Daily Fintech

Cool data points for the U.S. insurance industry- do customers care?


Are there common threads for or against the industry changing customers’ insurance viewpoints among these data points?

Patrick Kelahan is a CX, engineering & insurance professional, working with Insurers, Attorneys & Owners. He also serves the insurance and Fintech world as the ‘Insurance Elephant’.

I read an interesting white paper on digital insurance transformation this week, “Automating for End-to-End Claims Processing, How Design Thinking Combined with Automation technology Pushes Insurers to Evolve.”  The paper’s authors, Elaine Mannix and Sathya Sethuraman, as industry leaders are eminently qualified to discuss change and insurance, and the paper proposes and supports a thoughtful roadmap for companies to follow on a digital claims (read as ‘service’) transformation.  The primary principle being discussed-

“You must tie all claims processes together to build toward the ultimate goal:

end-to-end (or straight-through) claims processing.”

Set all the processing machinations aside, the authors are supporting claim service as the goal of organizational/digital transformation, and adoption of Robotic Process Automation (RPA) as a liberating innovation to free staff from process.  Leveraging technology change/adaptation in the provision of service to customers.  This is a common refrain, and the authors’ path is well-defined, but does the industry have the depth of commitment and patience to take on such a journey?  And does the journey lead to customer satisfaction?

Consider the size of the U.S. P&C industry- $1.2 trillion written premiums, more than 376,000 employees in the top ten carriers alone, and an industry that is driven by process and success that is measured in pennies on the dollar.  New entrants have expended efforts for some years in ‘disrupting’ or injecting innovation to shake up the incumbency, but a startup-focused investment of $8 billion over five years is not material compared to the enormity of the industry, and particularly not in the eyes of the more than 100 million legacy insurance customers.

In his recent post, “Shootout At the InsurTech Corral”, beyond questioning the very efficacy of the principle, ‘InsurTech’, Mark O’Brien cited sections from a post-ITC article penned by Bill Wilson, “The Problem With InsurTech Conferences”:

“I just wonder if the organizers or participants in these events simply don’t want any naysayers to rain on their parade … [with] the misguided premise that what consumers want and need is fast, easy and cheap … It’s a combination of ignorance and the perception, fueled by our own industry advertising, that insurance is a commodity differentiated only by price … they cater to the base instincts of people because of ignorance or avarice … the U.S. has a great need for rebuilding infrastructure. If we let the equivalent of insurtechs do it, they’d be rebuilding bridges with matchsticks.”

No one can say that Bill minces words, but he has four decades of observation and knowledge supporting his position.  What does that say for our authors who have a well-thought out framework for automation/innovation of claim processes?

Don’t start with the 600 CEOs and 7000 InsurTech stakeholders, start with the estimated 600,000 plus claim staff and agency participants who live the service process daily.  Yes, there must be C-level sponsorship, but if the track record of continuous improvement programs is any indication, service organizations will go through the motions of learning straight-through methods but in the end the effects of the ‘quarterlies’, those omnipresent process and profitability measures will color the innovation message gained beyond the C suite

The effort needed to adopt the comprehensive RPA framework Mannix and Sethuraman describe extends well beyond even quarterly reporting periods, and if properly adopted, involve multiple organizational silos.  It’s not that adopting RPA is an incorrect path, it’s that insurance org culture is not patient, and is looking for plug and play solutions.  And of course, immediacy of results.

Ironically claim staff have become expert at enduring the prospect of change, and in adopting work arounds to ensure the production of claim service is not derailed with well-intended innovation efforts.

Continuing, what is the impetus for change if in the end the current industry regime has record cash surpluses and the current tech threat is measured in tenths of percentage points of volume?

Well, lets look at one of the top ten U.S. carriers and its path to date regarding innovation- USAA.  USAA is a multi-line P&C option in the U.S. market, catering primarily to military families.  It operates like most of the industry with one exception- it has been a frontrunner in terms of engaging its staff in innovative efforts.  Micah Solomon recently published an article highlighting the firm’s current efforts in implementing innovation with the Google Cloud.  The virtual damage and estimating methods discussed are interesting but are eclipsed by USAA’s innovation culture that embraces input from staff that cites achieving 900 innovation patents, many from staff ideas.  That endorses the presence of an innovative culture built over time, and a ‘from the bottom up’ approach to innovation.  The company’s C suite dwellers are wise to simply support the efforts and be certain to not get in the way.  The nature of the innovations is not described, but it can be expected that if staff are the source, then customers are the impetus behind those efforts, aka #innovatefromthecustomerbackwards.

What is notable as understated or missing from the RPA white paper, the USAA article, and even Mark O’Brien’s clever piece?  The voice of the customer.  It’s hinted at, but stepping past the hundreds of thousands of insurance staffers one encounters millions of customers who know not of InsurTech or innovation efforts, they simply know they must have or need insurance coverage, and it needs to be accessible in a manner they are comfortable with, from agents or digital sources, be available when needed, and provide service that resolves potential adverse situations.

If one considers customer satisfaction data over the past few years (to gauge innovation culture effects on customer satisfaction), there is some indication (albeit not tested by the author for significance) that USAA’s efforts have at least anecdotally affected USAA’s relative position in CX.  JD Power’s 2016 relative position of 895 sat index vs industry average of 860 has improved in 2018 to 903 index vs industry average of 861 (see below).  The firm’s customers may not know to attribute the relative improvement to innovation, but they are more satisfied over the period.

What does that say about the effect of the $82.6 billion spent on tech within the P&C industry in 2018, and similar amount during the past few years?  Potentially well spent on operations, just not the focus that customers may be aware of.

[i] http://www.statista.com

[ii] http://www.iii.org

[iii][iii] https://www.carriermanagement.com/news/2019/10/15/198989.htm

[iv] https://fintech.global/global-insurtech-funding-tops-3bn-in-2018/

[v] http://www.jdpower.com

[vi] https://www.forbes.com/sites/micahsolomon/2019/10/14/usaas-latest-ai-powered-customer-experienceinsurtech-innovation-is-a-collaboration-with-google-cloud/#4942ec702347

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