Published 7
April 2022 - ID G00765461 - By Laurie Shotton
The
insurance sector is primed for automation, with an abundance of manual
processes, legacy systems and a desire to be more open, agile and efficient.
Product leaders need to align their offerings to demonstrate relevant industry
applicability.
Quick Answer
What are the opportunities for automation within the insurance
industry?
·
Significant interest
in automation: 53% of insurance organizations are actively experimenting
or already implementing digital process automation technologies and a further
27% of organizations plan to adopt it in the medium- to long-term. This
represents a growth opportunity for vendors and system integrators offering
automation capabilities to the insurance market.
·
Insurers face
challenges: However, Gartner has found that many insurance
organizations are struggling to scale automation beyond initial use cases, and
most initiatives are focused on data input and replication of human tasks
rather than supporting a reinvention or recalibration of processes.
·
Focus of automation
will change: Initial automation deployments are more focused on
replicating human data entry tasks, tackling the high-volume, high-error-rate
use cases. While adoption of automation to augment work in more skilled
roles (such as claims administrators and underwriters) remains in its
infancy, this is expected to change over the coming years as insurers’
experience with automation grows. Product leaders providing solutions
or services to the insurance sector have an opportunity to help drive
greater adoption and scale by expanding their solutions from initiatives
that are solely focused on data entry to driving greater insights,
improving customer engagement and developing new services.
The insurance industry, like many other industries, is
accelerating its digitalization progress. In particular, insurers are looking
to technologies to streamline processes and drive greater efficiency and scale.
However, the industry is hampered by a considerable amount of legacy core and
supporting systems. In fact, around 50% of insurers have 50% or more of
their core insurance systems utilizing legacy systems. Gartner has also
found that 65% of IT budgets are allocated to “run” the business (see IT Key Metrics Data
2022: Industry Measures — Insurance Analysis). Historically,
insurance companies have approached the problem of legacy simply through
core system replacement and modernization initiatives. However, the complexity
and long tail payback from legacy modernization approaches has led many
insurers to look for alternative options to alleviate the burden of legacy.
This has been one of the reasons for the rise in adoption of
automation. Automation should not just be seen as a way to mask the
internal inefficiencies of an enterprise — it should be looked upon as a way to
enhance the resilience, efficiency, agility and productivity of the
organization. To achieve this, insurers will need solutions that enable them
to recalibrate and reinvent their insurance processes with a mixology approach
to automation that augments the role of humans. Gartner believes that this
wider outlook on the application of automation can be sizable with our
prediction that “through YE23, insurers that exhibit high automation maturity
traits will be three times more likely to exceed their growth
metrics compared to their peers” (see Predicts 2022: Insurance — Advancing Digital Maturity
Will Enable New Ways to Differentiate).
The
industry as a whole is maturing its automation adoption, as reflected in Figure
1 below. Many insurers have progressed beyond simple task automation to looking
at full end-to-end processes like new business and claims
administration. They are now at the stage where they need to build the
skills, competencies and structure to be able to orchestrate automation across
the enterprise requiring more skilled roles. Insurers are also looking in wider
business units such as actuarial, finance, HR and compliance for where
automation can be useful. Eventually, insurers hope to reach the level of
experience and capabilities to be able to reinvent and recalibrate processes by
rethinking them as driven by technology capabilities rather than human-driven
activities.
Figure 1. Hyperautomation Progress In Insurance
Product
leaders working for technology vendors, consultancy firms and system
integrators should look at how to develop use cases and even productize
solutions that go beyond replication of human data input tasks to
create value add for the insurer. Creating relevance by
demonstrating easily adoptable use cases as well as helping
enterprises to build the governance structure, skills and approach to
automation will be fundamental to product leaders. This is especially true as
insurers look to scale their hyperautomation initiatives and go
beyond the low hanging fruit of obvious use cases. Gartner has built a
tool with 174 unique use cases for automation for financial services
institutions (banks and insurers) built from analyzing over 1000 sources of
evidence of automation in the industry sector (see Tool: Banking and Insurance Use Cases to Drive
Hyper Automation).
Product
leaders should use this toolkit to evaluate and expand their own use cases and
offerings to build relevance and thus revenue opportunities. Moreover, the
tool will help product leaders understand the challenges across the value chain
of insurance, enabling an ideation of solutions that can address the
challenges. The tool will also help product leaders appreciate that the
challenges are not uniform across different lines of insurance. Specific use
cases are included where some of the product-line nuances require very specific
automation solutions. For instance, in commercial lines, pricing and claims
decisions can rely on administrators to evaluate and extract information from
large documents to inform their decision making. Automation tools can help to
extract this key information, freeing the administrator to focus on the
analysis and decision making. In motor insurance, automation tools can help
claims administrators to evaluate images of damage to vehicles, cost the
claim based on past events speeding up evaluation and decision making.
It
is, however, important for product leaders to avoid productizing and stepping
too far into areas where there is too much nuance around the inputs, outputs
and variants from one insurance company to the next. Thus, they should avoid
trying to duplicate record-keeping activities and focus more on data ingestion
and interpretation to create structured data and augment the decision making in
more skilled roles. Product leaders can apply
the hyperautomation scale to think about their offering and use case
development, as per Figure 2.
Figure 2. Evaluating Opportunities Aligned To The
Hyperautomation Scale
Insurance
should be seen as an attractive industry for vendors, but creating relevance
and value to the insurance company beyond the obvious use cases will be a key
to success. This market is already inundated with suppliers of automation
tools who have helped insurers tackle the basic automation tasks. However,
there are many opportunities for automation vendors that do have
insurance-specific tools and expertise and can help insurers grow their
automation maturity to a more advanced level.
Tool: Banking and Insurance Use Cases to
Drive Hyperautomation
Infographic: Hyperautomation Use-Case Prism for
Insurance
Why Insurance Product
Leaders Must Reevaluate Their System Configuration Capabilities
4 Steps to Automation
Success in Financial Services
How Automation Will
Change the Future of Work in Financial Services
10
Most Common Mistakes in Financial Services Automation Initiatives
Gartner’s
2021 Financial Services Technology Survey: The 2021 Financial Services
Technology Survey was conducted online from October 2020 through December 2020.
Respondents included senior leaders who were either primary decision makers for
their organization’s or business unit’s technology strategy, or had a high
level of influence in those decisions. The total sample was 847, with
representation from all geographies and from both the banking and investment
services and the insurance industry sectors. The survey was developed
collaboratively by a team of Gartner analysts, and was reviewed, tested and
administered by Gartner’s CIO Financial Services QUADS team.
Gartner’s
2021 Digital Maturity Assessment: The survey provides business and IT leaders
from life and P&C insurers with a baseline assessment of the current degree
of digitalization within their organizations. This assessment is
designed as an online survey completed by those either responsible for, or at
least familiar with, the overall digital strategy of the organization.
Currently, we have a total of 187 responses, out of which 94 responses are from
life insurers and the remaining 93 are from P&C insurers.
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