challenging traditional insurers to adopt new technologies in the cloud and be more agile in terms of digitalising their operations,” said Karen, speaking to the upcoming innovations and disruptive technology expected to upend the business.
“While Singapore’s life insurance market, for example, may be stable in the short term, complacency will be detrimental to business growth.”
“These modern competitors are disrupting the industry with digital capabilities, automation, streamlined operations, flexibility, and efficiencies. They are quicker to the punch when it comes to launching new products, offering personalised pricing, expediting customer acquisition, and delivering a superior customer experience.”
Karen said that although InsurTechs face the same obstacles, “traditional insurers may find these challenges harder to address as most are re-using outdated legacy technology and operating models to create digital businesses, while InsurTechs are leveraging state-of-the-art cloud-based technology to respond and adapt faster.”
Her advice is that traditional insurers need to refocus their digitisation efforts and start by focusing on areas that will have the most impact on their overall business to achieve the best results.
“These areas tend to be those that are simultaneously content or data-intensive as well as process-intensive. Focusing on these areas generally allows traditional insurers to realize operating cost benefits coupled with the ability to improve customer experience and even possibly open new markets or launch new products.”
“There are several key areas in the insurance value chain where we traditionally recommend traditional insurers focus to realise the best return on technology investment,” she said.
While there are many areas that will benefit from digitisation, Karen suggests that there are three key areas that could be enhanced as part of a blended model that delivered better operating results and improved customer experiences while still leveraging the legacy backend systems and data.
“The three areas on which we focus include account and contract management, specifically applicant onboarding, although there are opportunities in the entire process, claims management, and underwriting and risk management.”
“This digital workflow transformation will provide resiliency and a competitive edge in an intensely competitive, fast-changing environment,” she added.
Renovating businesses
Before getting down to the nitty-gritty of how Singaporean insurance businesses could “renovate” —or innovate—their business processes and upgrade their risk assessment standards, we note some analyst findings.
Deloitte, in its 2023 Insurance Outlook, suggests that digital transformation is key to sustainable growth for life insurers and advises insurance carriers to “double down on their pandemic-spurred digital enhancements” and introduce more services and distribution options.
Karen sees digital transformation as “fundamentally reshaping the way insurers do business, and insurance companies that want to lead the charge towards digital transformation must embrace intelligent automation end-to-end.”
“Insurers face an intensively competitive, fast-changing environment with customers who have little patience for complex, inflexible or paper-based processes,” she said. “In order to stay competitive, they must be able to onboard faster, reduce insurance claims timelines and keep costs in check — all while keeping their customers engaged, secured and informed. These are all benefits of a fully automated workflow.”
Focus areas for innovation
“When it comes to digital transformation, there are several areas traditional insurers can see big returns quickly. They are onboarding, claims processing, and underwriting,“ she continued.
These three processes have several things in common that make them ideal candidates for building a solid foundation that can help insurance organisations achieve their broader digital transformation vision, she explained.
These processes all comprise:
“Customers want fast answers, real-time updates and personalised service,” she said.. “That’s impossible to deliver when everything is done manually. By automating these three areas, however, traditional insurers can see big gains when it comes to competitiveness and customer retention and acquisition.”
Her comments on focus areas are summarised here:
Onboarding
For the onboarding process, today’s consumers expect a seamless digital experience that they can complete on their mobile devices or other preferred online channels. In addition, they prefer real-time status updates and faster responses and turnaround times. Traditional insurers, stuck in paper mode, will not be able to compete. By using robotic process automation (RPA) to automatically connect to sources and systems and AI technology, as well as e-services, insurers are able to provide a digital onboarding process, which will reduce abandonment rates, improves compliance, and creates a superior customer experience.
Claims Processing
This process involves a high volume of documents and data being collated from multiple sources, and a manual approach will cost insurers money; the slower processing times also create a poor customer experience. With automation, insurers can input the First Notice of Loss (FNOL), automatically notify loss adjusters, and give assignments to claim handlers. Additionally, they’ll be able to integrate all the information pertinent to a specific claim across all sources and formats. One insurer that has embraced automation in this process has seen a 75% reduction in adjudication times and a 15% increase in their customer satisfaction ratings.
Underwriting
To assess risk, insurers need to gather information from multiple sources, which is why it can take weeks for the process to be complete when done manually. Automation technologies such as RPA and process orchestration can gather and process the required data about the applicant from internal and external sites, while intelligent robots can update internal systems with the data and produce a report and make recommendations. This makes the process faster and more accurate, enabling insurers to win new customers while also reducing risk.
The ESG conundrum
The conversation moved on to another conundrum—Environmental, Social and Governance (ESG)—which has recently risen in importance, boosted by concerns linked to the economic and environmental effects of climate change.
Karen clarified that: “Today, ESG reporting is more than just compliance to regulatory measures, but a crucial tool in helping mitigate risks and secure the future of organisations in the face of massive changes.”
The Monetary Authority of Singapore has even recently launched an ESG Impact Hub for all businesses to spur the growth of the ESG ecosystem. Singapore is also among the countries with a high level of understanding and preparedness in implementing ESG frameworks in the APAC region. Among the insurance companies that were surveyed in PwC’s Insurance Industry ESG Survey, Singapore is among the highest to have incorporated the ESG framework in their investment processes.
“Insurance companies are uniquely positioned to help individuals and businesses transition to a greener economy,” she said. “By embedding ESG factors into risk management frameworks and decision-making processes, insurance carriers can help organisations avoid the negative consequences of these risks.”
The answer to long-term and efficient ESG is automation, she continued. “Automation does not only speed up what used to be manual-driven processes, it also reduces cost and waste (paper). A report by McKinsey shows a “significant correlation between resource efficiency and financial performance.”
Indeed, RPA, for instance, with its higher efficiency rating, makes it possible to read and extract data more quickly and efficiently, paper-free. Carrying out simple, systematic and repetitive tasks such as data entry using robotic software allows for greater business sustainability. Karen concludes with a comment closer to home: “Our commitment to sustainability and today’s environmental and societal challenges is an important responsibility. We help companies rely less on physical resources (namely paper) that impact our environment, and we believe that our business can and should do things to promote a positive influence in matters that improve the world.”
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