Achieving digitisation and automation in risk processing: Part 3

by Matthew Churchill, VP of Customer Success, Cytora

Achieving digitisation and automation in risk processing: Part 3

This is the 3rd and the last part of our series “Achieving digitisation and automation”. In part 1 we talked about why it is crucial for insurers to facilitate better performance in risk processing and how digital risk flows look in an ideal world. In part 2, we explored what it would take (across engineering resources, time and cost) to build a digital risk processing system in-house with an insurer’s own IT resources, as well as the tasks and implications for any insurer who has decided to build a digital risk processing platform all on their own.

In this third part, we will focus on the implications for an insurer who decides to partner with a software provider to deploy a digital risk processing platform. For clarity and ease to compare the options of in-house-build with a ready solution, we will use the same evaluation criteria as in the previous post. 

This article isn’t going to suggest how an insurer should select a partner, but it will provide a flavour of what both parties should do to ensure a successful engagement. 

Time to value 

When working with a partner time to value depends on the complexity of the business lines the product is deployed to.

In some smaller commercial classes where risks can be priced and underwritten using a small number of data fields, ie. turnover or profession/activity will lead to a relatively straightforward codification set of rules to be applied. That makes the job of extracting, validation and augmentation simpler and more standardised.

Larger commercial lines ie ‘commercial combined’ with insurers who regularly sees commercial risks with multiple properties, specified contents and global turnover splits are more nuanced and therefore configuration takes more time.

Upon starting the partnership, the first period should be spent on clearly articulating the existing process and then working together with the partner to develop the desired future process.

A good software partner will have experience in the insurance sector but will need time to fully get up to speed on the specifics of the individual insurer. If the relationship is going to work and the product successfully deployed this period of time cannot be shortcut and it can be a significant portion of the entire deployment timeline. Once done however, it will be much easier for the partner to create a plan that will be very close to the final timeline. At this point, the software partner can also highlight the leading indicators and long term benefits with a high degree of certainty allowing the insurer to quickly feel comfortable committing to the delivery.

Delivery certainty

Delivery certainty is usually quite high when engaging with a software provider. After the agreed onboarding and configuration time as well as training, the insurer should start seeing their underwriting teams being able to use the solution, and see the impact on efficiency and effectiveness.

In order to ensure successful delivery, it’s important to design the deployment process to optimise for the onboarding and ramping up the usage of the solution.

The best method of deploying software that is looking to drive significant long term improvements to business operations (such as digital risk processing) is to start with a number of small deliveries that can kick start the transformation. Once underway the delivery gradually gains traction as smaller successful deployments land and benefits are measured. The impact of trying to do a big bang deployment puts the insurers’ own resources under unnecessary stress and often causes a longer overall timeline when compared to breaking the project up. The impact of this on the insurer is that they will need to ringfence resource to support the deployment of the delivery.

Another helping factor that impacts the delivery certainty is the software partners’ customer success team, who are able to provide operations, underwriting and technical teams with best practices, know-how and expertise while guiding them to avoid the most common pitfalls and mitigate any roadblocks that may occur.

Run cost

When working with a vendor the bulk of the cost is known upfront, subject to contract and potential data usage. There’s little to no chance of the cost of the project/software spiralling out of control due to changing requirements, development delays and failed attempts of in-house building.

Another benefit is, behind the scenes, continuous software improvement over time. Throughout the duration of the contract, the provider will continue developing the product which the insurer can take advantage of. That may be extraction capacity, extra data libraries or advanced routing systems. The insurer should rely on the partner to guarantee uptime in an SLA (Service Level Agreement) and provide support.

When selecting a software partner it is important to clearly understand the fixed and variable costs of the delivery. In the specific example of risk digitisation then this could be broken into extraction, augmentation, entity resolution and rules processing. The most significant variable cost will be the volume of records processed and the additional data costs in augmenting the risks with additional data to meet the insurers needs. During deployment it should be expected that these costs can be confirmed and forecast with a high degree of certainty so that the insurer can manage growth effectively and ensure the business case continues to make sense.

It is likely there will be an overall platform cost, which will cover access to the services and possibly a per-user charge. 

Personnel requirements

There’s little cost and implications in terms of personnel when it comes to working with the vendor. 

During delivery success can be enhanced by ensuring there is an appropriate project delivery resource in place to support the vendor deployment. This would generally consist of:

  • Project Manager
  • Business Analyst 
  • Solution Architect
  • General Infosec resource

Alongside this delivery resource success can also be improved by ensuring that there is someone with significant experience of the insurers’ operational processes involved.  

Throughout the configuration phase and once the deployment is complete, the key resource to achieve success will come from underwriting leadership and the underwriters themselves. The group that should expect to see the benefits and will ultimately be most impacted by the deployment of a digital risk processing system will be underwriting. Early engagement and continued interaction with this group are of paramount importance.

It is important, for the success of the project delivery, to factor in the right amount of time spent on training and onboarding end users.

The partner should make available a few key managers under the customer success function that can support stakeholder management, liaise across all teams and act as a central escalation point during the delivery and then ultimately throughout the lifetime of the relationship. Typically those roles could look like the following:

  • Delivery manager
  • Delivery analyst 
  • Product architect

Conclusion

As digitisation is increasingly a way to achieve genuine competitive advantage, insurers are understandably looking for ways to improve their processes, increase efficiency, and drive profitable growth through superior risk selection. It is not surprising that the desire to eliminate waste and focus on profitable risks is high in insurance companies; that in turn enforces a change in risk processing flows.

When investing in any digital risk processing solution, whether in-house built or SaaS, it’s important to go have a long and hard look at what are the business goals, by what time they need to be achieved, at what scale across the organisation, at what cost and at what level of delivery certainty. Having clarity on the objectives enables insurers to make clear-sighted decisions and ensures concrete progress can be made.