A Framework for Insurance Innovation – Now

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Today’s consumers think about car ownership and driving experiences in fundamentally different ways than they did even five years ago. Car ownership used to be a rite of passage, but that is not necessarily the case anymore due to the widespread availability and use of ride-hailing and car-sharing services. Additionally, whether they own a car, share a ride, or both, consumers expect vehicles to come equipped with advanced safety features and the convenience of connectivity.

Manufacturers are responding. The available options related to vehicle ownership continue to grow and include new, new lease, new subscription, used, used certified pre-owned, and used lease. And market penetration of advanced driver-assistance systems (ADAS) is growing, too.

For example, 52 percent of all MY 2018 vehicles included auto emergency braking (AEB) as a standard feature and 20 automakers have committed to making AEB standard in all light trucks and cars with a curb weight of 8500 pounds or less by September 2022. Other investments in electric technology and car-sharing fleets are in place to help automakers strike the right balance between producing cars people want to buy and ride in, and those that can turn a profit.

For insurers, the complexity associated with changing driving preferences and advanced vehicle technologies challenges business processes that have been in place for 100 years. Questions about who is driving, which autonomous features are engaged, and whether the person behind the wheel is driving for personal or professional purposes create ambiguity, around pricing, risk, and liability.

As these trends continue to evolve and gain traction, insurers will live in a constant state of responsiveness. You can no longer simply wait and see how the change will impact your business. It’s time to establish a new foundation for your business that will put you on a trajectory to support a more consumer-centered, connected, and autonomous world.

Enabling Technologies are the Foundation for the Future
There’s a reason why mobile, AI, and IoT get a lot of ink across industries, including ours: These three technologies are quite literally setting the foundation for the future.

Let me explain.

What started as a two-pound “brick” has become a pocket-sized supercomputer that we use for everything: our wallets, our dinner reservations, our newspapers, our calendars, our maps, cameras, stereos, and even our memories. Today’s smartphones are our control panels — they direct our interactions and experiences.

If you’re in business today and aren’t offering engagement and experiences through a smartphone your relevance is set to expire.

AI is a scientific process to train machines with data so they can make predictions with high accuracy. AI started in 1950 and for 60 years it improved incrementally.

When it combined with new ‘Big Data’ sources (sensors, pixels, etc.) in 2010, AI started to achieve its full potential and is now the core technology transforming society. Gartner predicts that by 2021 AI augmentation will generate $2.9 trillion in business value and recover 6.2 billion hours of worker productivity.[1] There is no other tech on the market today that is expected to generate this much value in as short a time span.

IoT (Internet of Things)
IoT is a network of interconnected objects that can collect and exchange data across the internet. In 1982, overworked and underpaid Carnegie Mellon graduate students needed a caffeine fix to stay awake, but they found an empty soda machine. Frustrated, they created a way to connect it to the Arpanet, a sort of proto internet at the time, to monitor the machine’s stock levels, saving themselves the indignity of trying to get a drink only to learn the machine was out. This is IoT on its own and it marked the beginning.

Today, we know that the real power comes when you combine these three technologies. Widespread adoption of mobile served as a catalyst for a digital-first model, which needed to occur before the full value and potential from AI and IoT could be extracted. With nearly 250 million people with smartphones, interacting and transacting daily, we’ve reached the tipping point. Now, the rocket ride powered by the fusion of mobile, AI, and IoT technologies is beginning.

But even though we’re hearing a lot of interest and excitement from the insurers we speak with; we’re also seeing uncertainty about how to get started with these technologies. We have some thoughts on that.

Setting Priorities to Get Started
Innovation takes time, investment, trial, and calibration so it’s imperative that the resources spent are guided by strategic priorities and objectives to make sure what you’re doing is worth the effort. This can be challenging, but we’ve found value in a “shift left” framework.

“Shifting Left” describes how a process can become more efficient when one of its steps shifts left or occurs earlier than it did before. It requires an investment in technology to power the revised process, but the resulting process yields higher customer satisfaction, shorter cycle time, and lower costs.

Imagine a process with four steps: A-B-C-D. Now imagine, step B shifts left. The result is often that step C is no longer needed, creating a new process: B-A-D. But ignore the acronym BAD — this outcome is good because the impact is often twofold: leaner, more efficient business operations and a more valuable experience for the customer.

Starbucks offers a great example. The company improved its already successful business model by shifting the steps of the process for getting coffee to the left. Rather than forcing customers to walk to Starbucks, wait in line, order, wait for the coffee and then pick it up, the consumer can use the Starbucks mobile app to order, walk to Starbucks and pick up the coffee. The result is less waiting and more convenience.

The new process delivers more customer control, reduced cycle times, and ultimately a superior customer experience. Add to that the actionable user data Starbucks can now access to power future consumer experiences and you have a recipe for creating lifetime customer loyalty.

The Shift-Left Opportunity for Insurers
The shift left framework offers a great way to evaluate opportunities and set priorities for insurers interested in leveraging today’s advanced technologies in a manner similar to Starbucks and other industry titans like Amazon and Netflix. Can the process area be improved from a customer standpoint? Will technology help reduce cost and/or improve cycle time? If the answer to these questions is yes, then the initiative seems ripe for investment.

For example, the traditional underwriting process has frustrated customers and insurers alike. It’s time-consuming, often inaccurate, and far removed from the actual behavior of customers, which leaves them feeling short-changed. In other words, underwriting was a prime candidate for innovation — or a shift left.

Tapping into telematics technology, some insurers are now using near-instant access to driver data to more quickly and accurately price policies. Not only has this reduced time-to-quote, sped up operations, and improved the underwriting experience for customers, but it has also prepared early adopters for the future of the industry.

This last point is extremely important. As mentioned earlier, mobile, AI, and IoT are the foundation of the future. Investing in them now will help grow your knowledge and confidence, preparing you for the inevitable acceleration in the deployment of these technologies.

Let’s look at another example in APD claims and the rising popularity of claims self-service. Instead of waiting days for an estimator to take photos, the extent of damage is knowable at first notice of loss (FNOL) because consumers take their own photos of vehicle damage to facilitate speedier claim decisions with the help of telematics.

According to our data, consumers love this new claims experience. Within CCC's network alone, the number of self-service claims increased 250% in 2018.

Some insurers are even shifting their employees’ processes left. Casualty claims adjusters and managers are accessing deep, actionable medical and industry data to accelerate claims management processes, while empowering employees to confidently settle claims with greater accuracy than ever before. Cycle times are reduced and insurance customers are happier as a result.

Repair shops are also doing their part, enabling their customers to schedule appointments online and monitor the progress of their repairs via mobile. On the shop floor, managers and employees can generate estimates and order parts from the same digital platform, shrinking the process, reducing cycle time, and improving the customer experience.

Here’s the bottom line: When you shift the consumer experience left, pulling value forward in their experience, the value works all the way back up the chain, delivering improved outcomes back to your operations as well.

Jason Verlen, SVP, CCC Information Services Inc.

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[1]10 Ways AI Will Change Insurance in the Next 5 Years.” David Weldon. Digital Insurance, June 2018."

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