RPA Implementation Proves Challenging – But Rewarding – for Insurance Companies

RPA Implementation Proves Challenging – But Rewarding – for Insurance Companies

As RPA successes add up for insurers, these may early wins may be seen as just the first steps on an industry-altering journey.

by Laura Sullivan

The insurance industry is something of a moving colossus. Throughout history it persists, but it is not exactly built for a deft response to the changes around it.

In many ways, the insurance industry’s deliberateness is the source of its durability. The sector’s success is at least in part the result of its own weight — its complex systems and interwoven processes — and the constraints imposed by numerous regulations. These factors mean that insurers are less likely to leap before they look than banks often are.

But the inherent languor of the industry also creates a cultural resistance to the necessary adaptation to technology trends. And that is showing more signs of being a weakness in a modern business world that is evolving at a speed never before seen.

A survey of insurance CEOs conducted by KPMG last year backs this up. Nearly three-quarters of respondents indicated that they are concerned that their organizations are not keeping pace with new technology. In search of flexibility, adaptability, and efficiency, these executives see an industry in search of solutions that resemble their structural limitations and risk-adverse nature.

In recent years, however, robotic process automation (RPA) has given the insurance C-suite an answer. And the results have been promising enough to spur some companies to action, especially in the areas of underwriting and claims.

More so than their counterparts in other sectors, insurance executives now look first to an automation strategy when it comes to technological transformation.

More so than their counterparts in other sectors, insurance executives now look first to an automation strategy when it comes to technological transformation.

RPA’s ability to be implemented alongside legacy systems and on an individual process-level (that is also scalable to multiple locations) produces traits that insurance leaders find most endearing: low risk, low cost, fast returns. It also serves their critical directives to always be scalable and flexible while improving operations talent and increasing the speed of bringing products to market. And better still, it does all of this without requiring an increase to the workforce.

“RPA is filling a gap that is unique to the industry,” said Rod Dunlap, director for insurance with Paris-based outsourcing company Capgemini.

Insurers apply RPA to reap the rewards of digital solutions and sidestep the compounded tangle of legacy system overhaul. “In the short term, process automation robotics are viewed as a means of prolonging system lifespans,” said Reetika Fleming, research director of operations and analytics strategies with HfS Research in the United Kingdom.

It will be in the longer term — five to 10 years — that Fleming hopes to see more industry-wide evolution to RPA, machine learning, and virtual agents.

RPA Potential Realized

Robotic process automation presents sufficient potential to inspire broad insurer adoption. For some, it is currently a limited resource while others are thinking of implementing RPA systematically. Many insurers, however, have only come on board in the last six to nine months as adopters “realized they would be left behind,” said Dunlap.

The recent rush has resulted in high failure rates for new RPA deployments in their first year. The bots are put in place, but the companies see minimal — or no — labor cost savings, marginally lower error rates, or very little new business capacity. Fleming calls this “robotic limbo.” The trouble lies not in the technology but with human management.

Many insurers have only come on board in the last six to nine months as adopters “realized they would be left behind,” said Rod Dunlap.

“It is still the early days, as both providers and carriers struggle to find the talent at all levels to manage automation initiatives while the tools themselves are undergoing changes at a rapid pace,” said Fleming.

There is good news though. With sufficient foresight and groundwork, insurers can reap the anticipated rewards. This includes the establishment of an RPA center of excellence (CoE) to oversee the process.

When RPA is implemented correctly, the insurance business model in particular presents ripe opportunities in both core business and back office functions, including sales and distribution, underwriting and pricing, policy administration and servicing, claims, and finance and accounts.

These are the lower-hanging fruit that can prove the case for wider adoption later. An Ernst & Young (EY) whitepaper, “Digital Transformation in Insurance,” says that justifying the RPA effort becomes easier when automation is applied to insurers’ rampant “slow, error-prone, and expensive processes.”

Moreover, in business units where insurers apply RPA, productivity increases an average of 50%, according to work from Capgemini and Pearl River, New York-based nonprofit ACORD.

Their jointly produced whitepaper, “Robotic Process Automation in Insurance,” also estimates an 80% reduction in cycle time for service delivery. And along with improved accuracy, security, and continuity, regulatory compliance reaches 100% when proper coding is applied to appropriate processes. As for costs, investment recovery is typically seen within six to nine months.

One large insurance client of KPMG, for example, implemented RPA into its account-processing function, and a three-hour reporting process was shortened to three seconds — while also generating more consistent and reliable data. On the human end of the process, this fed into more accurate and timely decisions and freed up resources to focus on work that generated greater value.

One large insurance client of KPMG implemented RPA into its account-processing function, and a three-hour reporting process was shortened to three seconds.

Other KPMG insurance clients have used RPA to identify mismatches between internally and externally generated policies in order to identify potential policy losses and for claims management to predict outcomes and suggest strategy.

For the back office, UiPath of New York worked with a global reinsurer to implement RPA for financial reconciliation of monthly bank statements to improve processing rates. The robot performed its data extraction and comparisons with the accounting system with 100% accuracy. It reduced turnaround time by 80% and operational costs by an amount equivalent to a quarter of a full-time employee (FTE).

The Holistic Approach to RPA

Although robotic process automation is used in nearly every aspect of insurer operations, it is largely applied through a piecemeal approach. The RPA pioneers, however, have shown the greater benefits of a holistic approach.

At the start of its RPA program in 2014, Swiss insurance carrier Zurich, working with EY, had its CoE direct a pilot proof of concept for its UK life and pensions division. Within six weeks it could show a 50% cost cut in certain processes and six weeks later put the concept into production, increasing capacity by 25%.

This started a “global dialogue” about robotics solutions within Zurich, including in the company’s global general insurance, global claims, and group finance areas. The insurer’s efforts led, in part, to a 2017 ISG Paragon Award for collaboration with Capgemini to allow bots to issue standard commercial insurance policies. The initiative led to efficiency gains, improved customer service, improved governance, and lower operational risks.

Justifying the RPA effort becomes easier when automation is applied to insurers’ rampant “slow, error-prone, and expensive processes.”

Around the same time, Swiss Re, a leading global reinsurer based in Zurich, also formed its in-house robotics center of excellence to foster greater RPA expansion and faster automation maturity. Within three years of idea conception, it was running five bots with 50 more process candidates to be incorporated. By 2017 the program had more than quadrupled in size.

In order to reach the full potential of RPA, more insurers will need to move their existing programs in the direction of the industry vanguards.

“Insurance carriers need to find a bridge between radical digital experiments happening on the front end with the global middle-office and back-office service delivery backbones they have put together over the last couple decades,” said Fleming of HfS Research.

Smarter Robots, Smarter Companies

A 2016 KPMG survey of insurance CEOs shows that 15% plan “significant” investment in cognitive robots over the next three years. Nearly all are concerned about the integration of automation, artificial intelligence (AI), and cognitive robots into their business and operating models.

These leaders form a part of the banking, financial services, and insurance segment that sees a growth of 30%-60% in RPA technology spending annually, according to ACORD research. That adds up to more than $1 billion by 2022.

Though the difficulty of implementation is very real, the industry success stories are starting to show just how much can be gained when everything is done right. In EY’s “Journal of Financial Perspectives,” this was highlighted by three experts, Chris Lamberton, (EY partner of advisory and performance improvement), Damiano Brigo (chair of mathematical finance at Imperial College of London), and Dave Hoy (EY robotic automation leader).

“Relatively few have succeeded in industrializing the benefits,” wrote the authors. “However, the size of the prize on offer from doing so, in terms of the cost savings and service transformation, places accelerating and industrializing software robotics firmly on the agenda for the C-suite of more financial groups.”

“Relatively few have succeeded in industrializing the benefits. However, the size of the prize on offer from doing so … places accelerating and industrializing software robotics firmly on the agenda for the C-suite.”

Whether on a standalone basis or enterprise-wide scale, many insurance executives are betting on the so-called “fourth industrial revolution.” As successes add up and greater clarity is gleaned on the best practices for RPA implementation, these may early wins may be seen as just the first steps on an industry-altering journey.

Though the world of insurance may forever maintain much of its traditional mentality, we may be seeing the beginning of a digital transformation for an industry that will no longer be beleaguered by its colossus reputation.

 

This article was originally published on Cognitive Business News. It has been reprinted with permission.

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