There is a path to digital transformation for companies in all sectors, including those with strong traditions and highly risk averse. In this blog post, John Lucking, Principal Solutions Architect at AWS, discusses the insurance industry.
In risk-averse industries like insurance, customers often ask what other customers like them are focused on when adopting the cloud. Many companies are struggling to automate the first notice of loss process, provide customers with multiple digital customer service channels, migrate core insurance systems to the cloud , create a cloud data analytics platform or use machine learning to improve insurance underwriting (also called underwriting or coverage).
I have led cloud innovation journeys as CIO and CTO at various insurance companies and had over 250 conversations with insurers during my two years at Amazon Web Services. I’ve seen what works and what doesn’t. Today, I’ll dive into the three key areas that innovative insurers are constantly focused on: people, process, and data.
Before starting a new project, you have to consider the team that will work on it. According to the US Bureau of Labor Statistics, insurance industry employees have the highest median age in the insurance and financial industry. The average age of employees in insurance IT departments is even higher due to the number of legacy systems that insurers still maintain. Therefore, it is of the utmost importance to plan how to help your people with the tsunami called change that is about to hit them as they begin their cloud journey.
Fear is a common reaction to change, and some people hold on to fear for a second while others hold on to it indefinitely. To address this fear, leaders must communicate and offer different educational opportunities for the new skills needed by new technologies. Experience employees need to be give time and patience to experience and learn the cloud. I often found that the key information came from the old programmers and infrastructure engineers and that they were able to adopt cloud-based technologies.
The last insurance company I work with began their cloud adoption journey by selecting three members of our 200-person IT organization who were known to be lifelong learners and frequently experimented with the technology. After a period of learning and experimentation, we partner with actuarial and insurance underwriting teams to implement a new commercial truck insurance quoting, linking and underwriting portal.
The best processes always have three key traits: simplicity, transparency, and automation. The process should be easy to understand and use. It should be easy to monitor and troubleshoot. And it should be as automated as possible. A key scaling process we use was model after mitosis, a type of cell division in which a cell divides to produce two new cells that are genetically identical to itself. The most experienced member of the initial cross-functional team left to form a new team. After the new equipment had solidified, we repeated the process. Pair programming was used daily, and business users were frequently shown ideas in development. A natural two-way dialogue developed to ensure solutions met the immediate needs of the day.
To streamline our business processes, we first focus on the policy lifecycle. We identify opportunities for innovation in the creation, version control and distribution of policy forms. The builders first understand the logic of the process: collect data, select the correct form template. Combine the data and template, distribute the forms. Keep track of who the forms were distribute to and when. The long history of an insurance company usually leads to a large collection of policy forms. That are not well organize.
Therefore, the key success factor was working closely with insurance underwriters to rewrite existing forms so they could be organize into templates. We then quickly experiment with some cloud-base solutions. As well as the form capabilities of a basic insurance policy system. Based on the results of the experiment. We chose a cloud-based solution that allowed us to build a process. That had the right levels of simplicity, transparency, and automation.
A typical insurance company is sidle with a legacy that includes multiple policy, billing, and claims systems. The processes of insurance proposals (submissions), policies, billing, claims and financial closing have difficulty finding a single source of truth. Friction between IT and the rest of the business exists because IT has limited time to respond to business requests due to the difficulty of running all the legacy systems. Starting from scratch and using innovation by forming new cross-functional teams and defining new processes. As described above is the best way to create, capture, analyze, and govern your data.
As new data pipelines are create, the new data can be compare to existing data. At this stage, you will likely find discrepancies indicating that existing data is incorrect. New data conduits must have the three aforemention traits: simplicity, transparency, and automation. Data is the key to measuring progress and identifying signals that define your future strategy; working with existing data that cannot be trust is counterproductive. As our new cloud-based quoting, linking and issuance portal began to bring in business and lead to some claims. We were able to easily track the combined ratio in the book of business and delving into the details. Which allowed us to make informed changes to our coverages, qualifying questions, and scoring formulas.