Technology innovation has a new capability in artificial intelligence (AI) and machine learning (ML) are transforming insurance products and customer experience. But technology alone isn’t enough for sustained innovation and growth.
To really make the most of the technologies, successful organizations are making fundamental changes to the way they manage their business.
In short, they’re getting agile.
What does it mean to be agile?
Building agility into a business means taking a look at how decisions are made across the organization and particularly in a traditional industry like insurance, making some significant changes.
Insurers are very much comfortable with risk. It is the bedrock of their business model. Agile working and innovation, on the other hand, create uncertainty, which is very different.
Lee Ng is vice president of Innovation at Travelers. Ng explains in a recent Insurance Nexus whitepaper, “Agility is the key to successful, AI-powered innovation in insurance,” that while risk is a known but undesired outcome, uncertainty is simply not knowing the outcome and “no amount of thinking and research is going to eliminate that uncertainty.”
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Essentially, Ng is warning that you can’t “prove” innovation before it happened. That doesn’t mean it can’t be based on a range of strong hypotheses but, she suggests: “You’re dealing with uncertainty, don’t overdo it on analysis.”
This is where agile working comes in. Some would say that the opposite of agile is waterfall — where a plan is created, decisions are taken at the top and these then cascade down through the organization as various steps in a defined process are taken.
Agile takes a much looser approach (note, not unstructured — agile isn’t about chaos). The company iterates as it goes. “Your key goal is to learn, pivot and decide if you want to put in an even bigger assessment,” Ng summarizes.
How carriers become agile
For the traditional carriers, changing the way they work is not an overnight transformation. When advanced technologies such as AI and ML are involved, there is also the questions of how it might impact the bottom line, should experiments fail.
This is why agile working tends to take two distinct, but complementary, approaches. First, there is the piecemeal approach. Ng suggests carriers make sure the hygiene factors of their business and the main ROI-generating pieces are taken care of first. Then, the company can look at areas to experiment with disruption and an agile way of working to create change that may, eventually, be rolled out across the rest of the business.
Secondly, there is a ‘done is better than perfect’ philosophy. To discover if an innovation has potential, organizations need to root out the opportunities — and failures — rapidly. Partly because the competition is moving at speed, but also so as not to waste resources. Innovation can show its potential without being refined.
Nor does potential need to be explored with specialist equipment. Glenn Fung, chief research scientist and AI & Machine Learning research director at American Family Insurance, says: “We took a drone and filled around with it. These aren’t very sophisticated. You can get them at Amazon.”
Agile workers can get projects off the ground at speed. They also create valuable proofs of concept. In the paper, Ted Stucky, managing director, QBE Ventures, QBE, noted that “there was a lot of push-back” when he first introduced the company’s AI-driven medical admin system to doctors. Seeing systems in action is critical to winning hearts and minds.
Carriers don’t need to go it alone
Insurance organizations may be able to implement agility quickly but they can struggle with developing the technical skills in-house that foster innovation. Vendors and service providers are specialists, used to assimilating the latest technologies and innovating within their own field to stay ahead of the competition. Partnering with these organizations gives carriers immediate access to the latest skills and insight.
Partnership is the key word here. “If we work together, they learn from us, they grow and get more customers. Our investment also grows,” says Stucky of one of QBE Ventures’ partners. “We think that with their speed and technical expertise, they can potentially come up with a solution that we’re not even imagining.”
The insurance sector is already beyond the point where AI and ML could be considered ‘new’ technologies, and many carriers have already deployed pilot projects. There may be uncertainty when launching into innovation, but there is a quantifiable risk in holding back.
As Travelers’ Ng concludes: “We don’t know what good this [innovation] is going to do yet, but as soon as it becomes clear this might be the right way to approach a problem, everyone else is doing it and you’re late to the table. You’re not sure where it’s going to go, but you invest in it so you can be ahead of the curve.”
Agility is the key to successful, AI-powered innovation in insurance is a foretaste of just some of the insights delegates can expect to explore at the upcoming Insurance AI and Innovative Tech USA 2020 conference, an event by Insurance Nexus, a Reuters Events Company.
Expecting more than 500 attendees from across the North American insurance ecosystem, the summit will bring together senior innovation and business unit executives to uncover the rewards of embedding technologies such as AI, IoT, blockchain and automation to create valuable, relevant insurance products and services and seamless experiences through the power of tech-enhanced operations.
High-level speakers include Vineet Bansal, SVP and chief technology officer, Swiss Re; Jim Tyo, chief data officer, Nationwide; and Will Dubyak, vice president of Analytics for Product Development and Innovation, USAA.
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