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Insurtech and insurance – lessons learned and moving forward

Lessons learned

It’s not over yet, but I am starting to look at lessons learned from the spring 2020. There are many personal takeaways, some family memories to look back on and a little sadness too in a period of time when life suddenly and unexpectedly became difficult for many. From a business perspective, there are also a number of takeaways that I am starting to look at from over the past 16 weeks. For example, while initially challenging, we have settled into a rhythm and cadence in the working from home (WFH) environment that, while not perfect, is sufficiently effective. Many businesses and industries have figured out new ways to get the job done. For other sectors, notably the hospitality industry, the new rules around social activity have no doubt been more difficult to adapt to.

What I have found is that the reliance on technology is very apparent. The fact that our business group has been able to work effectively during this time is due to the ease in which we transitioned to a daily use of modern technology for communication. Without it, we would have really struggled.

Many aspects of the insurance industry are in a similar position. Remote working has been the only option available for many for quite some time. Moreover, this will likely remain this way for the foreseeable future. Only time will tell how effective this proves to be.

The economy is coming back to life slowly, as pockets of the US are easing the rules around getting back to work and defining new socially acceptable practices. However, this is very much at different speeds for different regions, and I think it may be a “stop start” situation with COVID-19 related cases spiking in some areas. Similarly, as well as business making decisions about future operations, individuals are all making decisions on what is acceptable for them as they look to return to normal.

In this new work environment, we also face a new set of risks; there are different pressures, mentally, physically and operationally. We are more reliant than ever on technology for us to perform day-to-day tasks.

It is this reliance on technology that has highlighted the continued need to develop the right use of technology in the insurance sector. This is critical, and was so, even before COVID-19.  The last 16 weeks has highlighted the need for the insurance sector to continue to look for ways to use technology to modernize the insurance transaction.

Expect the unexpected

Within Baker Tilly I am part of a team focused on the measurement of damages resulting from unexpected events; this is essentially the point of the insurance market. Preparing for the unexpected and handling the financial consequences associated with that. This results in the need for damages analysis and claims analysis. 

While in the first quarter of 2020, investment in Insurtech has slowed, I am hopeful that this was merely a reaction to the economic forecast for Q2, Q3 and Q4 in light on the global pandemic. Insurers and reinsurers are likely to be focused on other issues presented by COVID-19. The insurance industry must and likely will continue to invest in technology to enhance and improve the way that the industry operates and serves its customers.

As business remains in a WFH state, this is also true for the insurance community. Even the Lloyd’s market, which for years has been a true market place – where personal meetings were held to develop insurance solutions being the mainstay of how business was conducted. We are social animals and it is fun and natural to conduct business in person, but this is now a virtual market place.

Insurtech development will need to continue if this is the new normal business environment.

Use of technology for claims management

In our role performing damages analysis, we have noted in recent years the increased efficiency and transparency that technology has brought to our daily lives. If I order something from Amazon, I can track the transaction until the moment the item is in my hands. If I perform a banking transaction, I can do that from my phone, and see instant results. If I wish to watch a movie, double click –and it is on demand, I can watch it when I am ready. This kind of connected lifestyle is influencing how we expect most transactions to take place. We expect things to be quick, transparent, without error, and importantly give us the feeling of being in control…..I can do things when I want…..Our tolerance levels for how long things should take are shrinking, and waiting for others to respond has an impact on customer satisfaction.

This fast-paced behavior is being transferred to the insurance claims profession. The expectation for speed, efficiency, visibility and control is being felt in the day-to-day handling of damages analysis. Lead times for performing analysis, business review and reporting are rapidly shrinking. So, we have to adapt to address this and technology is vital to this effort.

Customers are increasingly expecting immediate satisfaction from online activity or a double click on an App. That expectation of speed is being felt in the insurance sector, especially in crisis management situations where resolving an insurance issue might be critical to a business’s success. App’s have developed in the personal lines and auto sectors and these will transfer into commercial lines.

As mentioned, we work in the field of damages analysis, and the one element of a project we always get asked is, “how long will this take”. Add to that the pressure business owners and professionals face when an unexpected event jeopardizes the continuity and cash flow of their business, and now, there is even greater expectation for a damages analysis discussion to take place quickly.

The COVID-19 situation has left many business disrupted compared with normal operations. That has had a very direct impact on cash flow. As businesses were told to close, revenue streams dried up. The impact was immediate.

There remains various discussion and debate on whether COVID-19 is an event where a massive volume of claims will need to be measured by the insurance industry, or whether many will not be covered by insurance – this article is not intended to be part of that debate. We are not in a position to provide opinions on coverage.

But what I think it highlighted for me and my colleagues is that if not this event, there will be future events where significant volumes of business disruption take place, and millions of insurance customers are expecting their business partners to respond by protecting their future through the insurance process.

To address this with changing customer expectations, technology is key. The ability to receive, handle communication and provide a status on a damages claim with efficient speed is critical The insurance industry is addressing the need to modify the claims process to stay relevant and current with other features of modern day life, (Apps, online loss measurement, Artificial Intelligence for damages analysis, parametric triggers).  The industry will also need to modify its approach to be able to handle a vast volume of claims resulting from a single event.

There will no doubt be at some future stage an event where a huge volume of claims submissions needs to be addressed. While now seemingly in the distant past, Hurricane Katrina is a good example of this. Other more recent situations include the California wildfires, Australian bush fires, and the hurricanes over the last decade. However, time has passed since some of those large catastrophe situations occurred and the global expectation of speed and efficiency has dramatically changed. Policyholders will not have the same tolerance for time if they suffer a loss that is determined to be covered by insurance. They will want speed and efficiency to a greater degree than in the past, as well as better control and visibility over their claim. A quick injection of cash flow could be critical to the survival of a small business. A 3-6 month loss adjustment process, while perhaps unavoidable because of the circumstances, may not be acceptable. People’s personal experiences and expectations in many day-to-day transactions are being looked for in the insurance sector. These same expectations, rightly or wrongly, will set the parameters for what should be possible in Business Interruption (BI) loss claims. Technology must be developed and deployed if we are to meet those customer expectations. Customer service and claims excellence will be measured by the ability to adapt to serve this new level of customer expectations.

At Baker Tilly we are doing our part to assist in the digitization of the insurance processes. We have created a dedicated team of professionals who are bringing together their vast experience in the insurance sector, and marrying that with a technology team who is focused on product and service development through digital processes. “Baker Tilly Digital” has a clear focus on the insurance sector and the opportunity that exists to look back, learn, and advance the industry.

For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.

Simon Oddy
Partner, FCA, CFE, MCIArb
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