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Achieving Cost & Operational Efficiency with Automation in Insurance

Oct 26, 2021

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By Gabriel Valmonte & Andrea Nalupa

Part of our Banking, Financial Services, and Insurance Series

The global insurance industry has remained steadfast in the face of the pandemic, inching forward and continuing to persist despite challenges and seemingly overwhelming losses. Fortunately, with challenges come opportunities that the industry can capitalise on. At the forefront of those emerging opportunities is the increasing viability of Robotic Process Automation (RPA) to achieve multi-layer efficiency. 

In this report you will learn: 

– What issues need to be addressed to further global insurance industry growth 

– How Robotic Process Automation (RPA) can drive operational and cost efficiency 

– About case studies from top insurance enterprises reaping the benefits of RPA

Insurance Industry Recovery

The insurance industry has continuously enjoyed positive growth until 2019. At the time, insurance premiums reached the 5 Trillion USD milestone for the first time ever in history. Such is roughly equivalent to six percent of the world’s GDP [1]. Across the globe, the Americas led this growth with a premium growth rate of six percent, followed by Asia Pacific with five percent, then Europe, the Middle East, and Africa or EMEA with three percent.

In 2020, however, this growth was disrupted by the COVID-19 pandemic. In terms of gross premiums written,  insurance companies experienced a significant slowdown, most notable in the life sector [2]. Non-life insurance premiums grew only by a measly 1.2% last year. On the other hand, life insurance premiums suffered a worse fate – with growth declining by 2.2%. This setback continued this year despite it being the 15th consecutive quarter of sector-wide rate increases to adjust to inflation and pandemic-related losses [3]. Cynthia Beveridge, President of Aon Global Broking, opening their most recent quarterly market update shares: “Declining interest rates have worsened the industry’s loss ratio by 5% during 2020 and into 2021,” and continues;  “This means the price increases we’ve seen have been offset by the further decline in interest rates.” [4] 

To turn this situation around, many insurers are looking to increase their pricing even more – with 70% of surveyed firms in the UK and EMEA capitalising on policy rate inflation from 11%-30% [4]. But research argues this can only aggravate the situation, as losses continue to ensue despite continuous annual price increases (although not found inversely correlated) [3].What then becomes a true solution? We argue that integrating Robotic Process Automation or RPA can promote the recovery and growth the industry needs. And we continue to explore this idea in this mini report.

The Need to Capitalise on Growth

The pandemic has brought on multiple challenges but has also created opportunities for the insurance industry. For instance, awareness for insurance has surged because of the health concerns from COVID-19 [5].

More individuals reached out and have shown sustained interest in insurance coverages that will benefit them or their businesses in uncertain times. However, because of the limitations in conducting normal operations due to health protocols in place, companies have to find a solution to overcome two of the most critical challenges to generate growth; achieving efficiency and operational excellence [6].

Minimizing the costs of doing business is imperative to keep profitability in a competitive and cost-conscious consumer market. And achieving operational excellence is geared towards adapting to the shift in customer expectations to deliver the best customer experience.

Automation is Essential 

Insurance has traditionally been operating on a very tedious process; requiring several forms to accomplish,  extensive data gathering, and vast information processing, including monthly billings and policy claims. These take up two of the company’s critical resources; time and personnel.

Companies’ reliance on old ways of working was shaken by the shift to digital of customer engagement in the  pandemic era. Technology adoption has never been more important than at this point. More particularly, RPA  integration.

Although as much as 30% of insurance companies have indicated considering using RPA for their processes, only a mere 2% actually use the technology [7]

Before we continue, here is a quick refresher on what RPA fundamentally is.  

In a nutshell, it is an application of technology governed by logic and structured inputs aimed at mimicking human  work processes thus automating the task. Software, or the “robot”, can be configured to capture and interpret applications for processing a transaction, manipulating data, triggering responses, and communicating with other  digital systems. 

Possibilities range from something as simple as generating an automatic response to an email to deploying thousands of bots, each programmed to automate individual jobs in an ERP system. As a result, insurers can maximize two of their most important assets, time and manpower. 

By automating rudimentary tasks such as form filing, data cross-checking, etc., businesses can realise great time savings and even eliminate human errors in the process. This can lead to overall operational efficiency. At the same time, precious manpower can be better utilised to conduct higher level tasks – opening the opportunity to gain more relevant business skills. 

How RPA Complements the
 Insurance Business 

“RPA holds so much potential in reducing costs and optimising labour efficiency in insurance. There are a lot of routine and repetitive tasks in this industry. For instance, according to research from a large Japanese insurance company, 20% of tasks on the computer could be done with RPA. In countries like Japan, RPA can be an important labor force substitute at a time of declining working age population.”

Masahiro Hiraishi, Monstarlab Omnibus CEO

RPA can be useful in a wide array of areas in the insurance business. The most important processes in the insurance business include:

New Business Underwriting

A process that requires the collection of vast amounts of data from multiple sources to ensure enough information is on hand to assess risk associated with a policy. When done manually, this process can take weeks at a time which can also affect the interest level of prospective clients to pursue coverage. 

By employing RPA, robots can be programmed to access accurate and specific information from multiple resources  as needed, update internal database systems then go on to produce a summary report that can be used for premium recommendation. This entire process can be  triggered automatically by an application and can run even beyond operating hours. 

Claims Processing 

“The low hanging fruit of RPA in insurance companies is to optimise different claim processes using RPA. Specifically, handling transfer of data between systems, and automating validation and categorisation of online claims reporting especially.”

– Tobias Lund-Eskerod, Executive Director at Monstarlab

Claims processing is a document, time, and data-intensive process. It requires quick and cohesive action from the system and personnel. Because of many interdependent moving parts, claims release may take some time and, in  effect, influence customer perception.  

RPA can hasten the entire claims process extracting information from a digitally submitted First Notice of  Loss, then automatically trigger actions from the adjuster and claims handler. The system can then subsequently consolidate gathered information and automatically review against your policy coverage and proceed with payment processing.

“ The tricky part is to combine RPA with machine learning and human validation, to ensure the initiative does not create bigger costs through the unchecked, automatic approval of all claims being processed.”  

– Tobias Lund-Eskerod, Executive Director at Monstarlab

With the right combination with intelligent technologies, this becomes a more cohesive and structured process that can be scaled and can help enhance the customer experience. Having a well-executed claims process can help develop customer loyalty and further build your brand. 

Business Analytics 

One of RPA’s benefits is the availability of precise process data. Every workflow deployed that utilises RPA generates end-to-end information that will be useful for audits and reviews for areas of improvements. Unlike manual processes, workflow efficiency can objectively be measured with readily accessible data. Each task the robot does is recorded and monitored by the RPA software – giving users complete visibility.

RPA Case Studies in Insurance Industry 

Real-life applications can serve as inspirations and eye-openers. Here are some inspirational experiences from some of the world’s largest insurance companies with RPA. 

Safe-Guard Products International

Key Result: 15% Increase in Customer Satisfaction

An insurance firm catering to the motor vehicle industry, Safe-Guard aims to distribute protection products & solutions to speedsters in the United States. However, with an average of two million contracts and thousands of claims to process annually, delivering speed can become a challenge.

To address the aforementioned issue, Safe-Guard maximised automation technologies to optimise their contract and claims submission processes, as well as reduce the need for employee intervention with every single document. To do this, they automated the scanning or capture of physical documents, sending them directly to the local document management system, and overall manufactured a centralised information system.

As a result, the firm is now enjoying several significant benefits. Apart from achieving successful document capture and operation optimisation, adjudication time has now been reduced by more than 75% on average, productivity rates have been increased by at least 30%, and customer satisfaction has improved by 15%.

“In the past, document capture alone used to take up to two hours a day; now it takes just 10 to 15 minutes. And during this process, documents used to be handled by an operator three to five times. Today, they’re touched just once—a reduction of up to 80%.” 

– Tim Dewey, Vice President of Operations Technology, Safe-Guard Products International

Dai-Ichi Life Insurance

Key Result: 132,000 Labor Hours Saved Annually

Established in 1902, Dai-ichi Life Insurance has been, until its 2010 demutualisation, among Japan’s oldest, most enduring mutual insurance companies. With over 55,000 employees, the company envisioned expanding its operations on a global scale. To be able to provide unique value in the saturated global services delivery market, they turned to RPA to provide critical leverage – operational and service delivery speed. 

Post Proof of Concept (POC) to evaluate the consistency of ROI, the insurance provider integrated Automation Anywhere in 2017. This implementation increased functionality and ease of use that enabled employees to create bots regardless of programming and development abilities. RPA was then fully implemented to perform 460 tasks spread across 39 different departments – constituting roughly a 132,000-hour time savings from previously manual labor. To date, Dai-Ichi Life Insurance remains one of the most quantifiably successful companies in RPA implementation in Japan. 

According to a recent statement, Dai-ichi Life plans to continue automating three thousand more of their routinary tasks. This is an effort towards reducing 450,000 hours in total and increasing efficiency with AI and RPA-based solutions

“We are saving 132,000 hours annually by implementing RPA to perform 460 tasks across the company.”

– Kei Maedomari, Life Insurance Manager, Business Process Planning Department

Aioi Nissay Dowa Insurance Co.,Ltd. 

Key Result: 10,000 Employees Shifted to More Meaningful Work

Aioi Nissay Dowa Insurance is one of Japan’s largest insurance providers. Employing around 70,000 people, with nearly fifteen percent of them doing purely clerical work. This huge manpower covers 49 operational businesses, including back-office operations for window sales, corporate insurance and personal insurance, general affairs, and asset management. 

However, despite a large number of people, Nissay still encounters operational challenges. The sharp increases in business every month lead to irregular overtime. As a result, the risk of errors increases due to stress brought about by looming deadlines. Additionally, during peak months, the company is compelled to hire and train inexperienced temporary staff within short periods of time, adding to company costs. 

Looking for ways to improve their business operations, Nissay decided to try and integrate RPA into their business processes. The company ended up deploying more than a hundred robots in all 49 business operations. 

This resulted in savings of more than 50,000 labor hours a year, reducing the stress and workload of employees as well as eliminating the need to hire and train temporary staff. 

Work efficiency has been achieved by doing automated processing 24/7 and at the same time avoiding manual errors. This expedited entire business processes – which in turn helped provide customer satisfaction.  

Best of all, employees did not lose their jobs but instead spent their energy and time on more humane work.

RPA is Sweeping through the Market

COVID-19 has accelerated the adoption of RPA across industries. Forrester Consulting found that 31% of organisations have increased their RPA spending in one quarter while 48% said they plan to increase RPA spending this year – which has been estimated to turn in roughly 1.89 Billion USD in revenue [8]. By the end of 2022, 85% of large organisations will have deployed some form of RPA.

At this point, the question now is this: 

Are you in step with the times? Or will you be left behind?
Take action, future-proof your business.  

Meet our Experts:

Tobias Lund-Eskerod (DK) | Data & Digital Strategy in Insurance 

Tobias has more than 10 years of experience within the insurance and financial sector, with a focus on Customer Experience, Insight, CSR, Ethics and Sustainability as well as the use of data to create business value.  He has successfully driven and implemented a number of digital projects in his role as a CRM director with responsibility for global Customer Strategy. Tobias has deep knowledge within analytics and the use of data and teaches this topic as an External lector at CBS.

Masahiro Hiraishi (JP) | Operational  Solutions & Efficiencies 

Masahiro empowers small and medium enterprises by providing technology and tools, including RPA (Robotic Process Automation), to give them a competitive edge against much larger industry players. By establishing Monstarlab Omnibus and launching RAX editor with Monstarlab Philippines, businesses get access to world-class automation tools and transformative technology.    

Authors

Gabriel Valmonte | Global Marketing
Andrea Nalupa | Global Marketing

Read more about banking, financial services, and insurance here.

Endnotes:
[1] McKinsey & Company, “Global Insurance Pools statistics and trends: An overview of life, P&C, and health insurance”, 2021
[2] OECD, “GLOBAL INSURANCE MARKET TRENDS 2020”, 2020
[3] Marsh, “Global Insurance Market Index – 2021 Q2“, 2021
[4] Aon, “Market Update Q3, 2021 – How the year is shaping up and emerging future risks”, 2021
[5] Asia Insurance Review, ”China: New festival to raise public awareness of insurance”, 2020
[6] EY, “2020 Global Insurance Outlook: The drive for transformation and growth”, 2020
[7] Statista, “Usage of robotic process automation (RPA) in selected claim and underwriting processes among  insurance companies in the United States in 2018”, 2019
[8] Gartner, “Gartner Says Worldwide Robotic Process Automation Software Revenue to Reach Nearly $2 Billion in 2021”, 2020

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