A chase between Auto Insurers and Technological Innovations!

Transcription

1 A chase between Auto Insurers and Technological Innovations! HCL s top 3 strategies and 10-point checklist to help insurers adopt technological innovations seamlessly. Murali H HCL Technologies WHITEPAPER November 2014

2 TABLE OF CONTENTS INTRODUCTION 3 THE CHASE: AUTO INSURER VS TECH INNOVATION 3 AUTO-INSURERS LEVERAGING TELEMATICS 4 TACKLING NEW-AGE CONSUMER DEMANDS 4 STRATEGIES FOR INSURERS 6 TEN-POINT CHECKLIST FOR NEXT-GEN INSURERS 8 CONCLUSION 9 ABOUT THE AUTHOR , HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 2

3 INTRODUCTION While automobile insurers are busy chasing Telematics Insurance, the next pathbreaking innovation driverless cars is already on the horizon. This development raises a few important questions: y Are insurers ready to take on back-to-back disruptive innovations? y Do they have the ability to build scalable strategies to manage resilient business models? y Are they ready to compete with digitally aware players and grow their business profitably? This whitepaper explores how automobile insurers can tackle the challenges posed by next-gen customers. It provides the top 3 scalable strategies, which can be adopted, and a 10-point checklist to validate their journey towards future business growth. THE CHASE: AUTO INSURER VS TECH INNOVATION Though driverless car is in its early stage of development and is expected to be commercially launched in the next 4-5 years. When launched, it could be named as one of the Top Innovations of this century, as this is expected to disrupt the fundamental automobile industry and thereby auto insurance (personal and commercial) business model. According to studies- In the near future, driverless cars dominate the roadways and 90% of global fatalities resulting from auto accidents (that are more than a million in number today) could be avoided with driverless cars. Let us glance through few instances when driver-less car is operationalized to warm up the impacts. 1) Premium Income: Insurers may plan to link up with OEM/ car/ vehicle manufacturers to embed an insurance chip as a part of the vehicle, which means that automobile insurance premium will be included in the price of a car. This strategy can help insurers be early movers in the market and create a lasting brand. The risks to be covered will also include smart electronic boards, communication devices, etc., apart from third party liability, accident cover etc., other insurance, and the cost can be reasonably high. 2) Regulator demand: Driverless cars require no human intervention. However, the regulatory systems could insist car manufacturers to program the car engine to start only when there is a licensed instructor/ chauffer to instruct route changes, directions, etc. This will provide insurers with the opportunity to provide risk cover for damages due to wrong instructions! Auto Regulators, IT regulators, Insurance regulators may form consortium to address common needs to regulate auto industry. 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 3

4 3) Insurance Claims: In case of any risk occurrence may also be due to malfunctioning of car system, we can assume car in it have the capabilities to contact the insurer, manufacturer, and the contacts of the passengers without any manual intervention. Based on the estimate (approximate loss estimate could be done by the car), the insurance company will reimburse to the manufacturer directly. In case the communication failures, system may store in offline mode and communicate when connected. In short, the change will be, claims need not be initiated by consumer & insurers need not spend significant time, effort and cost for processing the claims which also means the Combined Ratio will be re-base-lined. Though very interesting, let us leave the driverless cars by the road for now and deep dive into the world of telematics (recent innovation) and how auto insurers can torque for a transformation. AUTO-INSURERS LEVERAGING TELEMATICS Even though telematics had arrived a decade ago, there are many reasons why adoption by next-gen insurers in the developed markets has been exponential. Among them, the top three reasons are: Reason 1: For the first time, through telematics, insurers will be able to connect with their customers every day/ moment. It will provide them with the opportunity to be nearer to their customers, (than any other financial service segments including banking), capture natural behavior and preferences, serve them with best-fit products/ services, increase business at NIL/reduced cost, and grow it profitably. Reason 2: Telematics policies account for just <5% of written premium in a globally scale currently. However, it can go beyond automobile insurance and help allied businesses such as home/ content/ travel, other consumer insurances to grow. In addition, it can enable businesses in the emerging countries to scale up by targeting a fresh segment of customers through the communication window. Reasons 3: Insurers can predict risk and use data-led information to undertake riskadjusted underwriting with personalized pricing and eliminate fraudulent claims drastically by increasing capital availability. TACKLING NEW-AGE CONSUMER DEMANDS In this context, for a while let us explore how insurers can response for 3 nagging questions from typical new-age drivers: Q1: Why I need to drive, when I can connect in real-time with friends through social media, online conferencing, and watch movies in home theatres, play virtual games, exercise at home, and shop online? - Next-gen consumers need a business case for every dollar/ pound spent. 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 4

5 Response by Insurers could be to identify what would motivate them to drive, and implement the following: y Focus on benefits: Insurers to create a business model to provide tangible benefits by partnering with external providers (retailers/ manufacturers/ service providers) and promote their respective products mutually for e.g., if insured cross a certain number of miles/ kilometers on driving, instant e- coupons could be issued while on the move for food/other miscellaneous consumables, discount credit on the premium can be given based on the route they drive or on the fuel bills if they fill gas at a specific fuel station, etc.,. These examples are indicative only. Important element is the benefits have to be clearly articulated and to be delivered in real-time & for short-term consumption. y Effective marketing/ communication: Engage marketing/ intermediaries/ agents to promote products and discounts/ points jointly, consistently, and effectively, especially through social media. y Experience through convenience: Aggressively partnering with retailers/ service providers/ providing e-insurance cards with top-up insurance premium facility for their intermittent needs for a with instant access through mobile/web/social media will improve significant customer experience. Q2: How can I mitigate the risks during my drive? In other words, insurers need to think what could help customers avert risk proactively and improve driving performance. This dovetails into the same question car manufacturers are trying to answer when they design their products. A few things that could be adopted by insurers are: y Focus on benefits: Proactively publish financial/physical impact of risks, by creating public risk database with powerful search facility, suggesting nearest mitigation plan to make consumer aware of situation could be of high use. This could also be done using gamification to make the consumer hook-up & create reward plan based on points earned. y Effective marketing/ communication: Motivate young drivers by publishing their good driving behavior in social media, recognize & announce spot gift for winners, through the social media. y Experience through convenience: Omni channel enablement will help consumers to effectively communicate on-the-go to avoid risks. Q3: In case of risk occurrence, what service can I expect & how can I access those services? y Focus on benefits: Telematics can help to track real-time, so even without consumer s intervention; emergency alerts could be auto-enabled & managed by insurers, by partnering with service provider for additional fees. This could remove the hassles of triggering the occurrence of risk & waiting for help by consumers. Any service level 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 5

6 breach could be compensated by insurers. Integrating with partners like restaurants/ service providers to serve will make the support effective. y Effective marketing/ communication: Communicating real-time experience using the social media will help consumer understand the process better and be alert with live examples. Communication of technology enabled features will help consumers to get the right expectation. y Experience through convenience: Providing effective communication facility like video conferencing with key expert could help consumer to record moment of truth, providing simpler mobile apps to communicate instantly to insurers or agents can improve experience. While the list of questions/demands of next gen consumers may go beyond all these, let us just consider these as guidance to focus on key 3 strategies & 10 preparatory check-list items which next gen insurers may need to adopt to give equal or better chase to technology innovation. STRATEGIES FOR INSURERS While redefining business strategies for next-gen consumers, insurers may have to factor in future technology adoption like driver less car innovation and business model changes. The 3 fundamental strategies insurers may need to consider: STRATEGY 1: COLLABORATION STRATEGY Insurers need to define clear collaboration strategy with a view to improve visibility (increase brand awareness), knowledge sharing (enable decision making), and receive instant feedback (enhance customer satisfaction). Strategy could be to: 1. Collaborate with employees: Employee participation at the ground level helps in increasing their bonding and passion towards business growth. Building internal ecosystem for seamless flow of communication between employees enabled through platform will help to bring in great value to customers. Employees need to be motivated by recognitions/awards based on quantified value created for customers will help insurers to shift their organization as value focused organization. 2. Collaborate with partners/ vendors: The maturity of product/ service vendors in other industries, especially in the retail, IT, and manufacturing, has grown substantially. There are a number of seamless tie-ups with banks and players from other sectors with the strategic intent to improve business. It will help provide seamless services and make insurance affordable for the customers. This will also include investments in the R&D innovation of auto manufacturers for future innovation adoptions and will make future-ready insurer 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 6

7 3. Collaborate with customers: Telematics consumers have different set of priorities and expectations. Ways of thinking itself differs from traditional consumers. So it is critical to have strategy to collaborate with different age segments of consumers. This will help to proactively deliver unique experience and match their expectation. Collaboration with this age-group consumers will mostly be virtual and their contributions need to be properly identified, evaluated and recognized at right time. Customers are ready to promote products/ brands voluntarily, if there is a genuine advantage. In addition, feedbacks are readily available through social media, specific websites, blogs, etc. Defining products, creating awareness of its features, illustrations and feedbacks will help insurers grow profitably and faster, while creating a niche customer base for the future. STRATEGY 2: 2-D STRATEGY (DIGITAL & DATA STRATEGY) Some people associate digital integration with providing a platform for integration. While it is one of the preliminary elements, in insurance it means: a) Platform and business process integration In telematics insurance, the source of transaction initiation will be vehicle/consumers/customers, and will be processed, completed by service provider independent of insurer. This means the transaction will be just recorded in the system for reference and approval only. So not only the seamless integration between core systems and allied systems is important, integration of business processes connected with digital technology & integration with service provider data, will be equivalently critical. This involves efficient change management mechanism, right selection of applications, and experts to implement the envisaged changes across the business processes. Insurers need to carefully select IT partners who not only have the technology capabilities but also need to understand the Insurance processes, bringing in right domain technology experts for building digitally integrated systems. b) Real-time integration with third party systems While core system integration can help to automate processes transactions seamlessly to reduce the process timeline and reduce the cost of transaction, real-time integration with third party systems will be essential to improve customer experience & reduce the data distortion, increase quality & reduce time. For example, financial advisors can involve underwriting or product experts during their conversation with customers with the help of the conferencing facility afforded by digital connectivity. Similarly, customers can interact with the claims officer through conference when they have an accident and receive instant guidance. In the same way, service requests can be handled swiftly with illustrations and the damaged insured contents captured using video and uploaded for reference and quick assessment. Furthermore, 3D simulations can be used to identify and demonstrate the damaged portions for faster claims assessment. Regulators need not have to depend on insurers to publish data, but will extract directly from service providers. c) Integrate with the unknown sources (social data) While social data integration is a fabulous thing, the big question is, are the resources spent on usability, storability, and accessibility worth it. Insurers need the social data with 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 7

8 sufficient substance and defined periodicity, for receiving feedback on the products launched, services, ideas, improvement in service levels, identify fraudulent claims on need basis, behavior pattern of customers, and create brand awareness. They need to think of sourcing only filtered substance data, after analysis for usage, because customers may ask them to pay for the usage of data. STRATEGY 3: CHANGE MANAGEMENT STRATEGY Change is inevitable while serving the next-gen customers because insurance product design, distribution models, service levels, and competitors strategies evolve. This demands a substantial focus on innovation, which may cause disruption in the business model, employee policies, and changes in the service model. Insurers need to identify competent leader to manage the change management team. Having right governance structure and mechanism will help to execute strategy. Decision on business model change, distribution change, process change should be taken consider the future technology changes including internet of things. Right communication at right time will make employees and consumers to be in sync with changes for easier adoption. Change management strategy becomes very critical for Insurers to devise now itself along with other stakeholders including HR, vendor management office, service provider, Technology partner, financial team & business operation teams. TEN-POINT CHECKLIST FOR NEXT-GEN INSURERS While strategies may need much time to design and implement, immediately steps for next-gen insurers is to use the below check list to verify and consider to take appropriate actions: 1) Identifying the right digital transformation partner who is capable of bringing value, the right set of business-aligned technology, and high-speed execution using framework. 2) Creating a special task force with the right set of professionals to work with the technology transformation partner. This collaborative team needs to have long-term objectives and a road map for execution. In addition, provide the team with sufficient space to bring in the right set of ideas and business case, along with governance and specific metrics to measure the progress. 3) Planning for a phased investment with a detailed roadmap for logical clustering platform implementation across the value chain, and digital system integration as one cluster. Additionally, calculated decisions have to be taken by the insurer if there is a business need to run some of the phases in parallel to get faster Return on Investment. 4) Finalizing the decommissioning plans for the existing platform and the product support plan in advance. It can help to save 20-40% in the current running cost, which could be used to fund-back the transformation programs. 5) Designing the products to cater for future business needs. Direct channel distribution need to be enabled with technology. If it requires the support of the advisors, make sure that they are given sufficient training for the right application/ channels. 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 8

9 6) Collecting governance and metrics to assess the initiatives and infuse the necessary capital, resources or advice as and when required with the help of tools such as CXO dashboards, capturing plans, and actuals. Additionally, plan to have digital governance to adopt change management. 7) Deploying a strong marketing force as a part of the core team/ special task force. Similarly, the collaboration with retail and communication using technologyenabled tools need to be planned. Furthermore, videos and interactive animated illustrations should be available for the customers at arms-length. 8) Prioritizing initiatives according to low business model impact, high customer experience and business growth opportunity. Instead of intuition or personal preferences, it is better to use proven scientific scoring methods/ frameworks to substantiate decisions with data points. 9) Organizing support/ service/ operational teams with people from the same age group as the target segment including the mix of genders. It will help to understand and communicate with customers in line with their expectations. 10) Securing future customers by using the early mover advantage. Moreover, taking prudent decisions on facilities and service providers will not only help establish integration, it will also provide sufficient scale. The right focus is required on vendor relationships and infrastructure requirements including data management (operational, analytics and big data), devices, channels, software applications, integration, etc. CONCLUSION A few next-gen insurers leaders in the market, have already taken steps to scale up to meet the requirements of the target millennial segment. Many, who aim to become leaders in the next 3-5 years, are re-thinking their strategies and have initiated conversations with vendors/ partners especially with their IT partners. It is self-evident that automobile insurers, especially those who have recently launched telematics products, have serious competition. To be ahead in the game, they have to join hands with partners who can understand business trends, support their transformation journey, and bring in the right expertise to deliver value. HCL Insurance services have been recognized as Mature by Gartner. HCL is the only IT Company in the world to receive the LOMA Education Excellence award for the 8th time. Furthermore, HCL is Leader in client reference score survey conducted by Forrester, both times, 2011, 2014: 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 9

10 ABOUT THE AUTHOR Muralidharan H Heading Business Solutions Group: Global Insurance Murali is a thorough Insurance IT professional with 20 years of total experience and is vivid observer of Global Insurance industry trends, strongly believes Business aligned Technology approach as the way to enhance intrinsic value of Insurers. During his career he has led IT Transformation, Insurance Core system implementations & devised turnaround strategies. A Certified Accountant by profession with rich IT knowledge and experience. AUTHOR S OTHER ARTICLES Insurance in 2020 & beyond: id=8088 Insurance sector started chasing technology, when its peers like Banks have crossed significant miles to embrace technology to their best benefits and customers. Nevertheless, word of caution! Insurance will become way ahead of their peers in next 5-7 years. This article is to visualize how insurance across the world may transforms in coming years using technology. Gamification in Insurance: Games have been a way of our life since thousands of centuries ago. Today, they find a unique purpose games are being used to improve non-game business. This article discusses how games could play an important role in Insurance s profitable business growth with go-to-market strategy 2014, HCL TECHNOLOGIES. REPRODUCTION PROHIBITED. THIS DOCUMENT IS PROTECTED UNDER COPYRIGHT BY THE AUTHOR, ALL RIGHTS RESERVED. 10

11 ABOUT HCL About HCL Technologies HCL Technologies is a leading global IT services company working with clients in the areas that impact and redefine the core of their businesses. Since its emergence on global landscape after its IPO in 1999, HCL has focused on transformational outsourcing, underlined by innovation and value creation, offering an integrated portfolio of services including software-led IT solutions, remote infrastructure management, engineering and R&D services and Business services. HCL leverages its extensive global offshore infrastructure and network of offices in 31 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare & Life Sciences. HCL takes pride in its philosophy of Employees First, Customers Second which empowers its 90,190 transformers to create real value for the customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 5.2 billion, as on 31st March 2014 (on LTM basis). For more information, please visit About HCL Enterprise HCL is a $6.5 billion leading global technology and IT enterprise comprising two companies listed in India HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India s original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of over 96,000 professionals of diverse nationalities, who operate from 31 countries including over 505 points of presence in India. HCL has partnerships with several leading global 1000 firms, including leading IT and technology firms. For more information, please visit Hello there! I am an Ideapreneur. I believe that sustainable business outcomes are driven by relationships nurtured through values like trust, transparency and flexibility. I respect the contract, but believe in going beyond through collaboration, applied innovation and new generation partnership models that put your interest above everything else. Right now 96,000 Ideapreneurs are in a Relationship Beyond the Contract with 500 customers in 31 countries. How can I help you?